Fintech In Africa And The Disruption That May Never Happen

According to Wikipedia, Financial technology (FinTech) is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. FinTech is a new industry that uses technology to improve activities in finance. The use of smartphones for mobile banking, investing services and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public.

Financial technology companies consist of both startups and established financial and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.

FINTECH IN THE GLOBAL SCENE

According to the report released by Accenture in 2017, Global investment in financial technology increased more than 2,200% from $930 million in 2008 to more than $22 billion in 2015. Thus shows the exponential growth experienced by this industry globally. Various other reports and publications such as Stockholm Business Region publication (June, 2015) and Redherring.com reporting that in Europe, $1.5 billion was invested in financial technology companies in 2014, with London-based companies receiving $539 million, Amsterdam-based companies $306 million, and Stockholm-based companies receiving $266 million in investment are strong pointers to the increasing investments enjoyed by this industry.

With all these booming investments and seemingly buoyant financial base, the question that readily comes to mind is that is the FinTech industry capable of any major disruption in the finance sector, most especially in the African Market? An in-depth look into the current state of financial affairs will be a good ground for providing factual answers.

FINTECH INNOVATIONS IN AFRICA

One of the most recent innovations in the FinTech industry in Africa is the launch of a digital platform called “Selfie” by FNB, one of the leading financial service providers in South Africa. With “Selfie”, FNB existing and new customers upload selfies on the FNB App, which captures biometric information about them. The App is linked to the home affairs department and uses Google Maps to validate addresses, doing away with paperwork for proof of residence.

Another major highlight in financial technology innovation is from Vendibit, a South African blockchain firm, opened its first commercial cryptocurrency ATM, which is inside the Spar-Northwold in Johannesburg. The cryptocurrency ATM will process digital currencies like Bitcoin, Litecoin, Ethereum, and the South African Rand. “The rapid spread of blockchain technology and Vendibit-Blockchain Teller Machine (VTM) are proof that the public is demanding access to the future, today.” Those were the words of Daniel Cappiello, Vendibit senior blockchain consultant when responding to the questions about the initiative behind this innovation.

With all these strides in the financial technology sector causing disruptions in the finance sector happening in neighboring countries in Africa, the Nigeria Banks and financial service providers seem not to be losing much sleep as these FinTechs are not considered a major threat to them.

Speaking to a church congregation at This Present House (TPH) Lekki, the CEO of Guaranty Trust Bank, Segun Agbaje, on the 6th of April, 2016 made a shocking and daring statement. He said “I confront disruptive technology for survival, I will never sit down and let other people take what I believe is my own business and my own market share, so if you think you’re PayPal or Apple Pay and I’m going to seat back, no, I will do *737, simple banking for every Nigerian and for every dollar or Naira you spend, I will spend as well, but I will not give up my market space.”

Despite the numerous global reports that banks are at the risk of losing up to 25% of their revenue to FinTech companies within the next few years, we can see that most Nigerian banks still do not consider the possibility of the FinTech industries taking over their market space and this is an assertion shared by most banks’ CEOs. The major backups to that claim are the various limitations of the FinTech industry as analyzed by Segun Adeyemi in his recent post titled: “Banks vs. FinTech – who should be afraid?” enumerated below: 

• Trust (Established Relationships) 

• Scale (Size and Reach) 

• Regulation 

• Customer Base and Distribution 

• Cash 

• Data 

• Domain Expertise

Summarily, it is really hard to disrupt banks. FinTechs are innovating the financial services space but aren’t necessarily disrupting it. The real disruption to banks in Africa and even globally is more likely to come from Telcos and global tech giants than from typical pure FinTechs. Banks and FinTech need to work together. A partnership offers the banks a potential path to new markets, new products and growth opportunities. This is not new because most of the “successful FinTech startups” in Africa today have some form of strong bank affiliations.

Thanks for your time.