PricewaterhouseCoopers (PwC) has carried out the Nigeria FinTech Survey 2017, aimed at Nigerian financial services industry leaders. The aim of the survey was to find out trends related to the impact of Fintech on Nigeria’s financial services industry, opportunities offered by Fintech, threats to existing businesses and perspectives on the way forward for Fintech and financial services players.

Among the respondents covered by the survey, 51 percent were in the banking industry, 29 percent in insurance, 10 percent in asset and investment management and 10 percent in funds transfer and payments.

Focus

Worldwide PwC estimates that in the next 3-5 years, cumulative investment in Fintech globally could exceed $150 bln.

A vast majority of the 49 respondents polled by PwC, nearly 77 percent, believed that their businesses are at risk of being lost to stand-alone Fintech firms.

76 percent believed that the most important impact that Fintech would make would be an increased focus on the customer.

86 percent of the respondents agreed that information security is the key threat issue related to the rise of Fintech.

However, there are opportunities locked away in the Fintech sector as well, according to those polled by PwC.

84 percent of the PwC survey takers think that there are additional revenues that can be viewed as key opportunities provided by Fintech. 55 percent of financial services incumbents even have Fintech at the “heart of their strategy.”

Why Fintech is seen as a disrupter

Existing financial services providers are already feeling the disruption unleashed by Fintech. In identifying what the risks are, PwC concluded that up to 40 percent of businesses are at risk of disruption by 2020.

The vast majority of respondents (92 percent and 85 percent) think that banking and fund transfer, coupled with the payments sectors, will be the most hit by a disruption in the next five years.

Insurance taking the lead

Insurance and asset management sectors are also set to be hit by disruption as the survey published by PwC says:

“The pace of change in the Insurance sector is accelerating more quickly than could have been envisaged with the emergence of mobile applications designed for easy access to transactions, insurance quotes, claims support or even roadside assistance. Respondents in Nigeria seem to be aware of this revolution with 78% of respondents indicating some part of their business is at risk of being lost to standalone Fintechs.”

Erosion of customer loyalty

There is a demographic shift underway, one in which the millennials will be the decision makers in the coming future.

This is the generation that has, for the most part, been exposed to technology as we know it today. This branch of customers also have a wide range of information at their fingertips, due to digital technology, and they expect their financial services to be delivered simply and quickly. It means all the sectors will have to be nimble and responsive and do so without wasting time. PwC quotes the Head of e-Payment Solution Group Guaranty Trust Bank Plc as saying:

“The key risk is the erosion of customer loyalty. To mitigate this, banks have to move with the times and become as agile as the Fintechs.”

Major rethink needed

Existing financial services providers have to rethink the way they are doing things today. There is a need for encouraging innovation.

According to PwC, this involves changing the “leadership-down” management style of traditional organizations. They also advocate adopting a Fintech mindset which means they would “need to understand what their customers really value and how their organization’s differentiating capabilities deliver that value.”

The nitty-gritty is that financial services organizations today operate in a very different way than Fintechs, which are more lightweight, less subject to regulations and are already offering digital solutions.

Will the powers that be rise up to the challenge that the Fintechs have thrown? The only way they can survive is if they put the focus squarely on the customer and abandon their current approach. Inertia is not an option anymore.