E-Financial
Most Banks Shaky, May Fail- Report
Indication has emerged that majority of the banks in Nigeria and indeed the world over “are not in great shape” or economically viable to withstand imminent downturn about to occur.
According to a report from consultancy McKinsey & Co, in its annual review of the industry released on Monday, it asserted that more than half of the world’s banks are already in a weak position because their returns on equity aren’t keeping pace with costs.
Ahead of a potential economic slowdown, McKinsey urged that firms take steps such as developing technology, farming out operations and bulking up through mergers.
“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” Kausik Rajgopal, a senior partner at McKinsey, was quoted to had said in an interview. “In the late cycle, nobody can afford to rest on their laurels.”
Reporting the findings, Bloomberg stated that the decade since the global financial crisis has seen a wave of innovation in financial services, bringing new competitors from fintech startups to giants like Apple Inc. and Alphabet Inc.’s Google.
Banks have pondered whether to compete with, partner with or acquire some of these newcomers. Some established firms have sought to rebrand as technology companies, in part to attract hard-to-get talent.
McKinsey, whose clients are some of the biggest corporations in the world, consults on topics ranging from strategy and technology to mergers and acquisitions, outsourcing and stock offerings.
In its report, the firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual,” it said.
Banks allocate just 35 per cent of their information-technology budgets to innovation, while fintechs spend more than 70 per cent, McKinsey said. Combined with regulatory factors lowering the barrier to entry — like open banking and looser requirements for startups — the environment is increasingly conducive for newer firms to take share from banks.
The report points to Amazon.com Inc. in the U.S. and Ping An in China as examples of technology firms that are capturing financial-services customers. To make matters worse for the old guard, the new players tend to go after the business areas that create the highest returns at banks — credit cards, for example.
Investors have taken notice. Globally, banks’ valuations have fallen 15 per cent to 20 per cent since the start of last year, McKinsey said, adding that “the drop in valuation suggests that investors anticipate a sharp deceleration in earnings growth.”
Lenders can cut costs and find funds for technology by outsourcing what McKinsey calls “non-differentiating activities,” including some trading and compliance functions. Banks “need to get much more comfortable with external partnerships and being able to leverage talent externally,” Rajgopal said.
“Going forward, scale will likely matter even more as banks head into an arms race on technology,” the report says.
The Securities and Exchange Commission (SEC) has cancelled the registration of Mainland Trust Limited, and suspended Centurion Registrars, following their failure to comply with regulatory directives.
The commission made the disclosure through circulars which were released at the weekend. The circular on Mainland Trust Limited read: “The Securities and Exchange Commission hereby notifies the general public that the registration of Mainland Trust Limited as a capital market operator has been cancelled with immediate effect.
“This cancellation order is made pursuant to the powers of the Commission under Section 38(4) of the Investments and Securities Act, 2007 and Rule 34(1)(e) of the SEC Consolidated Rules and Regulations 2013.
“The Commission’s decision is informed by the company’s failure to comply with regulatory directives and non-resolution of several complaints against it.
“All clients of Mainland Trust Limited are by this notice advised to contact the Central Securities Clearing Systems Plc (CSCS) for appropriate guidance on the transfer of their stocks to another stockbroker of their choice.”
SEC directed that the Nigerian Exchange Group (NGX), the Institute of Capital Market Registrars (ICMR), the Chartered Institute of Stockbrokers (CIS), the Central Securities Clearing System (CSCS) Plc and all capital market trade associations to discontinue capital market-related dealings with the company.
In the same vein, the SEC announced the suspension of Centurion Registrars Limited, its directors and sponsored individuals from capital market activities with immediate effect.
The SEC said the suspension order was made pursuant to the powers of the Commission under Section 38(4) & (5) of the Investments and Securities Act, 2007 and Rule 34(1)(e) of the SEC Consolidated Rules and Regulations 2013.
It explained that its decision was informed by the company’s failure to comply with regulatory directives and non-resolution of several complaints against it.
“All clients of Centurion Registrars Limited are advised to contact Africa Prudential Plc for appropriate guidance on the transfer of their portfolios to another Registrar of their choice.
“In addition, the Nigerian Exchange Group (NGX), the Institute of Capital Market Registrars (ICMR), the Chartered Institute of Stockbrokers (CIS), the Central Securities Clearing System (CSCS) Plc and all Capital Market Trade Association are directed to discontinue capital market related dealings with the company and its principal officers,” the circular stated.
The commission also disclosed that in furtherance of the commission’s unwavering commitment to the maintenance of zero tolerance for infractions in the Nigerian capital market and in line with its revised enforcement strategies, stakeholders and the general public are hereby informed that henceforth, the names of capital market operators (CMOs) found to have violated market laws/regulations would be published in the commission’s “name and shame” journal.
“The publication would be in addition to the sanctions/penalties for the respective infractions prescribed in the ISA 2007 and the SEC Rules and Regulations.
“This enforcement strategy underscores the Commission’s dedication to safeguarding the integrity and stability of the Nigerian capital market, protecting investors, and ensuring strict adherence to established rules and regulations.
“Stakeholders and CMOs are advised to be guided accordingly” the commission added.
FirstBank has formally denied allegations of fraud in an ongoing court case filed by customer Dr. Agbai Eke, describing the claims as “entirely unfounded and false.”
According to a statement from the bank, their internal investigation points to “unprofessional and unethical dealings” between Dr. Eke and a former bank employee.
FirstBank claims these individuals used a personal relationship to conduct unauthorised transactions without the bank’s knowledge or involvement.
The bank said it has reported the matter to law enforcement authorities for further investigation.
Officials noted that suspects have already provided statements to investigators.
FirstBank also declined to provide additional details, citing the ongoing court proceedings.
“We will refrain from further comments to allow the Court to dispassionately determine the issues before it,” the bank stated.
The case gained public attention following reports by Thisday Newspaper and Arise Television, as well as through a circulating video regarding the legal dispute.
Nigeria is undergoing a significant shift toward digital payment methods, with cash payments projected to decline by 32 percent by 2030, according to Worldpay’s Global Payment Report 2024 (GPR).
This is because access to financial services in remote areas via smartphones has transformed millions of people’s access to the global economy.
According to the report, Nigeria led Middle Eastern and African countries in cash dominance for point-of-sale transactions, accounting for 40 percent of 2024 PoS value from 91 percent in 2019.
The report said the use of cash in Nigeria is higher when compared to the MEA region including Saudi Arabia with 22 percent in 2024, South Africa (30 percent), and the UAE (17 percent).
“Over the past decade, Nigeria has witnessed progress in financial inclusion. According to the World Bank, the percentage of banked Nigerians increased from 30 percent in 2011 to 45 percent in 2021. Similarly, South Africa’s banked population grew from 54 percent in 2011 to 85 percent in 2021,” it said.
The Nigerian Inter-Bank Settlement System (NIBSS) reported that the number of active bank accounts surged to 311 million in 2024, further underscoring the country’s rapid financial transformation.
The global report disclosed that account-to-account (A2A) transfers via the NIBSS Instant Payments (NIP) have emerged as the leading e-commerce payment method in Nigeria.
Furthermore, A2A payments via NQR are now the second most popular payment method at the PoS, trailing only cash. This surge in A2A usage underscores the growing adoption of instant payment systems in the country.
Recent data shows that electronic payment transactions in Nigeria rose to an all-time high of N1.07 quadrillion in 2024. This is a 79.6 percent increase from the N600 trillion recorded in 2023.
Beyond transaction value, the volume of e-payments also saw a substantial increase. The total number of transactions processed by NIBSS rose from 9.7 billion in 2023 to 11.2 billion in 2024, representing a 15.5 percent year-on-year growth.
Also, PoS transactions soared to N19.4 trillion in 2024, marking an 81 percent increase from N10.73 trillion in 2023.
Industry experts attributed the surge in electronic transactions to a combination of factors, including the cash scarcity experienced in early 2023 and the continued implementation of the Central Bank of Nigeria’s (CBN) cashless policy.
The GPR report highlights MEA’s progress in digital payments, with e-commerce transactions accounting for 29 percent of total value in 2014. By 2024, digital payments represented 49 percent, nearly matching the combined value of cash and card transactions (51 percent). By 2030, digital payments are expected to dominate e-commerce, making up 65 percent of transaction value.
“The shift is even more pronounced at PoS. In 2014, digital payments accounted for only 1 percent of PoS transaction value. By 2024, they had grown to one-third of the market. Worldpay projects that by 2030, digital payments will account for 47 percent of PoS transaction value, nearly equalling traditional cash and card payments,” it said.
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