Fintechs democratising access to banking services, supporting financial inclusion, says FITC CEO

The Managing Director/Chief Executive Officer, Financial Institutions Training Centre, Chizor Malize, in this interview, talks about the necessity of financial technologies (fintechs) as tools for deepening financial inclusion, reducing the number of the unbanked and reducing poverty. GEOFF IYATSE was there.

Technology is widely defined as the application of scientific knowledge to simplify life issues and challenges. How are technology and innovation changing the world around us?

The advent of technology and its consequent adoption globally,has changed the way we live for the better. From transportation to education and healthcare, technology has improved service delivery and enhanced ease of access across many facets of our daily life. This is particularly true of financial services.

Today, thanks to financial technology, one need not be physically present at a bank, for instance, to initiate transactions or receive funds. Services such as e-wallets, and other payment infrastructure that makes sending and receiving money conveniently, along with tools for activities like budgeting, investing, microlending, insurance and more; mean that individuals and businesses can actively and conveniently participate in the global economy.

It is no longer news how the various Fintechs such as Paystack, Flutterwave, Piggyvest, Remitta, Kuda, etc. are disrupting the Nigerian Financial industry. Even though the rise of Fintechs has not been fully adopted in the country, especially by older generations, who still really trust in our traditional banking system, the trust in fintech is growing among lower-income segments, with 51% of youth and mass-market customers (according to Mckinsey). SME owners also say that they increasingly trust fintech because of its speed in operations. With technology, many of these Fintechs have expanded the reach of agency banking across suburban areas in Nigeria, providing many with access to much-needed financial services. These are just some of the many ways that technology is redefining the norms and changing our world.

Fintechs have emerged as unicorns leveraging technology to design new financial solutions. How has this changed the financial services landscape? 

  Fintech has democratised access to banking and financial services, providing even more Nigerians with benefits beyond just savings and payments. More importantly, Fintech is helping to close the gap that currently exists for the unbanked.

According to a 2020 EFInA report, over 35 per cent of Nigerian adults are excluded from financial services. Put starkly, more than forty million Nigerian adults do not have access to any kind of financial services, from savings and payments to pensions and insurance. Conversations around financial inclusion for the unbanked, as well as its importance for economic growth, are not new. The World Bank has stated that financial inclusion is a crucial tool for poverty eradication and economic growth, especially for those at the bottom of the economic pyramid. This is particularly the case for emerging economies like Nigeria, where there is significant income inequality across socio-economic classes.

However, the financial services landscape is rapidly changing as a result of the disruption and innovation introduced by fintech, anyone with an Internet-enabled phone can access a plethora of financial services, from payments to insurance, all at the tap of a button. This means that a significant number of Nigerians can participate in the digital economy: businesses and opportunities have been birthed that a few short years ago would not have been feasible, thanks to the rise of fintech adoption. All of these point to significant growth in the volume of transactions within the financial services sector, as well as the consequent gains in economic activities.

Additionally, the entrance of telcos into the financial services sector means that they can take important financial services the last mile simply by riding on their existing infrastructure, especially in rural areas. This has also significantly changed the financial services landscape, along with the many other benefits such as the many jobs being created.

Financial inclusion is one of the objectives of the World Bank. In Nigeria, the Central Bank of Nigeria (CBN) has a target of reaching 80 percent inclusion by the end of this decade. How are fintechs contributing to meeting these targets? 

  In addition to enabling ease of access to financial services, Fintech contributes to meeting the targets of both the World Bank and the CBN in several ways. The first is through solutions such as SMS banking and agent banks, which deepen the reach of financial services, especially in rural areas. As stated earlier, not only do these services bring financial inclusion to the last mile, but they also create employment, which in turn contributes to nation-building and economic growth.

Secondly, fintech enables SMEs to plug into the digital economy, with tools to not only access capital, but also manage and run their businesses and operations. These services and tools support business processes, enabling efficiency and profitability.

All of these point to significant growth in the volume of transactions within the financial services sector, and the consequent gains in economic activities. One can confidently say that fintech has significantly expanded the scope of the financial services sector beyond its traditional service offerings. The growth of the fintech space in Nigeria, therefore, can be said to be directly related to an increase in economic activity and wealth creation, invariably adding to the targets of both the World Bank and CBN.

What would you say is the impact of financial inclusion on economic growth and stability?

Interestingly, while financial inclusion can have both positive and negative influences on financial stability, the positive influence and impact it has on economic growth and stability cannot be overemphasised. These include diversification of bank assets, increased stability of deposit base, and increased monetary policy transmission. On the flip side, a decrease in loan standards, bank reputational risks, and inadequate regulations are some of the most common negative influences.

Exclusion from financial services severely limits economic participation and hinders an individual’s ability to grow wealth and rid themselves of poverty. In developing economies like Nigeria, the people who are typically excluded from financial services are ironically the ones who desperately need financial inclusion and the benefits it offers the most. These are the people found at the bottom of the economic pyramid.

It is remarkable to note that they represent a significant percentage of the population: nearly 40 per cent of adults, in Nigeria’s case, according to 2021 data from EFInA. With such a high percentage of our population excluded from access to financial services, the economy and GDP suffer as a result. We are effectively leaving money on the table so to speak when nearly half of the adult population cannot contribute meaningfully to the GDP. It also means that so long as this segment of our population remains unable to grow wealth and rid themselves of extreme poverty, the Nigerian economy cannot reach its full potential.

Thanks to the proliferation of tools and platforms created by fintech, many more individuals and small businesses can conveniently access a plethora of financial services, and participate in the digital economy, building more businesses and opportunities as a result of the adoption of fintech adoption.

How does FITC contribute to the attainment of these goals while supporting the vision for a stable financial system?

Financial stability is extremely important for economic growth, as most transactions in the actual economy are made through the financial system, and the best way to understand how important financial stability is is to experience periods of financial instability.

As an innovation-led and technology-driven organisation, FITC remains the leading knowledge solutions provider to consumers, operators, and investors within the financial services sector and other sectors of the economy. Our mandate remains to equip our clients with relevant skills and knowledge for business performance, organizational growth and success. Through our Advisory services, Executive Education, BoardLeadership and bespoke programmes, as well as our thought leadership conferences, research and industry reports, FITC provide actionable insights and knowledge to players and operators in the financial services sector and particularly within the fintech space.

To actualize the vision of a financially stable economy, FITC has remained committed to supporting all players in the financial services sector with the relevant knowledge and skills to meet the challenges of a rapidly evolving sector. We have designed programmes and workshops, to specifically address all identified gaps. These programmes help regulators understand the fintech space: the opportunities, associated risks and how to create frameworks to safeguard consumers while enabling operators to remain innovative and profitable.

For instance, FITC designed the Risk-BasedSupervision for Fintech programme to enable regulators to effectively address the risks and challenges inherent in the growth of the fintech sub-sector across Africa. This programme focuses on the most vulnerable areas and risks associated with fintech operations. It also addresses the financial stability of the industry, as well as key principles and methodologies for building supervisory frameworks. The first edition of the programme was launched in February in Rwanda, and the second in Dubai with participants from central banks from across Africa.

What other steps is the company taking to deepen the knowledge industry and help in proffering solutions to challenges facing the financial services sector?

In addition to our innovative programmes for fintech, we firmly believe that the financial services sector performs best when there is synergy through several innovative initiatives, one of which is our thought leadership Programmes and conferences for all players and regulators alike.

Every year, we bring together the best of resources from the financial services sector, Fintech companies, consulting, regulatory bodies and technology experts representing a pool of knowledgeable individuals and organizations from across the world to share insights on contemporary issues on technological innovations and the financial services sector at our highly innovative FITC Fintech Conference. This year, the FITC TechnovationConference themed: ‘Repositioning the Fintech Industry for Sustainability and Performance: Strengthening Institutional Frameworks’ will be held.