The major launchpad for Nigeria’s Digital Banking began in 2012 when the country’s apex bank, the Central Bank of Nigeria (CBN) announced the implementation of cashless policy. The policy marked the evolution of the banking sector of Africa’s biggest economy and set off an era of leveraging technology to deliver financial services through electronic means.
Mobile telecommunication in general took a new turn in 2001 as GSM launched in Nigeria through Econet and MTN – a development that heralded the wider use of smartphones. Internet network would then advance from GPRS’s Second Generation (2G) and Third Generation (3G), to LTE’s 4G and now, the 5G – about ten times quicker than LTE’s ten milliseconds.
These technology advancements open more possibilities for Digital solutions and shaping the future of banking, thereby helping financial services providers to offer more personalized service, improve efficiency, and increase profit. Frontiers Technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Blockchain, Big Data and Cloud Computing are changing the Business environment, and Banking is fast moving from the traditional ways to Digital Banking. For instance, the Internet of Things (IoT) helps financial institutions in providing new insights and tools to optimize performance and reduce downtime. IoT uses data and analytics to predict when equipment is likely to fail, so that maintenance can be performed before the failure occurs.
Artificial Intelligence enables banks to manage huge volumes of data at record speed; some of its features such as AI bots, digital payment advisers and biometric fraud detection mechanisms lead to higher quality of services to a wider customer base. Blockchain on the other hand builds a decentralized database of digital and unique assets while Big Data helps banks detect possible fraud before irreparable damage occurs, provide support in monitoring suspicious transactions, and increase the security of investments and privacy of customer accounts. Cloud Computing helps financial institutions to store and process data in remote servers instead of local systems.
Nigeria is not only giant of Africa per its population, but the country is proving that it is worthy of its role as a rallying point for Digital Banking and a point of reference for Banking revolution in Africa. Fintech businesses are springing up in numbers and getting foreign investors to expand their footprint beyond the shores of Nigeria. As of 2022, there were about 200 fintech firms in Nigeria, 27 percent of which specialize in payments and remittances.
Last year, Nigeria came tops in Google Black Founders Fund (BFF) for startups in Africa with 23 slots from the 60 eligible startups across Africa. The BFF granted $4 million dollars funding to enable tech startups scale up their ongoing work. Kenya and Rwanda received 12 and 6 grantees respectively. This development in the Banking sector of Africa’s most populous nation underscores the fact that the country is rapidly becoming the Digital Banking capital for Africa as it addresses the huge numbers of unbanked Nigerians and speeding up financial inclusion.
Financial inclusion is when individuals and businesses have access to basic financial services and products such as bank accounts, loans, and insurance, in a manner that is sustainable and affordable. According to the World Bank’s 2021 Global Findex report, Nigeria is one of the top three unbanked countries in the world, with 40 per cent of its population without a bank account and out of the 59 million unbanked adults, 73 per cent do not have the requisite documents to open a tier-three bank account. Despite having an amazing growth in its Digital Banking portfolio, this staggering data shows that Nigeria is a fertile ground for Digital Banking and when Nigeria gets it right, it will greatly impact Africa.
Investments in fintech startups imply that new technology will continue to be produced on the continent, leading to an increasing number of innovative services. Of the US$4.9 billion in total estimated funding in 2021, 62% went to fintechs, according to a report from Briter Bridges. The report also stated that “Financial technology companies continue to capture the largest share of funding on the continent, capturing almost two thirds of total funding into technology companies across Africa.”
Technologies have not only expanded the possibilities in Banking but have also aided sustainable environment in that, activities that previously required physical presence, or writing on paper can now digitally be achieved end-to-end. This change is having a profound impact on all aspects of banking: staffing strategies, operational expenses, customer relations, security, etc.
The rise of investment-inspired fintechs has fueled a new generation of digital products that transform access to financial services. With high smartphone penetration, a young demographic and a large unbanked population, the African market is ripe for the transition to digital banking, and Nigeria’s influence, as an elephant, will ripple across the continent.
