The COVID-19 pandemic may have disrupted global systems across trade, finance, health, and education, over the last three years, but for financial inclusion, it was a significant growth enabler, which accelerated the adoption of digital payments and online banking, amidst the global expansion of formal financial services.
71% of people in developing countries now have a financial account, according to the Global Findex Database 2021 report. The gender gap in account ownership also shrunk for the first time, narrowing from 9 to 6 percentage points in developing countries. However, there is still a lot to be done as 1.4 billion people worldwide remain unbanked, with Nigeria and six other economies boasting half of this population.
Financial inclusion, a concept that describes the process of ensuring that individuals and businesses have access to useful and affordable financial products and services that meet their needs in a responsible and sustainable way, has received significant global attention in recent years. Given its critical importance in driving significant economic growth and development, more than 55 countries in the world have made commitments to financial inclusion, and more than 60 have either launched or are developing a national strategy, since 2010.
In Nigeria, The Central Bank aims to achieve 96% rate of financial inclusion in the country by the end of 2024. Presently, the progress rate stands at 64 percent as recently revealed by the Deputy Governor of the CBN, Aisha Ahmad. While this is laudable, it is imperative to understand that in achieving this goal, the financial sector must strongly leverage technology to promote and enhance access to financial services for the unbanked and underserved segments of the population, while providing strategic financial literacy to drive adoption.
The gains from a solid financial inclusion strategy are huge. In an inclusive financial sector, financial institutions may have more opportunities to garner cheap retail deposits, and thus reduce marginal costs of producing banking services output. There is also an increase in fees and commissions revenues, alongside the overall viability and stability of the financial system are some of the most obvious. When supported by an enabling regulatory framework and a proliferation of digital technology, innovation and strategic collaborations, a national financial inclusion strategy is more likely to achieve its set objectives within a reasonable time period.
The renewed commitment from the CBN on enforcing a cashless economy for Nigerians, is also encouraging more persons to use alternative channels to carry out their banking transactions. The growing number of Fintechs and licensed Payment Service Banks within the ecosystem, also presents an opportunity for improved partnerships across various categories of players in the financial services industry for both mutual and industry-wide benefits.
The growing demand for exciting digital banking experiences from millennials and 'Gen Zers' is transforming how the entire banking industry operates. This shows an increase in the consideration of diverse customer desires to access financial services from digital channels, leading to a surge in new banking technologies that are reconceptualizing the banking industry.
The population in Nigeria is growing at 2.6% a year, one of the fastest rates globally, which means that the population could double within the next 25 to 30 years. About 70% of this population are under 30, and 42% are under the age of 15. This youth population cannot be ignored.
In Nigeria, as with the rest of the world, young people are early adopters, they adopt new technologies quickly, as soon as they have the opportunity. This adaptability also applies to the several innovations in the financial sector. They would rather use digital payments on their phones, purchasing mobile credit, or even employ mobile credit for online gaming and in-app purchases instead of queuing up at a bank counter.
Considering that Gen Z is the first generation born in the smartphone era, their entire worldview revolves around mobile telephone devices. Financial service providers will need to adapt to their tech disposition to capture this huge market of over 82 million Nigerians that are Gen Zs.
For Banks, Fintech and other digital financial services providers, there is a massive opportunity to serve the unbanked Nigerian youth, if they can consistently develop and offer more convenient, faster, secure and flexible products, with lower fees, that serve the specific needs of the youth. It is always a game changer for banks when they provide responsible digital financial services for youths who have challenges accessing basic financial services.
Without a doubt, digitization is changing the way people interact with themselves and do business. It is also transforming how the entire banking industry operates globally. From retail and mobile banking, to neobank startups and even Banking as a service, technology is driving growth for almost all aspects of the banking industry and we can expect this trend to continue, going forward.
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Just having access to the Internet as well as a mobile phone, now brings a wider range of financial services within reach, such as mobile banking, online applications, payment applications, mobile wallets, in-app purchases among others. To be very clear, the banking industry is facing a future marked by fundamental restructuring and only banks that successfully manage this transition are likely to grow faster, become bigger and more profitable.
In 2023 and going forward, more people will get comfortable with personalized banking. Banking apps are already turning to smart digital assistants as opposed to serving as mere self-service tools. This trend will continue as I expect to see more closed loop solutions driven by a very fast and intuitive system of data collection.
Blockchain will witness increased adoption in the coming years, and we can expect more banks to deepen customer relationships via AI and chatbots.
Adebise recently retired as the Managing Director of Wema Bank Plc after over 13 years of service on the Board of the Bank. His retirement takes effect on the 31st of March, 2023.
