BANKING

Challenges In The Banking Sector

Published

1 year ago

Challenges In The Banking Sector

A sound financial and banking system is essential for every nation to grow economically. Banking in Nigeria has substantial difficulties that have prevented the government from having a secure financial system. The banking industry in Nigeria has, in 2022, faced challenges of higher effective tax rates, historically low-interest rates, and competition from telcos: Challenges In The Banking Sector.

Disruptive technology, growing competition from fintech, changing business models, mounting pressure from regulations and compliance requirements, and the banking industry itself are all contributing to the big transition that is taking place in banks in Nigeria.

Challenges In The Banking Sector

The emergence of fintech or non-bank companies is changing the competitive landscape of the financial services industry and forcing incumbent institutions to reassess how they conduct business. Regulations and compliance requirements are becoming more stringent as the frequency of data breaches and privacy concerns rise. As if that weren’t enough, changing consumer needs include a need for personalized service available around-the-clock.

The same technology that has produced this disruption can remedy these and other problems in the banking business. Still, it hasn’t always been simple to move from old-fashioned methods to cutting-edge ones. Therefore, if banks and credit unions want to survive and grow in the current environment, they must embrace digital change.

8 Challenges Of the Banking Industry

Adoption Of New Technology

Implementing new technologies is currently one of the biggest challenges of banking in Africa. Larger firms struggle to embrace new procedures and technologies due to legacy solutions and antiquated business processes, making this issue the top challenge facing the financial sector in 2022, according to experts.

Banks are not in a rush to actively implement artificial intelligence, blockchain, or cloud computing, despite its effectiveness in other financial sectors. Customers expect banks to provide service with little involvement from consultants, according to recent studies. The independence and dependability of financial services are crucial for today’s consumers.

Solution

Innovative banking industry solutions are now available thanks to new technologies. AI chatbots are an excellent example. Additionally, several banks in more technologically advanced regions of the globe have already adopted VIP systems that feature audio and video chat.

Competition Between Banks And Fintech Companies

Fast-growing fintech firms can now compete head-to-head with established banking institutions. Web and mobile apps can disburse loans, work with cryptocurrencies, and even provide financial guidance.

Solution

Fintech startups can destroy small regional banks, but they cannot fully compete with giant international banks. Smaller banks might offer collaboration with fintech solutions as a remedy to fill in the organizational gaps.

To outperform their rivals, banks need to add more digital components to their physical locations. People will be kept interested and actively engaged through touchscreen technology, digital signatures, and video walls as they are informed about the services and updated on advancements. It has more than simply an interactive component; it also gets the interest of younger generations and eliminates the need for paper content.

Customer Expectation

Customers currently have differing opinions regarding the type of service they prefer: online and offline. Nevertheless, both types of customers seek to gain as much as possible and as early as possible.

Customer expectations, in any case, are what spark transformation. As a result, scalable strategies are necessary for financial institutions to advance.

Solution

For banks, having physical branches and ATMs in addition to an online presence is not sufficient. They must implement change at many levels, including worker training, technological upgrades, and management adjustments.

Customer retention will rise due to the creation and expansion of loyalty programs. At the same time, multi-channel marketing is necessary to draw in new clients. The banking industry must increase staff digital literacy and senior management digital skills if all these advances are to be implemented consistently and smoothly.

Virtual Customer Service

Whether a bank is physical or online, providing excellent customer service is essential. Customer service aims to quickly and amicably resolve customer issues while assisting banks in making financial savings due to efficiency and customer lifetime value. Large departments that don’t effectively use their human resources provide a significant problem to the banking sector (too many people doing too little).

Solution

Banking chatbots have already shown they can contribute to a better user experience. So what exactly is a banking chatbot, and how might it resolve problems? An automated launch-and-maintain system, simple to use and promises to decrease the number of customer service calls while increasing satisfaction, could boost customers’ perceptions of banks. Customer loyalty is increased, processing times are shortened, and administrative expenses are decreased when chatbots are integrated into customer support systems. Bots assist with locating transactions, money transfers, locking and unlocking debit cards, and many other tasks.

Cyber-Security

For obvious reasons, the banking industry is the one that fraudsters and hackers target the most. “Banks face a delicate balancing between customer experience and fraud control,” claims Casey Merolla. “Prevention practices can create friction, and a declined consumer is frequently a dissatisfied customer, but fraud incidents can lead to lost relationships.”

The annual cost of financial crime to the world economy is $2.1 trillion, which is greater than the GDPs of Saudi Arabia, Pakistan, Switzerland, and Ireland. The annual cost of $83.5 billion for AML compliance. Authorities discover only 1% of the $2 trillion in yearly laundering. Security and fraud detection concerns are a major, expensive worry for the banking sector.

Solution

Predictive analytics and machine learning are excellent strategies and tools that may help banks and their clients stay safe in the digital era. These tools can analyse a company’s cybersecurity, identify network invasions, secure user authorisation, and forecast attacks.

Biometric technologies are thought to solve security and privacy concerns more. The advancement of biometric technology can aid in the fight against fraud and money laundering. Users also prefer instant authentication based on iris and fingertip scanning over remembering codes, pins, and passwords. When it comes to cyber-security, blockchain technology is also a fantastic problem solver.

Payments/Transactions

One of the most disruptive and dynamic areas of banking is still payments. Global rivalry is getting more intense due to innovations raising customer expectations. The search for seamless digital payment experiences is ongoing because friction is pervasive in practically all legacy payment systems. The average monthly value of online transactions in Nigeria is about 46.6 trillion NGN, with about 2.2 billion online payment volume.

For card issuers, achieving volume-based fee increases in payments is anticipated to get harder in 2022. Card issuers may find it challenging to boost fee income due to inexpensive digital alternatives nontraditional players provide and pricey reward programs. In 2022, banks will be confronting this difficulty. Both for customers and businesses, banks will need to become quicker, more effective, and less expensive.

Solution

Simple payment methods reduce transaction costs and enable banks to expand their clientele globally, addressing a significant issue. The best approach to keep and please a customer in the financial services industry is through mobile technology. By utilising AI, big data, IoT, and blockchain, payment systems are enhancing mobile services and online products in response to new client needs and sophisticated security measures like biometric authentication.

Operational Efficiency

Banking companies have had to find a means to provide the best user experience to their consumers to remain competitive in a market that is becoming increasingly crowded, particularly with the more widespread adoption of virtual banking. The internal challenge is to maintain the highest levels of security while maximising productivity and keeping expenses as low as possible.

Asset management and other industries are already feeling the effects of automation.

Solution

The biggest banks in the USA and Japan confirmed the use of robotic process automation (RPA) in banking processes several years ago, demonstrating how technology can increase productivity and enable big businesses to save money. Meanwhile, small banks must meet strict requirements for audits, security, data quality, and operational resilience because they work in a heavily regulated field.

RPA enables contemporary banks to satisfy these expectations while achieving significant operational efficiency. Integrating automated components into financial ecosystems has several advantages, including high returns, improved cross-selling, quicker delivery of goods and services, greater customer satisfaction, and improved short- and long-term financial health.

Regulatory Policy Framework

Pressure on banks has intensified due to policy actions to strengthen lending and stabilise the financial system to boost the production of goods and services. The Central Bank of Nigeria’s (CBN) January 2020 downward pricing changes to electronic banking costs, intended to safeguard consumer rights as more people become financially engaged, have had a detrimental impact on banks’ fees and commission income.

Solution

The CBN must be flexible in its policy to enable commercial banks and other financial institutions in Nigeria to have a respective banks’ customer engagement that is tailored to each bank in a bid to serve its customer better according to their size and strength.

Conclusion

Banking operation and experience are already significantly disrupted by the emergence of sophisticated technologies that fintech leverage. It is, however, essential for the banking industry to join the bandwagon of providing sustainable payment and transaction strategies through the use of smart technology.

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BANKING

African Development Bank and Standard Bank Unite to Support Small, Medium, and Micro Enterprises (SMMEs) and Boost Trade

Published

1 week ago

Christopher

African Development Bank and Standard Bank Unite to Support Small, Medium, and Micro Enterprises

The African Development Bank Group (www.AfDB.org) and Standard Bank Group (SBG) on Monday signed a landmark financial agreement to enhance funding for small, medium, and micro enterprises (SMMEs) and expand trade across Africa.

The agreement includes a R3.6 billion investment in a social bond and a $200 million Risk Participation Agreement (RPA) for Standard Bank of South Africa Limited (SBSA). This initiative strengthens Standard Bank’s lending capacity, ensuring greater access to finance for SMMEs, a critical driver of economic growth and job creation in South Africa.

African Development Bank and Standard Bank Unite to Support Small, Medium, and Micro Enterprises

The social bond investment promotes inclusive economic development, particularly for SMMEs with a turnover below R300 million and loan sizes under R40 million. This financing will support up to 4,000 businesses, helping them scale operations, create jobs, and contribute to economic resilience.

Kenny Fihla, Deputy Chief Executive Officer of Standard Bank Group and Chief Executive Officer of SBSA, welcomed the investment, stating: “This landmark partnership strengthens our ability to support SMMEs, the backbone of South Africa’s economy. With approximately 3.2 million SMMEs accounting for 60% of jobs, ensuring access to finance is crucial. This initiative aligns with our Sustainable Finance Framework and our commitment to financial inclusion.”

In addition to the social bond, the $200 million RPA enhances trade finance across Africa, focusing on Low-Income Countries and Transition States. This agreement enables local banks to increase lending by sharing risk, bridging the trade finance gap, and promoting intra-African trade.

African Development Bank and Standard Bank Unite to Support Small, Medium, and Micro Enterprises (SMMEs) and Boost Trade

Leila Mokaddem, Director General for Southern Africa at the African Development Bank, highlighted the broader impact: “This collaboration marks a significant milestone in our long-standing partnership and is a testament to our shared commitment to supporting SMMEs’ growth and enhancing trade finance across Africa. Expanding financial inclusion and trade opportunities empowers businesses to drive economic transformation and regional integration. The Standard Bank Group remains a strategic partner in our shared vision for economic development on the continent.”

This initiative aligns with the African Development Bank’s Ten-Year Strategy (2024–2033), which prioritises industrialisation, regional integration, and improving the quality of life in Africa. It also supports Standard Bank’s Sustainable Finance Framework, reinforcing both institutions’ commitment to fostering green and inclusive growth.

“We are proud of this transaction, demonstrating our shared commitment to sustainable financing. By supporting businesses, we create long-term economic opportunities and financial resilience,” stated Ahmed Attout, Director of the Financial Sector Development Department at the African Development Bank.

Kenny Fihla reaffirmed the significance of the collaboration:

“By providing much-needed capital, we are helping enterprises overcome challenges and thrive. This partnership illustrates the power of collaboration in driving meaningful economic and social change in Africa.”

BANKING

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

Published

1 week ago

Christopher

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

The International Islamic Trade Finance Corporation (ITFC) (www.ITFC-IDB.org), a member of the Islamic Development Bank (IsDB), has reinforced its position as a key player in the Islamic syndications market, achieving prominent rankings in the 2024 Bloomberg and Refinitiv League tables.

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

For the fourth consecutive year, the ITFC top-tier performance reflects a strategic focus on delivering impactful trade finance solutions. For 2024, Refinitiv ranked ITFC as Globally # 1 Bookrunner and Mandated Lead Arranger (MLA) in their Islamic Syndications League table. Additionally, and Bloomberg also ranked ITFC among the top Bookrunners and MLA in the Islamic Syndications League table. These rankings are a testament to the ITFC ability to consistently deliver value-driven results and maintain a strong position among leading international and regional financial institutions.

The recognition from Refinitiv and Bloomberg confirms that ITFC is a key player in facilitating trade among OIC member countries. This not only reaffirms the ITFC status as the pre-eminent provider of trade solutions but also underscores its remarkable ability to draw investments from a wide spectrum of global investors and financial institutions.

Additionally, it emphasizes the positive impact on the lives and livelihood of people inherent in the ITFC business operating model, demonstrating its effectiveness in meeting the unique financial needs of OIC member countries.

The Refinitiv and Bloomberg League tables rank banks and financial institutions based on their performance in loan syndications, bonds, and mergers and acquisitions (M&A) transactions. The rankings, including arrangers, bookrunners, administrative agents, and advisors, are published quarterly and annually.

Distributed by APO Group on behalf of International Islamic Trade Finance Corporation (ITFC).

About the International Trade Finance Corporation (ITFC):
The International Islamic Trade Finance Corporation (ITFC) is a member of the Islamic Development Bank (IsDB) Group. It was established with the primary objective of advancing trade among OIC member countries, which would ultimately contribute to the overarching goal of improving socioeconomic conditions of the people across the world. Commencing operations in January 2008, ITFC has provided more than US$83 billion of financing to OIC member countries, making it the leading provider of trade solutions for these member countries’ needs. With a mission to become a catalyst for trade development for OIC member countries and beyond, the Corporation helps entities in member countries gain better access to trade finance and provides them with the necessary trade-related capacity building tools, which would enable them to successfully compete in the global market.

BANKING

Afreximbank and Kenyan government ink milestone agreements to promote industralisation

Published

1 week ago

Christopher

Afreximbank and Kenyan government ink milestone agreements to promote industralisation

Afreximbank will finance the development and operationalisation of industrial parks (IPs) and special economic zones (SEZs) to bolster the country’s industrialisation and export manufacturing

African Export-Import Bank (Afreximbank) (www.Afreximbank.com), Africa’s foremost trade development Bank, today in Mombasa, Kenya, ratified a series of initiatives designed to support Kenya’s industrialisation and export-led development agenda. Under the terms of the initiatives, formalised at a signing ceremony with the Kenyan authorities, Afreximbank will finance the development and operationalisation of industrial parks (IPs) and special economic zones (SEZs) to bolster the country’s industrialisation and export manufacturing.

Afreximbank and Kenyan government ink milestone agreements to promote industralisation

The proposed industrial parks, to be developed by Afreximbank through its affiliate company, Arise Integrated Industrial Platforms (Arise IIP), will create and sustain an environment in which export-oriented industries can thrive, by leveraging economies of scale, shared infrastructure and access to global markets.

Two projects to be undertaken by Afreximbank, with the support of the Government of Kenya and other strategic collaborators, are the development of the Dongo Kundu Integrated Industrial Park and the Naivasha Special Economic Zone II (Naivasha II), for which, having secured leases of the relevant land, Afreximbank intends to leverage the expertise and experience of Arise IIP, a special economic zone developer with experience in the development of integrated industrial parks in Africa.

Both the Dongo Kundu Integrated Industrial Park and the Naivasha Special Economic Zone II are included in the Fourth Medium Term Plan (2023-2027) of the Kenyan government’s Vision 2030, entitled “Bottom-Up Economic Transformation Agenda for Inclusive Growth”, reflecting the high priority which state institutions are giving to measures that strengthen, expand and accelerate Kenya’s capacity to export value-added goods within Africa and globally.

Speaking on the signing, the President of the Republic of Kenya, H.E. Dr. William S. Ruto said; “We have a responsibility to steer the country in the right direction, harnessing the immense potential of manufacturing, industrialization, agro-processing, and value addition within Special Economic Zones. The signing of these agreements today marks a significant milestone in Kenya’s development, expanding opportunities to enhance our manufacturing sector and create a more conducive environment for investment. We convene here today to sign an investment – and not a loan – undertaken by people whose faith in this country and its possibilities motivates their decision. This is our country, let’s continue to do whatever it takes to make it an attractive destination for those who want to invest.”

In his own comments, Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, said:

“Africa has been heralded as a land of opportunity, blessed with resources that power the world. Yet, we have struggled to translate this wealth into lasting prosperity for our people. For decades, we have watched as others reap the rewards of our natural resources, leaving us tethered to a cycle of dependency—exchanging our riches for aid and loans that kept us on the fringes of the global breadbasket.

“Those days are behind us. Today, Kenya takes a bold step to reshape this story in a profound and impactful manner. These Parks are an integral part of the Government’s plan to boost the country’s economic growth under the Vision 2030 development blueprint.

Today’s signatures are more than ink on paper—they are a promise to the people of Kenya, a pledge that the country will rise as a beacon of industrial might and self-reliance.”

Mrs. Oluranti Doherty, Managing Director of Export Development at Afreximbank, and Captain William K. Ruto, Managing Director of the Kenya Ports Authority, signed the Dongo Kundu Special Economic Zone agreement. Dr. Kenneth Chelule, Chief Executive Officer of the Special Economic Zones Authority, and Mrs. Doherty signed the Naivasha Special Economic Zone agreement, with H.E. Dr. William Ruto, President of the Republic of Kenya, and Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, witnessing the signing of both agreements for the State and for the Bank, respectively.

The Dongo Kundu Industrial Park within the Mombasa SEZ is expected, upon completion, to boost the area with a state-of-the-art industrial park that will contribute significantly to economic growth and industrialisation efforts in Mombasa County and in Kenya as a whole.

The Naivasha II Special Economic Zone – Naivasha II project is located at Mai Mahiu and will include a free trade zone, an industrial park, a logistics zone and a public utility area with a supporting road network. The project will occupy an area of approximately 5000 acres.

The Naivasha II project will also derive value from its strategic geographic position as it sits on the gateway to East and Central Africa through the Northern Corridor Transport System, which comprises both a standard gauge railway and a major highway. Moreover, the SEZ will be close to the Naivasha Inland Container Depot, which serves the East African hinterland countries of Burundi, the Democratic Republic of Congo, Kenya, Rwanda, South Sudan and Uganda.

Other dignitaries in attendance included Mrs Oluranti Doherty, Managing Director, Export Development, Afreximbank; Hon. Davis Chirchir E.G.H, Roads and Transport Cabinet Secretary; Hon. Hassan Ali Joho, Cabinet Secretary for Mining, Blue Economy and Maritime Affairs; Hon. Salim Mvurya, Cabinet Secretary for Youth Affairs, Creative Economy and Sports of Kenya and Honourable Lee Kinyanjui, Cabinet Secretary, Ministry of Investment, Trade and Industry. Additionally, Captain William K. Ruto, Managing Director, Kenya Ports Authority; Dr. Kenneth Chelule, Chief Executive Officer, Special Economic Zones Authority; His Excellency Abdulswamad Shariff Nassir, Governor of Mombasa County; the Honourable Benjamin Tayari, Chairman, Kenya Ports Authority, and Mr. Fredrick Muteti, EBS, Chairperson, Special Economic Zones Authority attended the event.

Distributed by APO Group on behalf of Afreximbank.

About Afreximbank:
African Export-Import Bank (Afreximbank) is a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade. For 30 years, the Bank has been deploying innovative structures to deliver financing solutions that support the transformation of the structure of Africa’s trade, accelerating industralisation and intra-regional trade, thereby boosting economic expansion in Africa. A stalwart supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has launched a Pan-African Payment and Settlement System (PAPSS) that was adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA. Working with the AfCFTA Secretariat and the AU, the Bank is setting up a US$10 billion Adjustment Fund to support countries effectively participating in the AfCFTA. At the end of December 2023, Afreximbank’s total assets and guarantees stood at over US$37.3 billion, and its shareholder funds amounted to US$6.1 billion. Afreximbank has investment grade ratings assigned by GCR (international scale) (A), Moody’s (Baa1), Japan Credit Rating Agency (JCR) (A-) and Fitch (BBB). Afreximbank has evolved into a group entity comprising the Bank, its impact fund subsidiary called the Fund for Export Development Africa (FEDA), and its insurance management subsidiary, AfrexInsure (together, “the Group”). The Bank is headquartered in Cairo, Egypt.