A recent report by CR2 on Africa’s fintech transformation suggests traditional financial institutions can still be a part of the fintech financial revolution if they leverage one of their most significant assets: client trust.
Partnerships Between Banks and Fintechs
The report urges financial institutions that wish to accelerate their advance to success in the fintech space to forge partnerships with fintech startups and technology companies. Having such partnerships, as well as their longstanding client networks and more defined regulatory environment, means financial institutions can still grow their share of Africa’s digital market.
To illustrate the importance of the collaboration between banks and fintech, the CR2 report makes reference to the story of how one Nigerian bank, GTB, lost clients after its mobile banking platform went offline. The report then contrasts GTB’s misfortunes with the rise of the VC-backed fintech startup Kudabank, which saw its customer base rise from 300,000 to 1.4 million in less than three years.
However, the report argues that traditional financial institutions can still compete with VC-backed fintech startups if they decide to leverage their most significant asset: client trust. This perceived client trust advantage is backed up by a fintech study conducted in Nigeria by the consulting firm McKinsey Consulting.
Trust Remains Key
According to the findings of the study, about 67% of banked customers in Nigeria had more trust in their bank than in fintechs. Although this study concluded that Nigerian banks had occasionally made some missteps, it still found that there is still some hesitation by consumers to shift to fintech products. Therefore, while access and convenience are important considerations for customers, trust is still critical and this gives financial institutions the edge.
In conclusion, the CR2 report urges banks to seize the opportunity to grow their share of Africa’s digital finance market. The report says:
“Longstanding financial institutions must respond with innovation services built through collaboration with enabling digital banking platform partners. Those banks that pair their customer trust advantage to novel innovation on the product and platform side stand to excel in Africa’s 21st-century fintech landscape.”
Who do you trust more, traditional banks or fintech startups? Tell us what you think in the comments section below.
Fintech, Africa, Digital Banking, Financial Institutions, fintech landscape, Kudabank, McKinsey Consulting