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Bringing more Nigerians into formal financial system

dr-segun-aina

Dr. Segun Aina

Experts say the government needs to adopt digital payment to enable more Nigerians to gain access to formal financial services, OYETUNJI ABIOYE writes

New reports show that 39 million Nigerian adults are still without access to formal financial services.

This may be a surprise to many people considering the fact this is the 21st century.

It shows the government has a long way to go in terms of bringing more Nigerians into the formal financial system.

The Financial System Strategy Vision 2020 of the Federal Government is seeking to ensure that 80 per cent of Nigerians gain access to formal financial services by 2020.

Currently, only approximately 49 per cent of the adult population have access to formal financial services.

Financial experts say the only means by which the government can achieve this objective is to adopt digital payment system.

According to them, the quest to reduce the population of adult Nigerians without access to financial services requires the alignment of digital payment strategies with the nation’s financial inclusion goals.

 “The key to solving this challenge is innovative digital payments solutions that offer convenient, affordable and reliable financial services, driven by collaboration among stakeholders, as well as enabling regulatory framework that encourages competition and innovation,” the Chairman, the Committee of E-Business Industry Heads, Mr. Dele Adeyinka, says.

While the nation has recorded some progress in the achievement of the National Financial Inclusion Strategy goal which seeks to reduce the number of adult Nigerians without formal access to financial services to 20 per cent by 2020, Adeyinka believes that the government must embrace digital payment more in order to achieve this.

The President, Financial Technology Association of Nigeria, Dr. Segun Aina, says the future of banking and the payment system depends on financial technology.

As such, he posits that for the government and private sector to make progress in terms of the payment system and financial services, there is a need to adopt financial technology.

Aina says, “My background in banking has made me to see this over 15 years ago. The future is fintech and we must adopt this if we are seeking to make progress in the banking sector and the economy in general.”

The CeBIH Chairman, Adeyinka, says the need to get more Nigerians into the formal financial system by 2020 represents a challenge as well as an opportunity for the industry.

He says, “Meeting this demand and need is a huge challenge. But it also presents very big opportunities. It is with this back ground in mind that CeBIH decided to take a cursory look at this policy frame work at a recent retreat, particularly as we are only three years away from the magic year 2020 referred to by the policy.”

He, however, notes that it is worrisome that 39 million Nigerians adults are still without access to basic financial services, 10 years after the inauguration of the Payment Systems Vision 20:2020 as a driver for financial inclusion.

A payment system expert at the Lagos Business School, Dr. Yinka Davis, says digital financial services will help to remove many of the barriers to financial inclusion encountered by the financially excluded.

She says, “It is affordable, and eliminates barriers of distance and access. It results into employment opportunities, enhances commerce and supports microfinance. The potential of the DFS is enormous if well exploited. It is not about big value transactions but low value transactions that happen frequently.”

According to Davis, research shows that there is an informal equivalent for every financial service offered by banks, and hence the challenge for banks is how to get people in the informal sector to patronise them.

This, she says, requires banks to build products and services based on understanding of who the people are and what they really need.

On the need to use mobile phones to deliver digital payments, Davis calls for increased awareness and home-grown mobile payment solutions that incorporate the use of local languages for payment transactions.

The CBN Deputy Governor, Operations, Mr. Adebayo Adelabu, told audience at the retreat organised by CeBIH recently that the National Financial Inclusion Strategy placed greater emphasis on availability of payments services for the extension of financial service.

He said, “The expectation of the strategy is to have 80 percent of adult Nigerians have access to payments services by the year 2020 in order to reduce the exclusion rate to 20 per cent by year 2020. While this may appear daunting, it is not beyond your reach. In fact, it opens the industry up to opportunity of having more customers, diversifying its deposit base and increasing revenues.”

Adelabu, therefore, called for increased investment in digital payments and cooperation especially between banks and financial technology firms.

He explained, “The scale of transactions that we can drive through digital channels is therefore a compelling business case for you to increase investment in this segment of banking business.

“This business case, as you may have observed, is driving the interest of fintechs into the banks’ terrain and failure to be agile in responding, not necessarily by stifling the space but by collaborating with the new entrants will impact banks negatively.”

A payment technology expert and Chairman, SecureID, Mr. Adedotun Sulaimon, in his keynote address at the CeBIH conference, a copy of which was obtained by correspondent, called for digital payment products based on customers’ needs.

He said, “It is also pertinent to highlight the instructive lesson that the financial services sector needs to rapidly absorb very useful insights from the experiences of consumer goods and mobile services industries, which happen to have leapfrogged banking as far as achieving far greater outreach and penetration of their products and services, and herein lie the imperatives for industry players.

“Specifically, these insights lie in the following areas: Understanding consumer needs and staying connected as the needs evolve; designing products that adequately address those needs and create a customer pull; leveraging and riding on deep, broad, and resilient, third party distribution networks which are not necessarily part of their owned infrastructure; and effective branding, marketing, promotion and active consumer engagement and education.”

A financial technology expert at Cymantics, Emeka Okoye, says banks need to take advantage offered by the explosion of digital data in their quest to extend financial services to more people.

Okoye says, “The high mobile phone penetration across the nation offers financial inclusion a huge opportunity to offer the unbanked with a ‘customer-centric’ approach. Every time these individuals make a phone call, send a text, browse the Internet, engage social media, or top up their prepaid cards, they deepen the digital footprints they are leaving behind.

He adds, “These digital footprints are helping to spark a new kind of revolution in lending. In the last few years, a cluster of fast-emerging and innovative firms, fintechs, has begun to use highly predictive technologies and algorithms to interrogate and generate insights from these footprints.

“Together, these consumer, data, and digital revolution trends are helping to change the landscape of inclusion and reach, offering the promise that billions of previously ‘invisible’ consumers can be ‘visible’ for the first time.”

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