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IFC Finds Banks Cut Services in Emerging Markets

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International banks are cutting back on the networks they maintain in developing countries, an unintended consequence of global regulatory reforms that could make it harder for businesses to grow and create jobs in emerging markets, according to a global survey of banks released today by IFC, the private sector arm of the World Bank Group.

Globally, 27 percent of banks surveyed noted declines in their correspondent banking relationships (CBRs) – financial institutions that provide services on behalf of other institutions – forcing them to reduce vital services. The challenge is most critical In Sub-Saharan Africa where 35 percent of banks reported a decline in these essential relationships—a major risk for countries’ economies heavily reliant on imports.

“We are concerned,” said IFC CEO Philippe Le Houérou. “In emerging markets, the business environment has often been challenging for banks and their customers, but a decline in correspondent banking disrupts the financial connections that countries and businesses need.”

Restricting the availability of trade finance, wire transfers, deposits and other services could have a severe impact in developing countries, where they are a lifeline to the wider world.  The WTO estimates the existing global trade gap to be $1.4 trillion, and it exceeds $100 billion in Africa alone, a gap the decline in CBRs will exacerbate further.  An IMF study in April 2017 said the decline in these relationships could undermine affected countries’ long term growth and financial inclusion prospects.

The survey  the first extensive survey of banks in emerging markets on the issue, polled 300 banks active in 92 countries. The institutions surveyed have a total of $5 trillion in assets—roughly 10 percent of all emerging-market banking assets.

Emerging markets banks are having to address multiple sets of new, sometimes conflicting, compliance requirements and are spending large amounts to upgrade their processes, hire staff, and upgrade software. Some 78 percent expected the costs of regulatory compliance to continue to rise, further pressuring their ability to serve their customers with essential services.

Over the past decade, policymakers have taken much-needed steps to bolster the global financial system with new rules against unnecessary risk-taking, money laundering, and terror funding. These reforms will help safeguard the system from future crises. But increased capital standards, rising compliance costs, and the threat of large fines are also leading financial institutions to rethink their cross-border networks, the survey confirmed.

Survey participants identified three solutions that could help address the issue, including greater harmonization of regulatory requirements, a centralized registry for due diligence data, and assistance with understanding and adaption to the new standards as measures. A solution will require multiple stakeholders across the international community to formulate a comprehensive response.

“Trade, economic growth, and the remittances that families depend on are at risk when banking relationships deteriorate,” said Marcos Brujis, Director of IFC’s Financial Institutions Group.

“By working together, multilateral institutions, regulators, and banks can help ensure that necessary reforms don’t create unintended costs for the most vulnerable people.”

Nigeria CommunicationsWeek believes that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world.

So since 2007, we have devoted our energy to independent reportage of technology and how they affect lives.

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E-Financial

Bitcoin Smashes Through $8,000 for the First time

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Bitcoin hit a new record high on Monday after smashing through the $8,000 level for the first time over the weekend, marking an almost 50 percent climb in just eight days.

The new high came after leading U.S. payments company Square Inc said late last week that it had started allowing select customers to buy and sell bitcoins on its Cash app.

Bitcoin traded as high as $8,197.81 on the Luxembourg-based Bitstamp exchange, up over 2 percent on the day and around 48 percent up since dipping to $5,555 on Nov. 12.

An eye-watering eightfold increase in the value of the volatile cryptocurrency since the start of the year has led to muliple warnings that the market is in a bubble, and institutional investors are broadly staying away.

Retail investors, however, as well as some hedge funds and family offices, are piling into the market. The “market cap” of all cryptocurrencies hit an all-time high of over $242 billion on Monday, according to trade website Coinmarketcap.

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ePayment Stakeholders’ Seek Review of Policy on PoS to Boost Growth

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Worried by slow pace of growth in the use of Point of Sale terminal (PoS) as a means of payment in the country, stakeholders have called on Central Bank of Nigeria (CBN)to review its policy direction in that ecosystem.

 

This is coming as Nigeria CommunicationsWeek investigations revealed fluctuations in the figure of registered and deployed terminals between August and October this year.

 

According to a report released by NIBSS the industry Payments Terminal Service Aggregator (PTSA), the number of deployed  terminals increased in August to 141, 531 and dropped to 140, 448 in September and increased again in October to 145, 350.

 

Also, same was noticed on the number of registered terminal with August recording 173, 815 and came down to 169, 318 in September while October witnessed increase to 176, 185.

 

Sarafadeen Fasasi, president, Association of Mobile Money Agents in Nigeria, attributed this slow growth to a number of factors which includes lack of support to drive the business.

 

“Support I mean is providing financial backing for transactions on the PoS just the way ATMs are loaded with cash for withdrawals. Today, there are no facility for PoS agency business by the banks which is the major determinant of success or failure of PoS innovation,” he said.

 

He decried lack of structure on ground to resolve issues arising from PoS transactions.

 

“If customer’s account is debited without ATM paying, the individual will go to the bank and fill form for reversal, but in PoS transactions there is no such thing which has pushed customers to resolve to holding on to PoS attendant to ensure that the issue is sorted out. As at today, all issues arising from ATM, switching, PoS, online among others, are under NIBSS which does not have the capacity to coup with these issues,” he said.

 

He however, urged CBN to review her policy on PoS for it to witness the desired growth, such review he said could come in creating a unit to address issues arising from PoS transactions.

 

“If the policy is reviewed it will build trust and confidence in the use of the platform for payment. More so, PoS fixed charge is high at .075, this means that customer is charged N750 on N100,000 transaction compared to N65 charged on withdrawal outside of customer’s bank ATM,” he added.

 

Onajite Regha, executive secretary/CEO, E-Payment Providers Association of Nigeria (E-PPAN)said: “So far, E-PPAN in its advocacy nature has taken steps ahead to break the barrier of this poor adoption. We are looking into capturing the lower part of the pyramid with the mobile payments awareness which will see more people included financially and thereby increase the adoption of the Cashless policy.”

 

“We are also open to discussions on advocacy and sensitization from financial bodies who have products and services to render in the pursuit of the success of this policy. From time to time we carry out sensitization, financial literacy and education programme and we partner with stakeholders to expose the benefits of electronic payments to consumers across the strata”.

 

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Africa FinTech Foundary set to Disrupt FinTech Ecosystem

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L-R: Victor Etuokwu, Executive Director, Personal Banking, Access Bank Plc; Averi Thomas-Moore, Company Builder, Venture Lab, ACCION and Victor Okigbo, Head, Africa Fintech Foundry (AFF) at a press conference to announce the maiden edition of ‘AFF Disrupt’ Conference 2017 in Lagos.

Africa FinTech Foundary, an Access bank accelerator which seeks to create new opportunities in sub-saharan Africa by providing a platform designed to inspire and challenge African innovators and entrepreneurs is set to launch with a conference on FinTech ecosystem.

The conference dubbed ‘AFF Disrupt’ is scheduled to hold on December 14, 2017 in Lagos.

Victor Etuokwu, executive director, Access bank, said that AFF will provide African companies seeking to launch their products, with capacity building and training in business development, provide connectivity to global innovation grids, promote access to capital, create opportunities for partnership as well as showcase best practices and successes in African-led innovation solution.

“Every FinTech seeks to disrupt the world through product or solution and AFF is here to disrupt. We want to do things that will drive the economy through innovative products and solutions. We are going to gather a team of investors that will help fund innovators that graduates from the accelerator programme of AFF,” he said.

Victor Okigbo, head, Africa FinTech Foundary (AFF), said that the Foundary has lined up activities preceding the main launch event which include master classes on entrepreneurship technology, enterprise design, collectively referred to as the AFF Innovation Tour, holding in four African cities this November.

He said AFF is in partnership with global technology giants such as IBM, Microsoft, Systemic Logic, Kantar TNS, SAS and Access bank as part of the AFF Disrupt programmes.

Adekele Adekoya, Event Coordinator for the AFF Disrupt conference, said that AFF seeks to create new opportunities in sub-Saharan Africa by providing a platform designed to inspire and challenge African Innovators and entrepreneurs.

“We want to engage with startups in all the locations we visit. This is a very good opportunity for startups to take advantage of the partner network created by AFF DISTRUPT and its partners to create linkages and networks that can help grow their businesses,” he said.

The vetting process is currently going on, and a total number of 12 starts-ups would be selected from a pool of about 400 start-ups, to demo at the AFF Disrupt 2017 conference holding in Lagos and also get to be part of the Africa FinTech Foundary’s 3-month accelerator programme.

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