The Managing Director/General Manager of the Chizor Malize Financial Institutions Training Center, in this interview, talks about the need for financial technologies (fintechs) as tools to deepen financial inclusion, reduce the number of unbanked and reduce the poverty. GEOFF IYATSE was here.
Technology is broadly defined as the application of scientific knowledge to simplify life’s problems and challenges. How are technology and innovation changing the world around us?
The advent of technology and its global adoption has changed the way we live for the better. From transportation to education and health care, technology has improved service delivery and facilitated access to many facets of our daily lives. This is especially true of financial services.
Today, thanks to financial technology, it is not necessary to be physically present in a bank, for example, to initiate transactions or receive funds. Services such as e-wallets and other payment infrastructure that make it easy to send and receive money, as well as tools for activities such as budgeting, investing, microcredit, insurance and more Again ; mean that individuals and businesses can actively and easily participate in the global economy.
It is no longer clear 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 embraced in the country, especially by older generations, who still really trust our traditional banking system, trust in fintechs is growing among low-income segments. , with 51% young and mass-market customers (according to Mckinsey). SMB owners also say they are increasingly trusting fintech because of its speed of execution. Using technology, many of these fintechs have expanded the reach of agency banking in suburban areas of Nigeria, providing many with access to much-needed financial services. These are just a few of the many ways technology is redefining standards 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 democratized access to banking and financial services, providing even more Nigerians with benefits beyond savings and payments. More importantly, Fintech helps bridge the gap that currently exists for the unbanked.
According to a 2020 EFInA report, over 35% of Nigerian adults are excluded from financial services. Put simply, over forty million Nigerian adults have no 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 are significant income inequalities between socio-economic classes.
However, the financial services landscape is changing rapidly due to the disruption and innovation brought by fintech, anyone with an internet-enabled phone can access a plethora of financial services, from payments to insurance, while pressing a button. This means that a significant number of Nigerians can participate in the digital economy: businesses and opportunities have emerged that would not have been possible a few years ago, thanks to the surge in technology adoption. financial. All of these points to significant growth in the volume of transactions within the financial services sector, as well as consequent gains in economic activities.
Additionally, the entry of telecom operators into the financial services sector means that they can take important financial services to the last mile simply by using their existing infrastructure, especially in rural areas. It has also significantly changed the landscape of financial services, along with many other benefits such as the many jobs created.
Financial inclusion is one of the objectives of the World Bank. In Nigeria, the Central Bank of Nigeria (CBN) aims to achieve 80% inclusion by the end of this decade. How do fintechs help achieve these goals?
In addition to facilitating access to financial services, Fintech contributes to achieving the objectives of the World Bank and the CBN in several ways. The first is through solutions such as SMS banking and agent banking, which expand the reach of financial services, especially in rural areas. As noted earlier, these services not only bring financial inclusion to the last mile, but they also create jobs, which in turn contribute to nation building and economic growth.
Second, fintech allows SMEs to connect to the digital economy, with tools not only to access capital, but also to run and manage their businesses and operations. These services and tools support business processes, driving efficiency and profitability.
All of these point to significant growth in the volume of transactions within the financial services sector and the resulting gains for economic activities. It can be said with confidence that fintech has greatly expanded the reach of the financial services industry beyond its traditional service offerings. It can therefore be said that the growth of the fintech space in Nigeria is directly linked to an increase in economic activity and wealth creation, invariably adding to the objectives of the World Bank and the CBN.
What do you think 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 overstated. These include diversification of bank assets, increased stability of the deposit base, and increased transmission of monetary policy. On the other hand, lower lending standards, reputational risks to banks and inadequate regulations are some of the most common negative influences.
Exclusion from financial services severely limits economic participation and hampers an individual’s ability to become wealthier and overcome poverty. In developing economies like Nigeria, the people who are typically excluded from financial services are, ironically, those who desperately need financial inclusion and the benefits it offers the most. These are the people at the bottom of the economic pyramid.
Remarkably, they represent a significant percentage of the population: almost 40% of adults, in the case of Nigeria, 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. We are effectively leaving money on the table so to speak while almost half of the adult population cannot contribute significantly to the GDP. It also means that as long as this segment of our population remains unable to enrich themselves and get rid of extreme poverty, the Nigerian economy will not be able to reach its full potential.
Thanks to the proliferation of fintech-created tools and platforms, many more individuals and small businesses can easily access a plethora of financial services and participate in the digital economy, creating more businesses and opportunities. through the adoption of fintech.
How does the FITC contribute to achieving these goals while supporting the vision of a stable financial system?
Financial stability is extremely important for economic growth, because most transactions in the real economy are carried out through the financial system, and the best way to understand the importance of financial stability is to experience periods of financial instability.
As an innovation and technology driven organization, FITC remains the leading provider of knowledge solutions for consumers, operators and investors in the financial services industry 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 consulting services, executive education programs, board and bespoke programs, as well as our thought leadership conferences, research and industry reports, FITC provides actionable information and insights to players and operators in the financial services industry and in particular in the area of fintech.
To achieve the vision of a financially stable economy, the FITC is committed to supporting all players in the financial services industry with the knowledge and skills necessary to meet the challenges of a rapidly changing industry. We have designed programs and workshops to specifically address any identified gaps. These programs help regulators understand the fintech space: the opportunities, the associated risks, and how to create frameworks to protect consumers while enabling operators to remain innovative and profitable.
For example, the FITC designed the Risk-Based Supervision for Fintech program enable regulators to effectively address the risks and challenges inherent in the growth of the fintech sub-sector in Africa. This program focuses on the most vulnerable areas and risks associated with fintech operations. It also discusses the financial stability of the industry, as well as key principles and methodologies for developing supervisory frameworks. The first edition of the program was launched in February in Rwanda and the second in Dubai with participants from central banks across Africa.
What other steps is the company taking to deepen the knowledge industry and help deliver solutions to the challenges facing the financial services industry?
In addition to our innovative fintech programs, we strongly believe that the financial services industry works best when there is synergy across multiple innovative initiatives, including our thought leadership programs and conferences for all stakeholders and regulators.
Each year, we bring together the best resources from the financial services industry, Fintech companies, consultancies, regulators and technology experts representing a cross-section of knowledgeable individuals and organizations from around the world to share ideas on contemporary issues related to technological innovations and finance. services sector at our highly innovative FITC Fintech conference. This year, the theme of the FITC TechnovationConference was: “Repositioning the Fintech industry for sustainability and performance: strengthening institutional frameworks” will take place.