‘With PSBs, banking has become business unusual’

strong> The Managing Director/Chief Executive Officer, Financial Institutions Training Centre (FITC), Chizor Malize, during a media interview with GEOFF IYATSE, talks about the necessity of financial technologies (fintech) as tools for deepening financial inclusion, reducing the number of the unbanked and reducing poverty.

How are technologies and innovations changing the world around us?
The advent of technology and its consequent adoption globally, have changed the way we live for the better. From transportation, and education to 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 needs not to be physically present at a bank, for instance, to initiate transactions or receive funds. Services such as e-wallet, and other payment infrastructure that makes sending and receiving money conveniently, along with tools for activities like budgeting, investing, micro-lending, insurance and many more mean that individuals and businesses can actively and conveniently participate in the global economy.

It is no longer news how the various fintech companies such as Paystack, Flutterwave, Piggyvest, Remitta and Kuda are disrupting the Nigerian financial industry. Even though the rise of fintech has not been fully adopted in the country, especially by older generations, who still trust in our traditional banking system, the trust in fintech is growing among lower-income segments, with 51 per cent of youth and mass-market customers (according to Mckinsey). SME owners also say that they increasingly trust fintech because of its speed in operations.

How is this disruption driving financial inclusion?
Fintech has democratised access to banking and financial services, providing even more Nigerians with benefits beyond 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 40 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, with 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 a 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.

Also, the entrance of telcos into the financial services sector means that they can take critical financial services to 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 many jobs being created.

Financial inclusion is one of the objectives of the World Bank. The Central Bank of Nigeria (CBN) targets 80 per cent inclusion by the end of this decade. Are these targets achievable with the adoption of fintech?

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. 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.

Also, 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 activities 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 overemphasized. 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 them 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.

What efforts are companies in your space making to support upskilling to catch up with the speed of change?
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, organisational growth and success. Through our advisory services, executive education, board leadership and bespoke programmes, as well as our thought leadership conferences, research and industry reports, FITC, provides actionable insights and knowledge to players and operators in the financial services sector, and particularly within the fintech space.

To actualise 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-Based Supervision 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.