Due to the rise of fintech and the digitization of financial services, the banking industry has changed a lot in the past few years. With the rise of smart platforms powered by AI and data-driven technologies, the industry is going through a change that is likely to continue into the future.
This article will explore the impact of fintech and digitization on the banking industry, the current market value of the fintech and banking industries, and the key players in the fintech and banking industries in Nigeria.
The Impact of Fintech and Digitization
The disruption caused by fintech and the digitization of financial services is transforming the industry. Fintech startups are no longer just two young people with a dream in a garage, but highly capitalized and experienced businesses that are enabled by readily available technology. With the ability to operate on a large scale, fintech now accounts for 35% of the value chain for financial services.
The current market value of the fintech and banking industries is estimated to be around $2.5 trillion, with the value expected to continue to grow in the coming years as the industry continues to innovate and adapt to changing consumer demands.
One of the major changes brought about by fintech is the way financial institutions collaborate with third-party providers. By working with fintech, financial institutions can attract new customers and generate more revenue for their businesses. However, in order for anyone in the financial services value chain to tap into closed systems and move money and information in real-time, it must be done securely.
Key Players in the Fintech and Banking Industry in Nigeria
In Nigeria, some of the big players in the fintech and banking industry include First Bank of Nigeria, Zenith Bank, Guaranty Trust Bank, Access Bank, and United Bank for Africa. Additionally, there are fintech startups such as Paystack, Flutterwave, and Kuda Bank, as well as regulatory bodies like the Central Bank of Nigeria (CBN) and the Nigerian Postal Service (NIPOST). The Interswitch Group and eTranzact International Plc are also important players in the industry.
What’s at stake?
Fintech is making it harder for banks and other third-party providers to communicate with each other. These companies, which could be disruptive and are sometimes not regulated, have come up with new ideas quickly and filled gaps in the services offered by traditional banks and credit unions with simple but effective services.
If deposits and value-added payment revenue go away, accounts may become less profitable, which could hurt bank relationships. Financial institutions might not be aware of what they’re losing until it’s too late because it happens gradually.
The Impact of Digitization
Digitization is taking place along the entire value chain, with cell phones replacing face-to-face interactions as the primary means of communication with customers in the front office. Examples include American robo-advisors like Betterment, Asian insurtechs like Ping An, and European neobanks like Revolut.
Customer assessment, onboarding, and service are all being automated, and chat and voice interfaces are being made with machine learning and natural language processing. This simple automation has made it hard for different industries to compete with each other as they change directions to bundle and cross-sell their services.
Creating a Culture of Trust and Success
The good news is that financial institutions will still play a significant role in consumers’ lives as a source of trust. However, because that is what they have become accustomed to for the rest of their lives, they are demanding more—and sooner. As a result, some people could think that banks and credit unions are unable to accommodate their needs in the same manner as Fintech.
If financial institutions want to change this perception and keep up with the growing demand for real-time, instant, and always-on experiences, they will need flexible solutions that give customers and businesses what they want. Technology has, after all, always made financial institutions successful.
It’s time to reconsider how we see fintech. Utilize their strength and agility to quickly launch new capabilities, provide your business and customers with superior insights, and firmly establish your place at the centre of the banking relationship.
A digital mindset and an openness strategy centred on three themes—cloud enablement, an API-driven environment, and real-time data access—are necessary to participate in this new era of banking.
The Benefits of Cloud Banking
A new element in the delivery of improved services to customers is cloud computing. Although the idea is straightforward, the size, compliance, and high stakes of financial services in the cloud make things more complicated. The public cloud, which is managed by organizations like Amazon and Microsoft, the private cloud, which uses data centers managed by companies like Fiserv, or a hybrid model that uses both are the three options available to financial institutions.
More and more, it’s clear that using the cloud has benefits, such as the chance to save money and work more efficiently. Operating in the cloud can often save money because of its scalable environment, flexible design, and pay-for-what-you-use pricing model.
Although CEOs of financial institutions occasionally mention security as a worry, cloud deployment offers a lot of potential to improve security.
More money can be invested in security, risk management, and compliance by companies that offer cloud computing services than by individual financial institutions, whether they are public or private. That scale produces environments that are exceptionally resilient and risk-free. Most of the time, a cloud environment is more flexible if you need to add services for risk and compliance, real-time fraud, or other security-related integrations.
That kind of flexibility is just another crucial advantage of the cloud. In a core-hosted environment, there are definitely rules and standards, but it’s easy to make changes. Financial institutions gain from the size of those companies because the capabilities added by Fintechs are not specific to one type of business.
The Limitless Potential of Open APIs
Open application programming interfaces (APIs) are a relatively new concept, and they have countless applications. By giving fintech and other partners access to the data they need to develop improved, insight-driven experiences, an API environment offers a free market for co-innovation. As a result, financial institutions are able to roll out new products and services quickly and affordably, creating opportunities for additional revenue.
Financial institutions that make their APIs available to third parties can charge them fees based on a variety of criteria, such as the amount or kind of data they use, in addition to enhancing their traditional revenue streams. Also, financial institutions can use an app store to make new things and sell them to other institutions.
With a strong API ecosystem, financial institutions of all sizes can quickly give customers new apps that have already been approved. Mature APIs can quickly and easily handle many requests when the right controls and risk management procedures are in place. The more challenging alternative would require businesses to create their own user interfaces for each application. That is an uncomfortable but necessary concept.
Real-Time Data Access Supports Real-Time Banking
In a real-time setting, banking is a seven-day, twenty-four-hour business. The first phase of that fundamental transformation is real-time money movement, but other capabilities, such as quick access to data, go hand in hand.
A data warehouse is a place where information about customers, transactions, profits, products, and channels is kept in one place. Financial institutions increasingly recognize the value of having immediate access to those insights. This quickness also makes it possible to get information about money that can help with investing and budgeting.
Surviving in a New Banking Era
The only players left in the game are no longer financial institutions. The idea of using technology companies to manage one’s finances is becoming more acceptable to the general public. But even though consumers are starting to trust Fintechs more, banks and credit unions remain reliable and relationship-based places to handle financial transactions.
Watch for machine learning, open data standards, and artificial intelligence to eventually put pressure on community financial institutions to offer a unique experience. In this new era of financial services, banks and credit unions that continue to add value and innovate in their markets and communities have a bright future.
The possible future market value of the Fintech and Banking Industry
It is difficult to predict the exact future market value of the fintech and banking industries, as it is dependent on various factors such as technological advancements, regulatory changes, and economic conditions. However, some potential scenarios for the future market value of the fintech and banking industries include the following:
- Continued growth and consolidation: The fintech and banking industry is likely to continue to grow and consolidate as fintech companies mature and expand their services, and traditional banks adapt to new technologies and customer preferences. This could lead to an increase in market value as the industry becomes more efficient and competitive.
- Increased competition from non-traditional players: New entrants to the market, such as technology companies and non-bank financial institutions, could increase competition and disrupt the traditional business models of fintech and banking companies. This could lead to a decline in market value as companies struggle to adapt and differentiate themselves in the market.
- Shift towards digital and mobile services: As more customers demand convenient and accessible digital and mobile services, fintech and banking companies are likely to invest in these technologies and services to meet customer needs. This could lead to an increase in market value as the industry becomes more user-friendly and accessible.
- Increased regulation and compliance requirements: As the fintech and banking industry becomes more complex and interconnected, regulators are likely to implement stricter rules and regulations to protect consumers and ensure the stability of the financial system. This could lead to increased compliance costs for fintech and banking companies, potentially impacting their market value.
Overall, the future market value of the fintech and banking industries is likely to be influenced by a combination of these factors, as well as other economic, technological, and regulatory developments.
What making a career in fintech and banking digitization looks like
A career in fintech and banking digitization involves working with financial institutions to modernize and digitize their operations. This may include developing and implementing new technologies, such as mobile banking apps and online payment systems, as well as analyzing and improving existing processes to increase efficiency and reduce costs.
Individuals in this field may also work on projects related to data analysis and management, cybersecurity, and regulatory compliance. They may be involved in the design and testing of new products and services, as well as working with customers and stakeholders to understand their needs and preferences.
To pursue a career in fintech and banking digitization, individuals typically need a strong background in technology and finance, as well as excellent communication and problem-solving skills. They might also benefit from getting a degree or certification in a relevant field, like business administration or computer science.
Overall, a career in fintech and banking digitization offers the opportunity to work on cutting-edge projects and drive innovation in the financial sector. It can be a challenging and rewarding field, with individuals having the opportunity to make a significant impact on how people access and manage their finances.
In conclusion, fintech companies are disrupting the financial services industry and changing the way consumers interact with their money. However, traditional financial institutions still play a vital role in providing customers with the trust and security they need when it comes to managing their finances.
To remain competitive in the digital age, banks and credit unions need to embrace digital transformation initiatives and invest in upgrading their digital capabilities. By doing so, they can provide customers with the real-time, personalized, and efficient service they expect, and stay ahead of the fintech curve.
I hope this explanation of the significance of fintech for banks has been helpful. As you can see, banks that employ fintech app development services can give themselves long-term opportunities for successful growth and high competitiveness.
The ability of humans to change and take on new behaviors is what underlies all of these changes.