Bank Profits May Suffer As A Result Of Fintech’s Intrusion Into Financial Services

Financial analysts have warned that as Fintechs’ services become more prominent in the delivery of financial services, they may pose a significant threat to bank profitability.

Although many banks are unconcerned about the threat, analysts from Coronation Merchant Bank observed in a research on Nigerian banks titled “Nigerian Banks, Resilience Built In” that fintechs will be one of the greatest threats to banks’ total profitability.

This is because their (fintech) banking platforms would appeal to tech-savvy customers who dislike visiting their local bank offices and could provide far more efficient services than traditional banks, they claimed.

While most of the conventional banks they spoke with appear unconcerned about the threat, Guy Czartoryski, head of research at Coronation Merchant Bank, noted that “one potential threat to the overall profitability of the banks in this study comes from fintechs, specifically internet banks, such as Kuda, Carbon, and Rubies.

“Millennials and other tech-savvy customers will be drawn to these banking platforms, which require little or no physical banking presence. They have an obvious cost advantage over traditional commercial banks.”

Most commercial banks, according to Czartoryski, “see themselves as partners with internet banks, offering customers cash withdrawals and clearing services.”

Simultaneously, they provide their own USSD-based services, putting them in direct competition with internet banks in some places. Time will tell if the traditional banks’ optimism is justified or merely complacent.”