Banks turn more screws as battle for unbanked deepens

By Odunewu Olusegun

Several deposit money banks (DMBs) have pulled off their soft gloves to battle for the heart, souls, and minds of underbanked customers, particularly in rural and suburban communities.

The penetration of the unbanked rural and semi-urban markets will become a major battleground for banks in 2021 as they try to grow their retail businesses and ensure smoother service delivery in this market segment.

The digital banking playfield is pushing into more aggressive areas of competitiveness as incomes from digital operations become increasingly significant to deposit money banks (DMBs).

In 2020 Nigerian banks were believed to have seen a surge in digital incomes as a result of the COVID-19 global health pandemic as customers opted for the purportedly friendlier electronic platforms for conducting their businesses.

Nigeria’s biggest banks appear to have made the jump on their Tier 2 rivals as revenues from digital transactions rose for the bigger banks relative to their smaller competitors.

For example, between 2019 and 2020 Access Bank Plc saw electronic banking income rise from N18.96bn in 2019 to N38.79bn in 2020 representing a growth of +104.5%.

This is not surprising, Access Bank has been one of the most aggressive banks in the race for digital dominance, and its acquisition of Diamond Bank in 2019 gave it a major boost in upscaling its digital distribution and technical capacity.

UBA came in with lower growth in its digital income between 2019 and 2020 with its e-banking revenue rising from N26bn in 2019 to N27.87bn in 2020, the rise was +7.19% which was comparatively slim compared to the industry leader in this business segment.

Coming behind UBA between 2019 and 2020 was ETI, one of Africa’s largest banking franchises with a presence in thirty-five countries.

ETI saw its electronic banking income rise mildly by +5.90% from N27.81bn in 2019 to N29.45bn in 2020. Surprisingly, the bank lagged well behind their fellow Tier 1 competitor, Access Bank, in e-revenues.

Nigeria’s oldest banking brand, FBNH’s revenue slithered marginally upwards by +1.56% from N48.03bn in 2019 to N48.78bn in 2020, however, revenue growth from its digital banking business has not been preppy.

The most harshly affected bank by falling digital banking income was Zenith Bank Plc which saw digital income slide by -47.74%. This was followed by Wema Bank where electronic banking revenue slumped from N2.79bn in 2019 to N2.02bn in 2020, the drop represented a -27.60% decline.

Close on the heels of the Wema Bank drop was GT Bank which slid -25.63% from N11.04bn in 2019 to N8.21bn in 2020, the GT Bank and Zenith Bank dips were worrisome as both banks were considered prime movers of the digital banking makeover and belong to the rarefied group of Tier 1 DMBs.

The battle for the lower consumer pyramid will become hard, fast, and uncompromising as the bigger banks attempt to rapidly expand their agency banking spread despite the constraints imposed by the COVID-19 pandemic.

In a recent African Digital Banking Transformation Report 2020 which was published by the African Banker magazine and titled “Building a Digital-First Bank”, the report noted that “The number of Africans with bank accounts increased from 170m in 2012 to nearly 300m in 2017 and is forecast to reach 450m by 2022, according to consultants McKinsey.