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Report: Why Nigerian banks should embrace Fintech

Commercial banks in Nigeria have been advised to forge partnerships and build trust in fintech firms.

 

According to a report on the role of fintechs in the economy, a partnership between the two financial services businesses will help the country deepen its digital economy.

 

The report by the Emerging Technologies Unit of the Research and Development Department of Nigerian Communications Commission (NCC) noted that the partnership between fintechs and banks, alongside tight security policies and regulations, would create a free flow of information and analysis of data to and fro which is necessary for the development of a Digital Economy for Nigeria.

 

While identifying fintech as a key component of the country’s digital economy project, the report noted that the fintech industry has been rising steadily in Nigeria as the youthful population is deploying their creativity to create massive employment and prosperity, developing homegrown solutions to solve unique challenges in various ways and exporting and deploying some of the solutions beyond the shores of Africa.

 

Noting that the African continent in general had already proven its readiness for Fintech and its digital innovations since it has one of the highest mobile phone penetration levels in the world and currently experiencing a boom in mobile financial services and payment technologies, the report stated that the revolution in Africa is primarily fuelled by the continent’s three main hubs of South Africa, Kenya and Nigeria.

 

Highlighting the critical roles of the fintechs in a digital economy, the researchers said: “Fintech can create impact in three broad dimensions, through stimulating economic activity, by creat

 

ing a multiplier effect, and by driving progress towards development goals. “Economic impact will primarily come from expanding revenue pools and attracting foreign direct investment to the country. The sector can unlock economic benefit by driving increased productivity, capital, and labour hours through the digitisation of financial services. “Fintech collects financial data. Financial data provides a clear picture of a person’s financial status, spending preferences, creditworthiness, and his or her general habits. A person’s spending also reveals a lot about their health status. All these available data leads to the development of appropriate innovative Apps to address Nigerian tastes and needs.” The report added that this

 

 

also provides positive data for government’s policy decisions. “For example, if a particular state or geopolitical region of Nigeria rarely carries out online services as culled from available data, it presupposes that a mix of lack of digital skills, lack of introduction of digital technology to the area, and lack of finances to partake in digital services is the reason.

 

“These lead to positive regulatory and policy decision making on the role of the Central Bank of Nigeria (CBN) on mobile payment market penetration to that area, the role of the Nigerian Communications Commission on the improved rollout of 3G and 4G services to the area as well as efforts for local manufacturing of telecom devices,” it said.

 

Fintechs, the report said, could also efficiently raise loans for SMEs or individuals with no credit history, using technology (Artificial Intelligence and Machine Learning) that supports alternative data for decision making based on the need of the applicant.

 

“This creates ample room which allows small and medium- sized businesses to grow faster and expand further. “Furthermore, with gathered data by FinTechs, Data mining techniques come into the picture. Nowadays several financial decisionmaking methods are based on Machine Learning techniques.

The analysis of data attributes like Customer ID, limited balance, gender, education, marital status, age, etc. all now come into play in determining customers crediting worthiness,” it added

 

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