Why banks and fintechs should work side by side

Wednesday, June 3rd, 2020 00:00 |
CBK Governor Patrick Njoroge. Photo/PD/FILE

Steve Umidha @UmidhaSteve

The coronavirus pandemic is expected to change consumers’ digital behaviour, altering digital banking as we know it, experts now predict.

Polys Hadjikyriacos, chief business development officer at NETinfo, said after the current crisis, banks will need to redefine their vision and consider a new digital strategy, while re-evaluating their competition, mainly mobile-based lenders.

“The financial environment is changing, and banks need to co-exist with fintechs and telcos. 

Banks will need to find synergies between themselves, their environments and fintech companies,” said Hadjikyriacos in a recent webinar with African bank executives.

NETinfo Digital Banking Platform is a comprehensive omnichannel solution that unifies multiple channels and creates a single, seamless banking service for retail, corporate and private customers.

Mobile money

Available data by Central Bank of Kenya shows mobile money transactions stood at Sh364.5 billion as of March this year, having increased by more than Sh50 billion a month earlier.

Such transactions have witnessed exponential growth in subsequent months and experts predict double digit growth in the months ahead as Kenyans move away from handling physical cash to avoid the contracting the virus.

“In short, Kenyans will continue to transact more going forward and digital platforms will be the new normal even after the curve is flattened and number of infections contained,” said Peter Macharia, financial expert and CEO of Jijenge Credit with his comments underlining the growing importance of digital wallets to the economy especially at this time.

In contrast, before the first case was announced in the country, January saw the number of mobile payment deals drop by 4.04 million to 150.2 million, down from 154.243 million in the review period, while payment deals worth Sh371.9 billion were completed through mobile phones during the first month of year, a slight 1.05 per cent rise from Sh368.02 billion a year earlier.

Mobile and internet banking is already widespread in the country and unlike during the early years when mobile money platforms were largely used for person-to-person (P2P) cash transfers, they are now used as channels for initiating and cutting relatively low-value business deals such as purchases as well as processing instant short-term loans being taken up by increasingly growing digital lenders.

Banks, which have rapidly grown user-numbers and spent billions in developing technologies over the years, are also expected to experience a surge in mobile money transactions brought by the Covid-19.

Further, with the planned credit- guarantee scheme by the State yet to hit bank accounts of business owners, businesses are expected to rely heavily on mobile-based lending institutions to stay afloat with majority of conventional banks still reluctant to fine-tune their digital interactions with customers.

CBK Governor Patrick Njoroge in a virtual address, said that SMEs were in need of urgent help to survive the economic slowdown caused by the novel coronavirus, with many at risk of shutting down by the end of June.

Most of those businesses — presently relying on digital lenders — are expected to take advantage of credit available to them once a planned credit- guarantee scheme was in place.

“I wanted to underscore the urgency of putting in place the credit guarantee scheme. This is extremely urgent. We cannot do this as business as usual,” Njoroge told a virtual news conference.

Funding kitty

CBK had in April encouraged Treasury to create a funding kitty worth Sh100 billion to cushion distressed MSMEs against the effects of  coronavirus — with details of the credit guarantee scheme still being worked on.

“As a result of the pandemic and delay in the credit guarantee scheme, we are likely to see a rise in online banking activity and a decline in trips to brick-and-mortar branches,” said Macharia, adding that the pandemic had forced customers, who once resisted online banking, to adopt digital banking Apps as their new default.

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