The threat of the digital age to traditional banking institutions is no longer a headline, together with the consensus that banks must take strategic actions to not only redefine their brands but to re-engineer their entire structure to be innovation firehouses.
Today, banks are facing threats from the new market players; FinTechs. These new players are characterized as Agile, Disruptive, Innovative and Open-Minded. These are characteristics, traditional banks are not used to either by virtue of the industry\’s stringent regulations or as a result of their rigid mindset to business. And this disposition reflects in the products and services many of them offer. A quick survey I carried out showed that retail customers rank the value they receive from their banks in the order below:
Charges (Negative)
Debit Cards to access their funds.
Security of Funds
What about interest on your savings? For those who had a savings account and many responded that they had never received interests on their savings. Unknown to them, interest is forfeited if more than 4 withdrawals are done in a month. Their responses showed that many were not receiving value for their banking relationships. So I enquired further if you had a platform that offered you the same service as your bank and even more at no charge, would you switch? The responses were hilarious. One respondent said; I will carry my entire family there. This simply indicated what the average expectation of a retail customer was in terms of service and overall value. The good news is that Winter is Coming!
With CBN\’s new directive on mobile wallets, the increase in the Loan to Deposit Ratio, the impending entrance of the Payment Service Banks (PSBs) and the \”weak\” economic growth. The banks certainly have their hands full. They most certainly would have to compete with:
MMOs to have built competencies in the mobile money market.
Microfinance institutions who are far more aggressive than most DMBs in the industry
The Telecomm giants coming into the financial services space as PSBs.
The attractive path would be to explore synergies. However, this can be exploited by players with the market experience. What I anticipate is that some banks will:
Engage in partnerships with established industry players.
Explore internal competencies to compete.
Make huge investments to attain strategic positions. A deviation from the traditional short term objective of profit.
Create or acquire innovation firehouses (FinTechs).
Increase their micro-lending efforts.
Sidon Look. (I can not come and go and kill myself)
My bet is that the brands who would remain relevant in this next phase are those willing to embrace an agile, disruptive and innovative approach to banking.
The next few months promise to be exciting.
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