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Driving financial services sector with innovative products

New financial services’ needs in Nigeria are driving innovations by banks and market regulators, writes STANLEY OPARA

Current innovations in the country’s financial market space are helping players to unleash creative juices while taking advantage of emerging technologies.

Customers’ changing lifestyles and financial services needs have and will continue to influence and shape how banks create financial products and market them.

Nigeria has continued to see a geometric rise in the number of financial products and services created by banks, and this trend will obviously continue to take reinvigorated dimensions as the market continues to get sophisticated.

To this end, an economist and Chief Consultant at B. Adedipe Associates Limited, Dr. Biodun Adedipe, says in the past two decades, the number of banks have reduced from 89 to 23, of which the abilities of the banks to be innovative given the prevailing environmental realities have shaped survival propensity.

According to Adedipe, lack of innovation will continue to impede the growth of financial institutions and eventually lead to their demise if the trend is not checked and growth measures deployed.

He maintains that inaction by financial institutions in this respect over a period of time is capable of making the institutions unattractive to clients, thus making it to get a fair valuation among stakeholders.

Experts say various innovations in the financial services sphere are made possible by the disruptions caused by the revolution in information technology and the market opportunities offered by these never-ending digital innovations.

These disruptions have changed the way the bank customer lives, sees the future and plans for it.

To retain their respective customers, build sustainable trust with potential customers, expand market share and keep up with competition, most banks in Nigeria device and deploy strong marketing strategies to keep them ahead of competitors.

Although the primary functions of banks are to mobilise deposits, credits and meet customer obligations daily, the banks have made more customers millionaires in the past decade than any other period in Nigeria. This was made possible through the creation of unique financial products that have continued to strengthen the bond and trust with the customer.

It is estimated that over 2,000 customers have been made millionaires through different financial products and marketing promotions by banks in the last five years, and this is seriously driving deposits and boosting the asset base of the banks leading the revolution.

For instance, more than half of the millionaires created by banks in Nigeria emerged from DiamondXtra customers on the Diamond Bank platform. Fidelity Bank is also another leader that has keyed into the strategy.

The Ernst & Young 2016 Global Consumer Banking Survey of 55,000 consumers in 32 countries revealed that traditional banks were under threat and their relevance with consumers was waning.

Therefore, the report recommended that traditional banks needed to rethink – and in some cases even revolutionise – their approach to consumer relationships.

The EY report stressed the need for financial institutions to show commitment to the financial development of their customers as such commitment was capable of multiplying businesses for the institutions and thus reinvigorating the economy.

For instance, the DiamondXtra scheme is said to have created over 1,000 millionaires and 90 beneficiaries that will earn salaries for life.

The bank’s books for Q3 2017 showed a significant growth in its customer deposits which contributed largely to its 71 per cent growth in profit for the quarter. It had said it was committing over N4.7bn to reward over 6,200 customers.

The Head, Information Technology at Wema Bank Plc, Adewale Saka, says, “The ease of creating banking products and services as well as making them available to customers is quite amazing and this is made possible through technology.

“Bank customers now have access to almost all banking services 24/7 including access to cash at odd hours through the ATMs, airtime recharge, bill payments, funds transfer, service subscriptions, online and offline shopping, lifestyle management and a host of others.

“Banks in Nigeria have leveraged technology to reposition banking in the minds of their customers.”

The Managing Director/Chief Executive Officer, CRC Credit Bureau Limited, ‘Tunde Popoola, had said that banks with poor innovative tendencies were fast heading towards extinction.

He said the era of traditional banking had gone and to remain relevant today, financial institutions must be very conscious about how they render services to customers.

The PwC in its 2016 Technology and Financial Services Report said, “Successful disruptors typically offer a better customer experience and greater convenience at a much lower price.

“Regulatory authorities are caught between wanting to encourage competition and innovation and wanting to provide meaningful oversight of these disruptors.

“The financial services industry has seen radical technology-led changes over the past few years. We’ve witnessed considerable innovations in the way and method of delivering banking transactions, payment methods and exchange mechanisms.

“Many executives have continually looked to their IT departments to improve efficiency and facilitate game-changing innovation – while somehow also lowering costs.”

The Director-General of the Federal Institute of Industrial Research, Oshodi, Prof. Gloria Elemo, says, “Innovative solutions can be applied to business issues so that businesses can create positive change. This can make people exploit new opportunities, refuse to give up and remake the economy for the better.”

To this end, the Central Bank of Nigeria has urged Nigerian banks to be innovative to increase their share of the global markets.

According to the apex bank, competition is getting keener in the markets, and only banks that are innovative and creative will remain relevant.

“Customers enjoy strong and competitive banking sector because of its effect of lowering interest rates and giving them choices of products and services,’’ the bank said.

In the quest to drive innovations, market regulators are also developing relevant products. For instance, since the NSE launched X-GEN in 2013, one of the mandates of the Exchange has been to make the market more accessible, using technology as an enabler.

This was achieved with the introduction of FIX protocol as the conduit to open up instant access of the Nigerian bourse to investors, media, government, software vendors, and other capital market stakeholders.

X-GEN has further accelerated financial inclusion as well as enhance investor’s participation in the capital market through initiatives like “Trade Smart”, for investors to trade on-the-go and at their convenience.

To this end, the Chief Executive Officer, NSE, Oscar Onyema, says, “Today, broker-dealers can now route orders from the convenience of their offices instead of coming to the floors of the Exchange. All these and much more have been facilitated through technology with market data as the catalyst.

“There is the need to pay close attention to the many solutions and initiatives proffered, and then proceed to leverage them in personal investment endeavours and also in innovating and enhancing efficiencies in different organisations. This is in support of our quest to raise more informed and better equipped investors.”

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