Chinwendu Obienyi
Digital transformation has been an area of significant investment in other areas of financial services where the user experience of a consumer is increasingly important.
Sadly, the Nigerian capital market has seen less investment as competitive differentiation in the sector has historically been driven by relationships, the range of products and services offered, and, of course, pricing.
To dismiss the need for a customer-centric digital experience in capital markets would be short-sighted. This is because transactions have moved away from the telephone and on to exchanges, thus, relationships have become harder to sustain and organizations are increasingly recognizing that a high-quality digital experience can boost client attraction and retention, while also helping to contain or drive down transaction costs.
Furthermore, digital disruption is making financial markets more transparent, accessible, inclusive and efficient. Moreover, it also helps the regulators get a better sense of the risks that participants typically take.
Given these benefits, it is expected that a greater adoption of digital customer experiences would be in the short and medium term.
It is a fact that the regulators of the capital market is working hard to address several challenges in the industry. For instance, the Securities and Exchange Commission (SEC) recently revealed that it has seen a lot of innovation and cost reduction in the money market and plans to develop a framework to support innovation and regulation within the blockchain and virtual financial assets’ space in the capital market.
Acting Director General, Mary Uduk, while addressing the media during the Capital Market Committee (CMC) meeting in Lagos, said, the SEC is in constant engagement with the Fintech Community, adding that the commission is building capacity as well as embracing FinTechs.
“There is a FinTech division that engages with the FinTech community, we also have a form on our website to invite would be fintech organisations that want to operate in the capital market to complete those forms to enable us understand the area that they are interested in and about 42 or more completed the form and we have been engaging them.
“We are also building capacity as a commission to understand FinTech. FinTech has come to stay, we are embracing fintech. Even in IOSCO, finTech is discussed. We know fintech companies are delving into investments, offering investments solutions, which boast of over 20 million milliners signing over their portals “, She explained.
Also, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, called on domestic investors to embrace fintechs while stating that as investment into the tech space continues to gain traction around the globe, the exchange is also planning to explore new technologies including blockchain and Distributed Ledger Technology (DLT) for capital raise.
According to him, the global picture of capital flow into FinTechs especially in emerging markets is a proof that fintechs are important economic catalysts in the fourth industrial revolution, but regretted that local investors are not taking its advantage to advance their investments.
“According to “2018 Global Analysis of Investment” by KPMG, equity investment into global fintech companies almost tripled from $18.9 billion to $50.8 billion between 2013 and 2017 and has continued to gain traction.
Surprisingly, foreign investors seem to be seeing these gains better than local investors as statistics show that they have dominated capital raise for indigenous start-ups in the last couple of years,” he said.
The NSE CEO said at the exchange, the key strategy is the segmentation of the market with the introduction of a growth board to cater to companies with high growth prospects, including fintechs emerging from venture capital management to a more mature management that would require public investment and corporate consolidation.
“This approach, in our opinion, would assist companies with high growth potential, leverage public finance for growth and expansion. FinTech offers the opportunity to deepen capital market activities and also achieve sustainable economic growth by empowering a larger portion of the populace to access financial services; unlock efficiencies in product and service delivery for financial institutions and increase transparency and resilience of the Nigerian capital market and larger financial ecosystem,” he added.
While this is commendable on the steps taken to transform culture and rebuild trust, progress in these areas takes time. So, given these challenges, where are capital markets firms directing their resources? The answer is that they’re primarily focusing on delivering changes mandated by regulators or driven by external threats.
It should be put in simplicity that the Nigerian capital market is in need of technological business-oriented models to evolve and to do so very quickly.
Thus, innovation is not optional and this presents the argument that fintechs can be of good use to capture market share from incumbents in many areas of financial services.
Speaking during the Chartered Insititue of Stockbrokers (CIS) annual conference in Lagos, Managing Director, RMB Stockbrokers, Abiola Adekoya, explained that the fintech space needs to be fully harnessed in order to drive growth, innovation in the nation’s capital market. “With the integrated and digital-driven global economy of today, the barriers to competition are gradually coming down, making it necessary for stockbroking firms with exposure to the domestic market to innovate to retain and attract customers. This is where fintechs can come in to help drive the much-needed domestic participation as well as activity. We have to take advantage because we want to be where our peers are globally.”,
Looking at how we transact business via mobile apps of different banks, it is cost effective. we also want that to filter through the capital market. we have seen that done successfully in treasuries, we want that on the equities and doing that will drive operators to reduce the cost of transactions for investors, hence the need for collaboration between the regulators as well as FinTechs”, Adekoya explained.