Chinwendu Obienyi
With massive digitalisation reshaping the agenda of many businesses and produce new leaders in several sectors as well as a shift in the balance of power from traditional value-chain business models to digital platform modelsn new vistas of opportunity are unfolding in the banking indsutry.
For financial institutions opportunities for revenue from digital financial services go beyond just fees. Opportunities to source new deposits and to increase cross-selling of transaction-based product sales could have a significant impact on these institutions’ cost of funds, while moving transactions through digital channels reduces their cost-to-income ratios, a key metric for defining the profitability of a bank.
Also, the linkage between financial inclusion and economic development of developing countries has provided the impetus for countries to develop & implement improved strategies to financially include their unbanked citizens .
A study by the World Bank in 2017 revealed that there was a strong positive correlation between account penetration of various countries and their Gross Domestic Product (GDP) per capita.
So far the impact of the internet economy and innovations involving digitalisation in the Nigerian banking industry is seen in the increased move to retail banking and use of e-banking channels, which has further led to improvements in financial inclusion. According to the Central Bank of Nigeria (CBN), the total value of electronic payment (e-payment) transactions recorded in 2017 rose by 32.5 per cent to N83.1 trillion in 2017 from N62.7 trillion recorded in 2016.
Several of these innovations include product development, financial education, proliferation of agent networks and more especially, digital lending. Digital lending involves the use of online technology to originate, renew loans in order to deliver a fast and more efficient way of automating processes seamlessly and improve customer experience.
Investigations by Daily Sun reveal that even big banks within the Nigerian market with huge investments in legacy systems are beginning to adopt this innovation as it is in sync with the emerging digital economy. For example, Access Bank Plc, launched a salary advance scheme called the Access Bank PayDay Loan/Salary Advance Scheme, to ensure credit is made available to borrowers fast, without stress and collateral.
In a move to bring to extend lending to more of its customers, Access Bank said it has expanded digital lending portfolio, by launching a special USSD code for quicker and instant access to loans for its customers.
The quick code, *901*11#, is a strategic tool for the recently-launched PayDay Loan product by the bank, according to a statement by the bank.
The product also enables customers to meet their urgent financial needs before receiving their salaries.
Speaking during the launch, Executive Director, Personal Banking, Access Bank Plc, Victor Etuokwu, said, “Acquiring loans in Nigeria has always been known to be limiting – either due to access or collateral issues, including the duration of the approval process.
“With our obligations to our customers especially during difficult economic periods, we are emphasising Access Bank’s position in offering lifestyle products and services that meet their financial needs”
According to him, the bank have disbursed over 3.5 million loans to individuals in two years while adding that in 2019, the bank have disbursed over N45 billion in over 2 million disbursements to individuals and has recently witnessed a spike in our volumes hitting N1 billion daily.
Etuokwu said, “this achievement and our focus on retail lending reiterate our commitment to democratise access to financial services leveraging digital technology.”
According to the statement, the payday loan can also be obtained to fulfil any financial and personal requirement to enhance their quality of life.
“The product is unique as recipients only have to be diligent salary earners who will now be able to obtain instant loans without stress or involving a guarantor,” It added.
As the bank continue to make funding available to customers and helping businesses to grow, its fortune has been improving too. The bank reported a significantly improved performance for the nine months ended September 30, 2019, reflecting the positive impact of its merger with former Diamond Bank Plc.
According to a filing obtained from the Nigerian Stock Exchange (NSE), the bank’s interest income grew by 47.6 per cent y/y to N405.03 billion, driven by good growth in income from both investment securities (+25.3 per cent y/y to N256.04 billion) and loans and advances to customers (+115.3 per cent y/y to N140.40 billion). Similarly, interest expense grew by 28.5 per cent y/y to N194.81 billion and was driven by increased expense on deposits from customers (+30.3 per cent y/y to N123.41 billion) and borrowings (+100.2 per cent y/y to N16.32 billion).
The increase in interest expense represents a 65.4 per cent q/q increase, which is significant and maybe signal to a tight pricing environment. Consequent, on the exponentially larger growth in interest income over expense, net interest income settled 71.0 per cent higher year-on-year at N210.22 billion.
Also, non-interest income grew by 3.3 per cent y/y to NGN97.74 billion, driven by fees and commissions income (+49.5 per cent y/y to N56.01 billion). Consequent, on the increased income from both funded and non-funded sources, operating income settled 42.1 per cent higher year-on-year while it recorded a growth of 44 per cent in profit after tax (PAT) to N90.7 billion in 2019, up from N62.9 billion in the corresponding period of 2018.
Speaking on the results, the Group Managing Director, Access Bank, Herbert Wigwe, said, the bank had their focus on retail market gained momentum and would be maintained going forward.