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 progression towards success in the fintech space to partner with fintech startups and tech 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 collaboration between banks and fintechs, the CR2 report refers to the story of how a Nigerian bank, GTB, lost customers after taking their mobile banking platform 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 important asset: customer trust. This perceived client trust advantage is backed up by a fintech study conducted in Nigeria by the consulting firm McKinsey Consulting.
Confidence remains the key
According to the results of the study, around 67% of bank customers in Nigeria trusted their bank more than 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 essential 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:
“Long-standing financial institutions must respond with innovation services built through collaboration with 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.”
