Financial and technology analysts have said that a single world currency was imminent given the growing technology disruption in the financial services industry typified by the popularity of blockchain adoption and its offshoots, cryptocurrencies.Managing director and chief executive officer of Precise Financial Systems, Yele Okeremi and Lead, Digital and Robotics Practice, Ernst &Young, Nigeria, Akinsope Roberts, stated this in Lagos at the maiden business a.m./GTI Finance and Investment Dialogue.
Speaking on: “Technology Disruption In The Financial Services Sector: How Prepared Is The Nigerian Market?” they noted that technology disruption had become the new norm and that the financial services industry would be impacted much more with traditional institutions losing market share to fintech start-ups.
Meanwhile, the nation’s lawmakers in the House of Representatives have stressed the need for the regulation of the blockchain technology, which is driving the cryptocurrency, given its inherent potency to eradicate poverty in many African countries.
Following a motion titled: “Need to regulate Blockchain applications and Internet technology”, moved by Solomon Adaelu, he identified the novelty of the innovation and its capability to facilitate activities in the financial services industry.
“Blockchain as a digital and decentralisation ledger technology that records all transactions without the need of financial intermediary bank is new to humanity and can be a core payment facilitator for financial services industry,” he said.
A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
Invented in 2008 by Satoshi Nakamoto for use in the cryptocurrency bitcoin, blockchain is said to have solved the problem of double-spending in digital currency transaction without a trusted authority or central server.
Okeremi said central bank governors were critical of cryptocurrencies due to the threat of losing control from fear of deregulated banking service, adding that legislation would soon lose its grip on the payment system and be part of the drivers of disruption in financial services with positive consumer experience being the lever.
He cited how legislation has kept and was still trying to keep hold on the technology that would clear cheques instantly in the country– either upcountry or local, and that Nigeria Interbank Settlement System (NIBSS) has in place a technology that would clear cheques instantly, which has been delayed by legislation.
Okeremi, who was former head, Systems and Logistics, Ventura Savings and Loans Limited, said digital banking was the future of the banking industry.
He traced the rise of fintechs to the realisation by technology companies that they were getting low value from selling their services to the banks and decided to provide such services themselves.
On his part, Roberts said over 35 per cent of financial services revenue will be at risk by 2025, and that with about 31 million banked Nigerians, there is room for technology start-ups to bring more Nigerians to access financial services.
“It is obvious that the traditional financial service providers are lagging behind in bringing the more than 150 million unbanked Nigerians into the financial system, which creates the opportunity for fintech to erode their market share,” he stated.
He noted that apart from technology, customer behaviour influenced by demographics is fast becoming a major disruptive driver.
“Nigeria’s population is young and young people want service on the go without being physically present at the providers’ offices and digital technology is providing the convergence for companies who can offer different services to meet their needs.
“Retail is the future for any commercial bank hence there is the need for banks to grow their technology so they can meet up with the new entrants and also know their customers more as fintechs now understand customers more than the banks, through monitoring of their data usage and are able to reach the people with services that they want,” he said.
He added that trust, which used to be the dominant issue in the banking sector some years ago, was no longer the issue as research carried out by Ernst & Young indicates that 70 per cent of respondents agreed that trust was no longer an issue and they would rather prefer providers that understood them.
“To survive in the disruptive economy, institutions need to put their customers first as their new products must be tailored to not only meet their needs but such products should be understood by the customers.
“They must also ask themselves if their disruptive tendencies would lead to growth and if all the disruptive trends are important and relevant to them. What are other like mind financial service providers doing?
“Is it going to enhance revenue? Is it empowering employees or is there an agreement between management and employees on how the products work?” he stated.