Banking halls are getting less attractive to customers. Huge transactions now happen outside the banking halls, courtesy of rising influence of Financial Technology (FinTech) in taking financial services to customers, the Managing Director, Nigeria Interbank Settlement System (NIBSS), Adebisi Shonubi, has said.
The NIBSS provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between banks and card companies.
Speaking at the Accion Microfinance Bank financial inclusion seminar held in Lagos at the weekend, the NIBSS boss said banks-branch transactions had dropped by 25 per cent in the last one year, as more customers embrace electronic payment, especially Unstructured Supplementary Service Data (USSD) technology platforms.
Banking transactions are moving towards zero human interactions, saving cost and time for customers. The USSD is a Global System for Mobile (GSM) communication technology now deployed by banks to offer transfer services to their customers using Android phone.
Digital financial technology, or FinTech, and particularly the global spread of mobile phones, has facilitated expanding access to financial services to hard-to-reach populations and small businesses at low cost and risk.
Shonubi said so much had happened in the digital payment system with even microfinance banks now being admitted into it.
“Microfinance banks now own their own Bank Verification Number -BVN machines and that shows the level of acceptance of technology in banking. NIBSS provides a platform that allows financial services to be provided to customers at reasonable cost. Over the last few years, the volume of digital financial has been growing, and we have brought down the cost by over 80 per cent,” he said.
Shonubi spoke of deeper issues than technology. He said only 12 per cent of bank customers were using Point of Sale (POS) machines and they are knowledgeable people within the society. “There are certain things to take place for us to have more consumers change their behavior towards digital financial services. Education about the product is key and that promotes financial inclusion,” he said.
”We need to find ways of building scales. And the cost of setting up is very high. If you are a financial institution and 80 per cent of your capital is used to set up the business, that means you can only lend 20 per cent. Everybody is now targeting 30 million customers that are largely employed people. I think there is need to target more people outside this group,” he said.
Shonubi said more surprises awaited customers using the USSD device. “I think there is much that will happen in three years around smart phones. We need to use USSD technology to provide these services. There is already knowledge, but we need to build on that.”
He explained that even with the banks, bank-branch transactions have dropped by about 25 per cent, internet banking transactions have dropped by 15 per cent while use of Apps has grown by about 10 per cent.
“But where the real growth is seen is around the USSD that has grown by about 25 per cent year-on-year. Even with the knowledgeable people, they are finding it more convenient to use than going online. So, we need to start providing services that are appropriate. People are talking about knowing what to provide, but also using channels that are appropriate is important. And that is where the opportunities really lie,” he said.
The USSD has helped bank customers facilitate low-value retail payments, grow e-payments by providing accessible electronic channels to a wider range of users and to further enhance financial inclusion. It has helped to extend e-payment benefits to payers and merchants at the bottom of the pyramid where usage of cash has been predominant.
The USSD technology has become the most accessible channel for financial and non-financial transactions. Banks have a choice of allowing their respective customers to access this new service with their customised short codes.
Shonubi said Nigeria has only 30 million accounts with verified BVN and that these customers have registered 75 million phone numbers against their names.
bank customers to open and enroll on BVN. “So, what are we finding out is that 50 per cent of those customers already have BVN. That means they already have accounts in other banks. That means there must be something they are going to the microfinance banks for that they can’t find in other banks, and I think it is credit,” he said.
He said the use of financial services by the larger population is still low, adding that out of 80 million bank accounts, only 30 million unique individuals can be identified with BVN.
“When we ran the analysis, only 3.5 million people use POS machines out of 30 million bank customers. And over 60 million cards have been issued. Why are people not using channels that are already there? What we are doing now is gathering data and trying to make it available. This will enable us understand what the issues are,” he narrated.