Winning the competition in the Nigerian digital banking and fintech sectors will be determined by the ability to change the basis of competition, over mere cost management. GTBank keeps delivering its category-leading cost-to-income ratio at sub-45% (2017 H1 was 40.2%), but that does not mean much in the digital banking era. Why? We may not even have cost to start with. The numerator of the cost-to-income ratio will tend to zero in coming years and that will be the new normal.
Within a decade, moving money around the world will be free. It is already done. Circle which received funding from Goldman Sachs allows Americans and Europeans to move money at zero fee across the Atlantic.
The future of lending, remittance and payment processing costs will be zero because technologies will reduce the friction which makes the need of having companies necessary. If buyers and sellers can come into direct contract at minimal friction, many industries will go. I expect ICT utilities like Google, Amazon and Facebook to simplify the use of blockchain within five years. If they become simplified like that of using or paying with debit/credit card, the world will change.
In this video, I explain how the Nigerian digital banking and fintech sectors will evolve in coming years. Brace for cost-to-income of sub-10% and any firm that cannot deliver that will fade.