Banks That Ignore Innovations Will Be Wiped Out By FinTechs — FSDH Merchant Bank

Deposit Money Banks that are struggling to evolve from the traditional banking system will either see their revenue eroded or face extinction due to the aggressive growth of FinTechs companies .

Babajide Asegbeloyin, Head of FinTech Business at FSDH Merchant Bank said the growth of fintechs is an existential threat to commercial banks in the country that are not innovative.

FinTech companies have delved into business ranging from mobile payments, alternative finance, online banking and corporate lending.

FinTech companies raised close to $3bn of the about $5bn raised by African tech startups in 2021.

He said “Fintechs evolution and growth will only be a threat to banks that are not willing to evolve and shakeup from their extremely traditional systems. But, FinTechs are great collaborators to banks that have embraced the reality of innovation, technology and fast pace growth.

“In my own opinion, FinTechs or tech startups driving financial technology are fantastic partners for banks, because banks many have legacy-based challenges and FinTechs because of their appetite for risks, we can work together to deliver value to customers.”

JPMorgan Chase chairman and CEO, Jamie Dimon, in 2021 listed FinTech among the “enormous competitive threats” to banks in his annual shareholder letter.

“Banks are facing extensive competition from Silicon Valley, both in the form of FinTechs and Big Tech companies,” Dimon had said.

In Nigeria, traditional banks are already facing stiff competition from FinTechs like Kuda Bank valued at $500m and Piggivest. Flutterwave, a Nigerian payments company was recently valued at $3bn.

“For banks that are struggling to evolve and catch up to the understanding that fintechs in the business space is like the emergence of android and we know what the emergence of android did to some certain brands that couldn’t quickly adopt that operating system,” said Asegbeloyin.

He said banks should understand that they have to embrace fintechs, as a prerequisite for the new normal in the global financial space.