Why banks’ e-business revenues are rising despite fintech penetration

Traditional banks have stepped up their game to improve e-business in Nigeria, which has vastly improved their revenue base in the first quarter of 2022 compared to the same period in 2021.

According to the analysis of financial statements released by 10 banks listed on the Nigerian Exchange (NGX), the banks generated a sum of N77.01 billion from electronic business in the first quarter of 2022, increasing revenue by 11.7 percent compared to N68.92 billion recorded in corresponding period in 2021.

Traditional banks had over the years dominated the Nigerian banking space for over a century providing banking services such as loans, cash withdrawals and deposits, among other services to customers.

However, the banks eventually became complacent, and many customers shared their bitter experiences while banking.

Some of the challenges cited by disgruntled customers included long periods spent in queues trying to withdraw or deposit money, lack of access to the right products and services, poor customer support, as well as exorbitant fees imposed on them by their banks.

Checks from Business Hallmark (BH) showed that over 400 fintech companies compete fiercely with traditional banks for control of the loan and payment market.

However, banks refused to roll over and surrender to the new operators as they responded to the disruptive threat posed by fintech by adopting innovative technologies and introducing more customer-centric and digital experiences to their customers.

Banks also improved their services to their customers through relevant product recommendations and insights to make informed business decisions.

For example, through cookies and other information technology (IT) tools that monitor customers’ online activities, some banks are now able to recognize customers’ urgent wants and needs.

Findings showed that all the commercial banks have digital channels that do not depend on the internet. These innovative channels include point of sale (PoS), short message service (SMS) and unstructured additional services data bank.

Also read: Nigerian fintechs struggle with KYC amid rapid growth

Terragon’s data-driven MarTech platforms deployed by banks have also been able to target unbanked consumers based on their device type, location, interest, spending power and others.

With the device, banks can now communicate with customers via SMS to recommend mobile banking channels, the nearest ATMs or bank agents and relevant products.

Meanwhile, banks that embrace technology seem to be paying off, evident in the good results they have recorded in e-business over the past two years.

The ten analyzed banks listed on NGX namely Access Bank, Zenith Bank, First Bank, United Bank of Nigeria (UBA), Guarantee Trust bank, Union Bank, First City Monument Bank (FCMB), Wema Bank, Stanbic IBTC and Sterling Bank, recorded a strong revenue of N77.01 billion in the first quarter of 2022 from their electronic businesses.

This represents about 30 percent of the combined profit after tax (PAT) of N276.31 billion generated by the 10 banks in the first quarter.

The significant revenues from the banks’ e-business channels were realized from USSD fees, POS payments, mobile applications, internet and branch banking, as well as fees for automated teller machines (ATMs).

Furthermore, topping the list of Nigeria’s largest banks by customer size is Access Bank, which earned the sum of N20.13 billion from its online business, out of the total N57.39 billion profit after tax generated in Q1 2022, the amount representing 26.1 percent of the total amount generated by the ten banks under consideration.