In the return of the Tally Numbers, I noted how Nigerian banks have worked hard to move customers away from banking halls only for the customers to return because of service related issues. Yes, the customers come to fix issues they encountered in the digital channels. Certainly, the banks are working hard in challenging environments and we must commend them: they run generators, hire private guards, make boreholes, etc. But at the end, they have to send tax money to the government.
The redesign to digital is global because the future of banking is digital. And software will eat the world, they say. In the UK, since 2015, retail banks and building societies have closed (or will do so) 2,868 branches by the end of 2018. HSBC, NatWest, and Lloyds Bank top the lists with the most closures.
Banks are finally moving toward a digital future. Banks have been focused on enhancing their digital channels for some time, but it seems these efforts are now translating into meaningful changes. For example, BBVA recently announced that it aims to convert 50% of its customers to mobile banking by 2019, meaning that it many of its branches would likely be redundant by then.
And other banks have stated that they are focusing their investments on digital innovation to overhaul their services, which is likely to lead to fewer physical touchpoints for consumers. Moreover, this is a trend that is not limited to the UK, but is something that we are seeing all over the world. This could indicate the beginnings of a shift toward a cash-free society in the future.
The Opportunity
Digital certainly has immense opportunity in Nigeria. The glory will come via a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. Nigerian banks must play roles in that redesign including the emerging blockchain and cryptocurrency areas.
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The Blockchain Future
The digital strategy must include how Nigeria could build a blockchain economy through a Central Bank of Nigeria blessed Nairacoin. It is very evident that cryptocurrency is becoming what many never imagined: decentralization may be on paper as actual technical capabilities are making few players lords over networks with quasi “regulatory” power. One of those new “regulators” is China-based Bitmain which controls most of the hardware and software tools for Bitcoin and other cryptocurrencies.
The promise of Bitcoin has always been about decentralization. No Federal Reserve (or central authority of any kind) was established to govern it. Despite that vision, Bitcoin does have its own 800-pound gorilla in the room.
Beijing-based Bitmain Technologies controls much of the infrastructure underlying bitcoin. The company, still 60% owned by its two founders, booked $2.5b in revenue last year – an extraordinary feat for a company founded in 2013 the same year as Coinbase). The company is now considering an IPO at a valuation north of $10b.
Bitmain is the leading producer of ASICs (“application specific integrated circuits”) and produces 80% of the world’s bitcoin mining hardware. The chips are incredibly powerful for the brute-force calculations that miners perform. The hardware is also used to power neural networks, challenging NVIDIA’s GPU as the incumbent hardware.
On top of its hardware dominance, Bitmain controls the two largest mining collectives (BTC.com and Antpool) which together have about 40% market share. The success of Bitmain has led many to question whether bitcoin is decentralized after all. (Source: Fintech Collective newsletter)
All Together
We would see branch closures at faster rate in Nigerian banking in coming years. There is certainly no other alternative if they hope to be competitive. Yet, we would also see more investments in non-digital platforms as I noted in what Diamond Bank is doing via human-platform banking.
Fast-forward, the bank is at a new game: human-platform banking. People call this agency banking. That is fair, but for me, it goes beyond agents if you read one of the key components of the CLOSA account …
So, we would see many branches disappear in our cities and neighborhoods. Yet, at the same time, banks would need many people to reach new customers as they pursue financial inclusion and deepen retail banking. Interestingly, a key component of this human-platform banking is anchored on digital tools which make it possible for associates and partners to connect from the “fields” into bank ecosystems at scale.
The irony is that as Nigerian banks close branches, they would create more non-digital jobs as digital technologies help them to pursue markets and territories they have ignored for years. The world has five hundred years of records: when new consumer technologies penetrate at scale, good things always happen on human welfare and standard of living. Say it another way, more opportunities emerge even though there may be labour displacement. So, let us not be fearful of the branch closures. Those farmers,artisans, villages etc banks are reaching will expand and make up for the losses associated with the branch closures.
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