COVID-19: A DISRUPTIVE FOR FINTECH ECOSYSYTEM
A panel discussion of Fintech with some digital financial professionals, where we have, Mr Abubakar Suleiman, the Managing Director of Sterling Bank, Dr Emmanuel Eze, Executive Director, system Specs limited, Mr Wole Oyeniran, associate director, Dr Babatunde Obrimah, Chief Operating Officer at the FINTECH Association of Nigeria who is also the moderator of the panel discussion. The panel discussion is about the implications of the pandemic on the financial sector and how the effects can be averted on FinTech ecosystem.
WHAT IS FINTECH?
Financial Technology, abbreviated as FinTech is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. It deals with the use of smart phones for mobile banking, investing, borrowing services, and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public.
It is an emerging industry that uses technology to improve activities in finance. It is a fast growing technology now in Nigeria, it consists of startups and established financial institutions and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.
The FinTech ecosystem in Nigeria is known to be a disruptive one since the Pandemic outbreak.
THE IMPLICATIONS OF COVID-19 ON THE FINANCIAL SECTOR TO PUSH RECAPITALIZATION OR DOWNSIZING
Since the outbreak of COVID-19, there has been an economy downturn and depending on how quickly we respond to this downturn or whether we are able to mitigate the impact, that could later lead to financial crisis. The collaboration between the international financial institutions, the government and the bank themselves is directed at averting this financial crisis.
According to the managing Director of Sterling Bank, Mr Abubakar Suleiman: “If we don’t see a financial crisis, the chances to push recapitalization, may become an option rather than mandatory and downsizing may not be necessary. It is now down to how successful are all interventions we have now seen today. Luckily, for us in Nigeria, the banks have gone into this circle with a very robust capital, the average of about 15% capital adequacy in an industry, where the capital adequacy in other places is barely up to 5%-8%, that has given us some strength.
The other areas where financial institutions have shown strength is in significant amount of liquidity, the Nigerian banks has been liquid since the pandemic outbreak, and it’s not just the naira liquidity that is in place, there is also a significant amount of dollar liquidity arising from the winding down of large trade books which are much smaller now and the financing now longer duration.
According to Managing Director, Sterling bank: “I don’t think this will be as bad as previous economic recessions for financial institutions and financial technology”.
HOW COVID-19 OUTBREAK HAS LESS EFFECT ON FINTECH ECOSYSTEM ESPECIALLY COMPANIES THAT ARE STRONG PILLARS FOR TSA AND GOVERNMENT REVENUE IN NIGERIA
With the lockdown, that is been experienced in the entire country, it has affected different sectors in the industry and the government included, it has equally affected the ecosystem. However some government parastatals, which happen to have very strong digital or online presence are still able to continue transactions, so the impact of the pandemic is there but not that enormous because some players within the government sector have strong online presence and are able to continue to render their financial services within the FinTech space.
According to Dr Emmanuel Eze: “if we look away from the government and take a look at businesses and operations that render services to consumers directly, interestingly these businesses are on the bright sides in terms of patronage, because a lot of people are at home and they have to use one or two online resources which they are not accustomed to doing. But overall, if we look at the wide range of sectors that we service, there are different sectors experiencing the lockdown, we are not able to see the kind of traction we normally see at this time of the year. So, I will say YES, the COVID-19 pandemic is affecting our businesses and other sectors”.
COVID-19 is a growing threat, which did not give the healthcare frontliners a clear direction as to the extent of its outbreak. A lot of tools, intellect and human capital are needed to dig our financial ecosystem and other sectors out of the pandemic and the lockdown effect.
As a Consultant in the FinTech industry, Mr Wole Oyeniran said: “the idea of global pandemic has always been there because there is a board group known as The Global Preparedness Monitoring Board, that always predicted that this kind of outbreak could happen. So, the only thing was that, there was no clarity to if COVID-19 was the outbreak that would cause this lot of crisis at the beginning of the year. This pandemic has really affected us in a number of ways, it has affected the oil prices, balancing of trades and it has caused some other ripple effects which are now devastating”.
POLICY MEASURES AND REGULATIONS, THE CENTRAL BANK OF NIGERIA HAS INITIATED TO HELP CUSHION THE EFFECT OF THE PANDEMIC ON THE FINANCIAL ECOSYSTEM
The Central bank of Nigeria, CBN has rolled out some policy measures to lessen and cushion the effect of the pandemic on our banking and cash flow system on the 16th of March.
According to a Director of the Central bank of Nigeria, Mr Oladimeji said: “There is an intervention the CBN released called 15billon COVID-19 intervention fund. I would also like the FinTech to take the opportunity of these funds”.
The CBN is working on some initiatives to make business easier for FinTechs some of which are:
According to Mr Oladimeji: “in line with our practice to promote innovation friendly policies, the regulatory sandbox when rolled out would also enable FinTech businesses to have a better and faster time to market. There have been instances where some FinTechs have complained about the minimum shareholder’s funds requirement from 100 million- 2 billion naira, depending on the license category, some of them have good and fantastic business ideas, but don’t have the ability or capacity to raise funds to accomplish this ideas”.
The regulatory sandbox allows the FinTechs ideas to be tested in an environment that is supervised by a regulator, before receiving endorsement from the regulator, so it is on the basis of this endorsement they can raise funds from investors, venture capitalists and so on.
This is another initiative rolled out by the Central Bank of Nigeria which helps to shed more light on or clarify the things that FinTechs do. It also helps to bond like activities together, like the Infrastructures and deposit gotten from customers.
According to Mr Oladimeji, he said: “it’s going to make it easy for new FinTechs to grow and manage our risk better in the FinTech ecosystem”.