The size of banks may not be a competitive advantage in the new phase of centralised finance, Special Adviser to the President on Finance and Economy, Mrs. Sarah Alade, has said.
Speaking at the Chartered Institute of Bankers of Nigeria (CIBN) Presidential Valedictory Address in Lagos at the weekend, she cautioned banks thinking size is everything to have a rethink.
Alade predicted that competitive advantage, built on size will lose its relevance while speed and core flexibility will become advantage.
Former acting governor of Central Bank of Nigeria (CBN), Alade spoke on Entrepreneurship, Innovation and Disruptions in the Nigerian Banking Industry: What Next.
She said the banking system is becoming agile, with focus on complicated and changing consumer dynamics.
According to her, innovations and disruptions of online banking became a key milestone, conceding control and flexibility to consumers.
She said increasing penetration of key variables of blockchain, and cryptocurrency are opening up a new frontline in finance, urging that banking must brace itseif for the prominence of centralised finance.
“… cryptocurrency and its attaining popularity is making threats and opportunity to which the banking industry must raise its preparedness. Substantial and potential bank deposits could become held up in crypto assets,” she said.
Alade added that challenger banks are rising, and providing major push for financial inclusion, while rewriting age-long banking services.
She said customers are now focus of tailored business model in new banks, while they demonstrate their ability to adapt, and transform in keeping up with customer base.
“The customer-centric model, and tenacity to drive it, is becoming relevant to survival and growth of every bank. Nigeria banking industry, going forward, must sustain its IT alertness. The accelerated case of technology will carve out new market segments in the industry, and this will turn out the next growth engine,” she said.
Alade said multitudes of informal sector players, the underbanked and unbanked will form the focus of the next disruption. In other words, the sector has not seen it all.
“Besides compulsory innovation, the significant sides of banking outcasts, or bank averse explain the gimmicks of present disruption and its potential effects. The banking industry world over is an offshoot of entrepreneurship. In its dual role, it also acts as catalyst driving entrepreneurship. Banking industry and entrepreneurship have intertwined roles that impact on the economy,” she said.
She said the relationship between banking and entreprenurship forms the basis for the evolving strategy, policy research and attention provided from the public sector to stabilise the functioning of this dual engine in banking and acting as catalyst to bringing up other businesses.
“The evolution of the banking sector is entering its most radical phase, and the drivers of its growth is changing. Entrepreneurship is a huge accelerator of banking growth. Within the last decade, innovations have disrupted the industry, with an uptick of digital technology,” she said.
Alade said the entrepreneurship and innovation in the Nigerian bank of the future, will be evaluated on its effective appeal and attraction for the underbanked.
Speaking on the gathering digital storm, she said entrepreneurship in the era of digital, borderless and global digital economy is certainly a mix bag scenario as traditional banks’ value is becoming continuously questioned by new players.
On the way forward, Alade said providing the smartest solution, through steady investment in key enablers and doing so at least cost, is essential to surviving the next phase of the banking industry.
According to her, the enormity of tech mobility in the industry, demands every bank must lay out correctly its innovation architecture to avoid possible mismatch.
Alade said the banking industry of the future, shall transform faster, not only cash-less but contactless mode as the physical contact will recede among customers, and even among banks.
“Therefore, a key area of future banks, and industry growth will require rapid progress in the security position and cyber processes. The least vulnerable in that era will attract customers loyalty and competence. Nigeria banking industry must brace up to ramp up innovation in this regard, and get ahead of any compromise and breach,” she advised.
Alade urged Nigerian banks to brace up for a new reality, and invest in tech to achieve relevance in the coming era of centralised finance.
“Nigeria cannot afford, not to be a hope to leading banks in the continent, with stable and strong growth. The banking industry should be ready to walk its way out of the likely challenges of the future,” she said.