FinTECH or FreezeTECH

Fintech concept . Icons of financial technology and bank . Light bulb , Infographic , texts and icons. Electric circuits graphic with blue background

Competition and industry rivalry in recent times have led to new thinking and newer strategic initiatives among players in the financial industry in Ghana to deploy technology to support financial delivery. The most dramatic force that impacts business and service delivery within the financial space is Technology. You can’t fault it!

So this is it, FinTECH or FreezeTECH. Either you ‘check-in’ or you ‘check-out’! So what is this fuss about Financial Technology- FinTECH. Obviously it is a disruptor. This piece will lean towards its positive emerging concerns in Ghana’s banking space. From universal banks to tier two, three and four banking levels, FinTECH is serious just as heart attack.

Frequent issues, recent analysis, constant discussions, critical debates and incipient journals have climaxed the ever increasing importance on FinTECH. Industry players are constantly on the lookout for strategies and proper marketing applications to sustainably create opportunities with systems and technology in order to remain relevant.

Bank of Ghana’s transit from Banking Act, 2004 (Act 673) together with the amendment act, 2007(Act 738) to a new framework that guides deposit-taking financial institutions, Act 930 (2016), has awakened the disruptor’s surge in finding its way into this space as a vehicle to drive deposit mobilization by banks and or act as a tool to facilitate banking activities.

Where do we go from here?

Introducing FinTECH and smart digital applications in banking, have attracted a lot of attention from industry, regulators and the general public. The use of FinTECH in banking always looks at financial inclusion in a broader framework to include the poor and subsequently the larger unbanked population.

Bank of Ghana (BoG) reports that about 70percent of the Ghanaian bankable population are unbanked. Findings, as confirmed by the Mckinsey Global Institute (2016) and the ING Economics department (2016) suggest that FinTECH plays and will always play an important role in building good and responsible economies especially where activities in the area of individual finances are important to economic growth. In effect, application of key technology devices like the mobile telephone and web technology are crucial to financial intermediation. Among the impacts are, financial inclusion, promoting savings culture, and high accessibility towards transactions and quick application of financial decisions i.e. banking on-the-go, the flexibility, speed and alsoeasy confirmation of transactions in real time.


FinTECH on Competition

To live or to die, is to decide. There is intense rivalry within the industry among players. Competitor challenge, though key in business, is seriously keen when players decide to go FinTECH. Interestingly, the current competition within the finance space has no barriers. It flows from Universal Banks to finance houses, savings and loans to rural banks and from microfinance institutions to money lenders. ‘Everybody dey go FinTECH’.

All of these categories of financial institutions engage in deposit taking from the public and granting of loans to customers who have needs as it is within the operations approved by the regulator, BoG. FinTECH gets things done. No doubt about that! So who gets there first gets the princess.

FinTECH has got all of us thinking and churning out core finance products, social banking, mobile banking, wallet concept grilled with digitized e-commerce services. Banks look through the same lens which is why the industry see more of the same opportunities and this lens has heightened competition among players to compete for the elite, premium, medium and mass markets.

Competitors compete over the same customers within the same space especially when they sell the same products. Kotler and Armstrong (2010), also agree. This seemingly rush for the few customers stiffens competition and it thus makes the customer often times than not, control the market. In effect, customers would normally decide on best priced and packaged rates. This is why players seem to be crafting products with the customer always in mind. Customer-centric initiatives and strategies to winning business are always sustainable. This will surely be tacked later. To the point, competitors sell same products probably under different names. Of course, some do innovate but banking can always be grouped under savings and loans i.e. mobilizing from the surplus end to feed the deficit end of the public.

Aside from broadening financial inclusion,FinTECH drives Superior Customer Service which takes its roots from ‘competition bringing out the best in players’.

So what’s FinTECH saying?

Players should be thinking ahead with devices that facilitate transactions. The penetration of mobile telephones in Ghana for example shouldn’t be taken for granted. The plethora of products and services that can be developed shouldn’t be undermined. It’s not just about ‘Momo’ and ‘Remi’.

FinTECH is charting a path in financial services. It’s impact goes beyond the creation of ‘alternative channels’ in service delivery. It is gradually becoming the main channel for financial services delivery. If 19.53 million was recorded as mobile telephone users in Ghana with 67percent penetration (Global Census, Digital in Ghana January 2018), it calls for critical thinking to tap into the opportunities this technology presents. It’s not just MOMO!

If you have your bank in your palm and in your living room, who cares about where a bank’s next branch would be? So FinTECH is saying that, it is creating an endless opportunity for banking which seeks to include everyone within our space.

Ready or not?

That is not the question, though. The main issue has always been with cost of deploying FinTECH. It is an investment. And it is also crucial that players invest right and see this as a necessity. Acquiring Fintech applications requires impeccable cyber protection. The most appropriate competitive approach to be adopted by playersto make the disruptor robust as part of the fierce competition within the industry is to ensure customer security within the cyber space. Control is crucial.

As proposed by Johnson et al (2007), it is best for companies to always look at their strategic options anyway. You cannot always follow the trail where others have taken off.

Yes! Companies go through phases i.e. growth, strategic direction or even remodeling.  Under a typical situation where Fintech seeks to facilitate innovation in financial services, every institution has to weigh its strategic options.

In the wake of FinTECH, financial institutions must seek to team up and pull resources together with other players e.g. Telcos, logistics, supplies, hospitality and even education complexes. Going FinTECH requires money. Business owners must learn to invest. Funds are safe. Transactions are real time but players must secure users to grow user confidence and trust.

Public Education

Users are not comfortable to go electronic payment or payment via e- devices. Change is difficult and we know. But we must know that FinTECH has come to stay and as a country, we can’t move backward. We are moving forward. We can only build on the possibilities while we look forward to perfecting service delivery options as far as the channels are concerned.

There should be a social orientation for the public to go e-payments. The NCCE can help by way of a new ‘dawn’ initiative. As a country, at least we have discovered a sure way to building a cashless society. We need to cut the talk and go down to it. With this in the picture, it is our collective responsibility to prepare ourselves. Going cashless would even make banks relevant to effectively play the financial intermediary role to benefit all stakeholders.

Information Technology is one of the ‘dramatic’ forces that has contributed immensely to business in current times. The way we twiddle with the mobile telephones for example, is the same way we can fidget with it to do business. Digitization has created a new arrangement to processes and how things are done and should be done. The mobile telephone for example has excellently been integrated into cash transactions and mobile banking operations. They are working just fine.

In effect, the public must equip themselves with basic knowledge in information technology and the urge to accept FinTECH to impact work, relations, operations, business and above all transactions. Kenya has done it beautifully with the M-pesa. Why can’t we? Farmers, taxi drivers, lottery, bar and restaurant operators can make this work if financial institutions develop products around their needs and package them in an attractive way.

So the discussion must go on

There should be heightened social orientation programmes to discuss the impact of FinTECH in banking and in our society at large. This shouldn’t be limited to a selected few in the market. If financial inclusion has the tendency to improving lives and creating convenience in banking, Bank of Ghana being the regulator, should also be on alert and be mindful of the fact that some swindlers could also use it as a conduit for what I call the ‘trifling money laundering’ i.e. ‘pushing’ money in orts to achieve a whole.

The discussion should look at the general overview of what financial inclusion and FinTECH is all about, the opportunities therein, cost and benefit options as well as the types of payment networks. Industry players should also continue sharing experiences as they look at the expectation from BoG in the mass implementation process.

So let’s keep talking on the benefits, the cost, regulators role in FinTECH, players role and modern banking methods, financial inclusion, financial literacy and how we get it down.

Some work done

Works have been carried out by several researchers in the area of  economics, business, financial technology through journals and academic newsletters and even by regulators aside from players.

Having evaluated the financial industry and operations to include Banks, Insurance and even Telcos because of their ‘gargantuan’ role in this case in Ghana, and having also engaged some of the players and related institutions in the micro, meso and macro environment, it is deemed relevant that regulators and policy makers make FinTECH popular.

Really, there is work to do.

Way Forward

The current heightened application of FintECH in banking has changed how banking is done in recent times. Financial Technology, FinTECH, has been a vehicle that facilitates banking services and subsequently supporting excellent customer service delivery options with e-products through e-processes etc.

The central bank which regulates the industry by introducing policies to control operations as well as promoting innovation towards economic and social development, should assist players in ensuring that the fundamental aspects of auditing more importantly systems and e-transactions are of greater concern too and should be way ahead of the pace.

Recent engagements with the regulator really confirm its readiness for the long haul. So let the games begin.

FinTECHor FreezeTECH simply advises that either we drink deep or taste not. We just need to be serious with the opportunities that FinTECH provides. If about GH¢2.3billion was verified as deposits recorded via mobile money transactions, in 2017 only, what evidence again do we need to prove that the opportunities are rubbernecking in our faces? And if we can also confirm these monies are ‘clean’, then I can say that the prospects in ‘momo’ alone is overwhelming.

And if regulators have licensed and approved operations for hundreds of institutions within the financial industry and allied businesses to cover capital markets, insurance companies and banking institutions, their operations to facilitate banking transactions are tied to their very existence aimed at providing financial support to drive economic development to individuals who really need social orientation to adopt to newer and better ways of getting transactions done.

The power is ours. To heighten FinTECH or to FreezeTECH?

The writer is the Managing Director of AllTime Finance Limited, East Legon Accra; lecturer in Strategic Leadership at the Accra Business School; and author of Your Journey To The Top.

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