E-Financial
Report Predicts New Rounds of Banking Sector Consolidation
A report by McKinsey and Company has stated that digitalisation will enable Nigerian banks to achieve between 25 and 40 per cent cost-reduction.
The report also urged banks to plan for another round of consolidation in order to thrive beyond the crisis by growing their capital base faster than the rates of inflation and devaluation of the naira.
It emphasised that another round of consolidation was inevitable given the need to meet Basel III requirements, manage the possible deterioration of asset quality and some foreign exchange-based commitments to service.
It also called for portfolio restructuring, warning that the Nigerian economy could not afford another portfolio crisis, which is likely to occur.
The report titled, “Nigeria’s banking sector: Thriving in the Face of Crisis and Bold Ideas to Help the Industry Build Resilience and Drive Long-term Sustainability,” also urged the Nigerian banking industry to boldly utilise the lessons it learnt from the COVID-19 pandemic disease interruption to drive sustainability in the industry.
It argued that bold thought and actions were required beyond the crisis, even as it enjoined banks to continue with their adjustment to a remote operating model, revisiting portfolio priorities and some valuable lessons in order to adapt to the “next normal.”
It also recommended four bold initiatives that would enable the lessons of the past few months to drive sustainability in the banking industry beyond the COVID-19 crisis.
The four dimensions, according to the report, are scale, efficiency and productivity, data and analytics as well as talent hunt.
It stated that scale could be achieved either by targeting specific market segment or geography to bring down marginal costs.
“In Nigeria, significant opportunities remain for banks to develop scale across segments–for example by targeting small and medium-size enterprises (SMEs), which have significant unmet needs in the banking sector–or by targeting geographies such as the north of the country, which has been historically underserved,” the report said.
The report also said that efficiency and productivity could be attained by transforming operating models to serve customers as they would want to be served.
“The McKinsey Financial Insight Pulse survey conducted in October 2020 found that most consumers expect to increase their use of digital and mobile banking services even after the crisis, with 53 percent of consumers wanting their banks to make it easy to get a line of credit and 36 percent desiring improved bank websites to facilitate online transactions.
“In Nigeria, we’ve also seen a surge in agent-banking transactions during the crisis, opening up new possibilities for delivering services to more people at lower costs. However, these shifts may reverse unless steps are taken to hardwire new behaviors and attitudes. Now is an opportune moment for banks to revisit and interrogate matters of efficiency and productivity in a disciplined manner.
“Actions taken out of necessity during the lockdown such as online training, virtual performance management sessions, remote working for certain jobs, and adjusted operating hours for branches could be refined for implementation on a permanent basis,” the report said.
The McKinsey stated that rethinking end-to-end digital options for card subscription and renewal, PIN reset, and electronic channel issue resolution, to name a few, could unlock new growth, adding that sales and lending processes, which have been heavily reliant on physical interaction, could be reviewed to identify automation potential, especially for SMEs.
“Ultimately, reimagining these processes in line with consumer requirements will lead to a redefinition of the role (and size) of the branch network and required coverage model,” it said.
The report also advocated for improved data and analytics by leveraging technology for commercial risk and operational effectiveness because rapid shifts in consumer behavior that is driven primarily by physical distancing have led consumers to embrace digital options at a scale and pace not seen before in the country.
“This, in turn, is clearing the way for banks to ramp up their use of data and analytics to enhance services and reduce costs. Previous McKinsey research has demonstrated that data and analytics can potentially increase a bank’s cost advantage by 10 percent and improve cost-to-income ratios by up to 15 percent, even in a recession,” the report said.
It suggested risk and sales as two immediate areas that could be explored and realised through digital marketing by developing new risk models that are powered by artificial intelligence and machine learning that improve accuracy and efficiency and leverage real-time transaction data to understand market and customer dynamics.
It, however, advised banks to find the best talents that could support their shift to digital operations as “the crisis has prompted dramatic shifts in working behavior–notably working from home models– that are opening up new avenues for banks to attract and retain the skills they need to support their shift to digital.”
The report said that banks could attract talents by improving on their employee value proposition, which is often perceived to be less attractive than those of technology companies that are competing for the same talent.
It also advised banks to develop capabilities for identifying and funding viable businesses within the intervention fund category; restructuring their funding base to reflect the realities of the current CRR impact and “use this opportunity to educate the frontline on the implications of CRR and the effective cost of every deposit.”
Tradewyse Concepts Limited (TCL), Nigeria-based technology solution provider has launched a product called “vetandpay” to address the issues of trust and fraud in online business transactions in the country.
Dr Kalu Ibe, founder and chief executive officer, Tradewyse Concepts Limited
Dr Kalu Ibe, founder and chief executive officer, Tradewyse Concepts Limited, stated that the software was proudly developed by a team of Nigerians.
Speaking at the product dedication ceremony in Abuja, Ibe explained that the app aims to reduce corruption by restoring trust and integrity. He added that it would inspire confidence in both business and the broader transactional environment in Nigeria.
“Today, I present vetandpay.ng, powered by Vetandpay Technologies Ltd, Africa’s foremost escrow company, a subsidiary of TCL,” Ibe said.
“What started as a spark two years ago is now shining brightly over Nigeria’s transactional space, bringing healing with its rays.”
He outlined the various escrow services offered, including auto purchase escrow, procurement escrow, service-based escrow, e-commerce escrow, and property escrow, with more services expected to be added.
Ibe emphasised that the service is available to Nigerians both at home and abroad, promising zero losses in all business transactions when using vetandpay.
Through its Corporate Social Responsibility (CSR) programme, TCL plans to initiate a comprehensive tech training programme for teenagers in Nigerian schools. Ibe highlighted that the initiative aims to equip young people with technological skills, preparing them to enter the digital economy and drive innovation.
Ntufam Ugbo, project director, commented that vetandpay is transforming the business landscape in Nigeria by building trust between buyers and sellers.
“What vetandpay does is act as a middleman between the buyer and the seller,” she said.
Mrs Rachel Samuel, head of Customer Service at vetandpay, described the platform as a secure payment solution designed to eliminate fraud in online transactions.
“Our basic goal is to address the issue of receiving something different from what was ordered,” she explained.
Referring to a report by the Federal Trade Commission, Samuel pointed out that consumers lost over 8.8 billion dollars to fraud in 2022, a 30 per cent increase from the previous year. She noted that with vetandpay, both parties to a business transaction could have peace of mind and zero losses.
She encouraged Nigerians to embrace the services provided by the platform by downloading the vetandpay app and using the technology to secure their transactions.
‘‘Today marks the beginning of a new era in secure online transactions. Whether you are a business owner, freelancer, or everyday buyer, vetandpay is here to protect your hard-earned money,” Samuel concluded.
Nigeria has approached the World Bank for a fresh $10.50m loan to enhance the Central Bank of Nigeria’s (CBN) technical capacity and modernise the country’s domestic payment infrastructure.
Olayemi Cardoso, Governor, Central Bank of Nigeria
According to information on the World Bank website on Thursday, the proposed CBN Technical Assistance Facility seeks to support integrating innovative technologies and data science into the CBN’s supervisory processes.
This is expected to help the apex bank tackle long-standing and emerging challenges in Nigeria’s rapidly evolving financial landscape while improving the domestic payment infrastructure for remittances.
The project, currently at the concept review stage, will focus on three key areas. Firstly, it aims to strengthen the CBN’s institutional capacity to keep pace with technological advancements through a robust governance framework, expert advisory support, peer-to-peer central bank exchanges, and modernisation of the CBN’s internal processes to align with the digital era.
Secondly, it will enhance the CBN’s supervisory capacity through technology and data improvements. This involves funding modern technical solutions, including Supervisory Technology systems, to improve data accuracy, operational efficiency, and risk-based supervision.
Thirdly, it aims to modernise domestic payment systems for remittances to improve their safety and reliability.
It will explore innovative methods to attract informal remittance flows into formal channels while conducting annual surveys on remittance households and fostering peer-to-peer learning for knowledge exchange.
According to the World Bank, the objective of this project is “to strengthen technology-enabled, data-driven, risk-based supervision at the CBN and improve domestic payment infrastructure for remittances in Nigeria.”
The project aligns with the government’s pursuit of a cashless economy and the increasing adoption of digital financial services in Nigeria.
The scheme, which has a commitment amount of $10.50m, is scheduled for board presentation approval on June 12, 2025. The implementing agency is the Central Bank of Nigeria.
Sterling Bank has called for the cancellation of bank transfer fees by major banks, announcing it will no longer take any money for itself for any local online transactions by its customers.
The announcement, made on April 1st, initially sparked widespread arguments, with many assuming it was a marketing prank tied to April Fools’ Day.
However, Sterling Bank, in a statement, has confirmed that it is not a stunt, that the zero-transfer-fee policy was real, and effective immediately.
With this move, Sterling becomes the first major Nigerian bank to take a definitive stand against the long-standing practice of charging customers for everyday digital transfers, an issue that has grown increasingly contentious as digital banking adoption deepens.
“We believe access to your own money shouldn’t come with a penalty,” said Obinna Ukachukwu, growth executive leading the Consumer and Business Banking Directorate, Sterling Bank
“This is more than a financial decision, it’s a values-based one. It reflects our commitment to making banking fair, inclusive, and truly customer focused.
“We’re not yet the biggest bank in Nigeria, but we’ve been the boldest,” Ukachukwu added.
“Sterling fearlessly believes in the future of Nigeria, and this is us backing Nigerians with more than words,” it sated.
Under the new policy, Sterling customers will enjoy free transfers for all local transactions conducted via the bank’s mobile app. This translates into significant savings, particularly for individuals and new small business owners who make frequent daily transfers.
The bank’s latest move has been met with widespread public approval, sparking positive reactions across social media and placing pressure on industry peers to follow suit.
We’re proud to lead this change,” Ukachukwu added. “We hope it inspires others to think differently about what customers truly need from their banks, not just in services, but in values.”
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