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APRIL 2019
ICAN- ACCOUNTANTS TECHNOLOGY SUMMIT
Presented By Ade Bajomo
Executive Director,
IT and Operations, Access Bank PLC
29th April 2019
Fintech, Regtech and Financial InclusionThe Real Solutions for Nigeria
Fintech And Digital Disruption
Regtech: Policy and Regulatory Framework
Financial Inclusion
The Future of Fintech and Adoption in Nigeria
Outline
1
2
3
4
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Name the first thing that comes to mind when you see these images.
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This refers to “radical, transformativechange”
A revolution is a tumultuous and transformative event that
attempts to change a nation, a region or society – and, in
some cases, even the world. Revolutions are the great
turning points of history.
What is a Revolution?
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Revolution!!!
Through the introduction of mechanical
production facilities with the help of water and
steam power. The first mechanical loom was
created.
Most of the time the word “Revolution” springs up, we think
“Protest”, “War”, “Violence”, “Death”. However, it occurs in
every aspect of lives whether we are aware of this or not.
Its part of our lives. Our history…
Through the introduction of a division of
labour and mass production with the help of
electrical energy. The Cincinnati slaughter
house was created.
Through the use of electronic and IT systems
that further automate production. The
Programmable Logic Controller was created.
Through the use of cyber-physical systems…
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What Makes A Revolution Successful
Wider
Audience
The ability to reach a wider
audience will increase
reach and publicity
Persuasiveness
The ability to persuade people
to believe the proposed
transformative change
Propaganda
This refers to Information
which can be used to
promote a point of view
Connection/
Understanding
with PeopleConnection with more people
promotes the essence of the
revolution
Control over the
Media
The ability to control the
media leads to a successful
revolution
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What is a FinTech?
Financial Technology, better known under the term 'fintech',
describes a business that aims at providing financial services such as
personal financial management, insurance, payment, etc by making
use of software and modern technology.
FinTechs generally aim to attract customers with products and
services that are more user-friendly, efficient, transparent, and
automated than those currently available.
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The Fintech Journey
The first transatlantic
cable was successfully
laid, providing
infrastructure for financial
globalization
Wells Fargo
became the first
bank to offer an
online checking
account.
The "Black Monday"
crash resulted in a
worldwide stock market
crash and currently
remains the largest
one-day percentage
decline in the Dow
Jones Index (-22.67%).1866 1967
2013
19931987
On 27 June 1967 Barclays
in Enfield became home
to the world's first cash
machine.
Key Achievements
1920
John Maynard Keynes,
published his book "The
Economic Consequences of
Power”, which talks about the
links between technology and
finance.
Fintech was the original
name of the Financial
Services Technology
Consortium, a project
initiated by Citicorp, to
overcome a reputation for
resisting technological
collaboration with
outsiders
1995
1997
The first virtual banks,
without physical branches
emerged. ING Direct
launched in Canada, as a
subsidiary of the ING
group.
2008
The financial crisis of
2008, which left the global
financial system on the
brink of systemic collapse,
can be viewed as the
turning point for FinTech
Version 0.1 of Bitcoin SW
is released. It includes a
Bitcoin generation system
that would create a total of
21 million Bitcoins
through the year 2040.
2009
Google introduced Google
Wallet, which allowed
users to make purchases
from their mobile phones
using NFC technology.
Apple similarly launched
Apple Pay in 2014.
2016
The first FinTech
bachelor program
was created.
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#AccessData
Cloud Technologies
Cloud platforms are no longer the “new
normal” for just developers but a standard solution for enterprises. Offering faster deployment;
scalability; agility, mobility, business
continuity; and lower total cost of
ownership.
Blockchain Technology
Digital revolution powered by
blockchain and other financial technology will
deliver “the internet of value”,
creating cost savings across the financial services
industry.
Mobile Banking & Smart Apps
Transaction and investment
management apps have transformed the experience of this age. Mobile
apps have become a “go to” platform for mass market
investing.
Robo
Advisory
Human intervention in
banking and investment will
increasingly devolve to algorithms.
DATA
(Advanced Analytics &
AI)
A wide range of historical, current, and forecast data are being used to generate greater
actionable insights and build predictive
and machine-learning models to
identify trends which will inform
investment decisions and
business strategies.
Drivers of Digital Disruption
How Digitization is changing the World
World’s largest taxi
company owns no
taxis
Largest accommodation
provider owns no real
estate
World’s largest movie
house owns no cinemas
Largest phone
companies own no
telco infrastructure
The world’s biggest bank
owns no actual cash
Largest software vendors
don’t write the apps World’s most valuable
retailer owns no
inventory
Most popular media owner
creates no content
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Digital Disruption- Global Banking Sector
MillennialsUse online
banking portal
IncreaseIn Online Banking
from 2017
MillennialsVisit branch locations
This interesting phenomenon is causing banks and other financial services to
rethink how they are doing business.
• The pervasiveness of online and mobile banking, a development from traditional brick-
andmortar branch locations. For example, 78 percent of Millennials used a bank’s website or
online portal, with Gen Xers and Baby Boomers close behind at 75 percent and 67 percent,
respectively.
• Furthermore, 35 percent are banking more online than they were last year, compared with
only 16 percent who are visiting branch locations more frequently
95 million
Active cardholders23 million
Active cardholders
1 billion
Monthly Users520 million
Monthly Users
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Global Impact of Digital Disruption
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Some Top FinTech Companies in the World
Some Fintechs Listed on an
Exchange
$4.5Bn
A$50.6Mn
€15.5Mn
$10.75Mn
$9Bn
IPO Value
Some Former Fintech Listed on an Exchange
$104Bn
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FinTech Companies in Nigeria
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Innovation Attracts Investment
The world’s most successful enterprises are
driven by innovation…
APPLE• The most valuable brand in the world.
• Veered away from existing PC products to
achieve global success
UBER• Leveraged cutting edge technology to disrupt the
taxi transportation industry
ALIBABA• Provided a way for thousands of small
manufacturers to reach global buyers
…yet, only 31% of Nigerian businesses are based on a new or innovative product.
(This figure rises to 70% in South Africa… )
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20
Investors continue to demonstrate confidence in Nigerian startups
Techpoint Africa: Nigerian Startup Funding Report 2018
$ 178,440,980Total Nigeria Startup
Funding in 2018
$ 103,410,795Amount raised by
Fintech Startups Only58% of total startup
funding in 2018
56% increasecompared
to 2017 ($ 115m)
Payments maintains the lead among the Fintech themes
23
Techpoint Africa: Nigerian Startup Funding Report2018
$ 75.5m
$ 19m
$ 7m
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22
FOREIGN INVESTORS
$ 157m
LOCAL INVESTORS
$ 2m
CROWDFUNDING / ICO
$ 20m
Techpoint Africa: Nigerian Startup Funding Report 2018
Foreign investors significantly dominate funding of Nigerian startups
Copyright: Access Bank PLC
Nigeria as a FinTech Hub
The payment space is one of the most attractive segments for Fintechs in
Nigeria, and it has become a key source of revenue for banks and other
payment service providers.
As part of its Payments Systems Vision (PSV) initiative to reform the
payment industry, the Federal Government of Nigeria launched the cashless
Nigeria policy giving rise to several innovative payment systems propelled
by changing consumer patterns, rising adoption of smartphones, increased
internet penetration, and deployment of ATMs.
There exists over 60 FinTech Companies currently in Nigeria.
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Fintech and Regtech: What is Interesting?
InnovationThere would always be new ways to provide value. Some decades ago people had to come
to banking halls and queue to perform transactions. Today People Make payments using
mobile, U.S.S.D, Artificial Intelligence, et al
ScalabilityCompanies have the opportunity to provide the same service to customers at an increased
rate by leveraging automation and Partnership. e.g At Access Bank we automated our credit
process through the use of a simple U.S.S.D code(*901*11#). We have also been able to
extend the offering to over 2 Million Customers through partnership with Remitta. We grant
Loans in Hundreds of millions daily. This would have been impossible had we relied on the
traditional credit creation process.
SecurityRegtech ensures that there is appropriate and sufficient regulation supporting Fintech’s.
This is why in the UK and Singapore regulatory sand boxes have been created to ensure
that while innovation thrives products should be tested within a framework to minimize risk
and breaches. In Nigeria too, SEC has instituted the Fintech Roadmap Committee on the
Nigerian capital Market to develop a Fintech Roadmap.
The Use Cases are LimitlessSome decades ago who would have thought:
• That an NFC enabled coffee cup can be swiped over a terminal to make
payment.
• That Payments can be made by Chatting with a BOT?
• That Payments can be made using your face!
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Global Regtech Outlook
Source: KPMG Regtech Report 3.0
Global Regtech StatisticsRegtech Development
Regtech is a blend word of 'regulatory technology' that was created to address regulatory
challenges in financial services through innovative technology.
Principles Underlying Fintech Regulation
Data Security
Privacy
CybersecurityTax
Evasion
Fair LendingAccess to Finance
Job Creation
Consumer Protection
Anti-Terrorism Financing
Promoting Innovation
AML
Regulators’ responses to technological developments in the financial services industry derive from a number of often-competing
principles and objectives.
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Regtech Outlook in Nigeria
Regulatory Bodies in Nigeria are ensuring Nigeria Benefits maximally from Regtech, The Latest step was evidenced by
the inauguration of the Fintech Roadmap Committee on the Nigerian Capital Market by SEC, the functions are stated
below:
01 02 03 04 05
Develop a Fintech
roadmap for the
Nigerian capital market
Inform the Commission
on approaches to
innovations within the
financial services sector
Promote access to
capital, financial
inclusion and to enable
greater transparency
and more efficient
compliance in a fast
digitalizing financial
services sector
Serve as a think tank
which will provide
guidance on
independent research
for examining the role
and value of Fintech in
the financial ecosystem
Seek responsible policy
regulatory regimes that
balance financial
innovation and
consumer protection.
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Financial Inclusion in Nigeria
The Unbanked population in Nigeria is
36.8% while the financial inclusion rate is
63.2%
The Statistics Further shows that breakdown
of the financially excluded.
Offer powerful solutions building on
weaknesses of existing solutions e.g NFC offline enabled capacity can fix internet related issues
with payments
Fintech Players leverage electronic
data in innovative ways to create better, more customized, and more
accessible digital financial inclusion
products
The spread of mobile technologies, mobile
network coverage, and mobile based financial services in developing countries represent a
game-changer in global financial inclusion efforts
Fintech’s can partner with Government to ensure
that friendly regulation is promulgated to promote
their cause
Opportunities Available for Fintech’s in Financial Inclusion
Fintech’s can drive adoption of their
products by allowing zero onboarding fees, reducing transaction costs and optimizing their infrastructure for
performance
12 3 4 5
Source: EFInA Access to Financial Services in Nigeria 2018 survey and World Bank Report
The CBN in furtherance of its mandate to
promote a sound financial system and
enhance access to financial service for low
income earners and unbanked segment of
the society set up payment service Banks
The Key Objective of PSB’s is to enhance
financial inclusion in rural areas by
increasing access to deposit products and
payment/remittance services to small
businesses, low-income households and
other entities through high volume low value
transactions.
Federal Government of Nigeria through the
Central Bank has a target to ensure that
over 80% of bankable adults in Nigeria have
Access to financial services by 2020
reducing the exclusion rate to 20%
Nigeria Currently has an inclusion rate of
63.2% meaning that 36.8% are financially
excluded. If we must close the 80% gap it
means that 16.8% must be financially
included by next year
The Central Bank of
Nigeria has placed a
spotlight on Rural
areas with a bid to
drive Financial
Inclusion. This has led
to the creation of
Payment Service
Banks.
Payment Service Banks
In a bid to drive Financial Inclusion, CBN has released a circular on Payment Service Banks
whose main business is to drive financial inclusion by providing Banking service in rural areas
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Challenges Fintechs and RegtechsExperience In Nigeria
From Fintech to Top-TechProcess of Developing a
FinTech solution
Idea Generation
Idea Screening
Testing‘Sandbox’
Marketing Strategy
Formulation
Business Analysis
Product Development
Market Testing
Commerciali-sation
Ideation Stage Market Stage
• Intellectual Property (IP) Protection
• Structure of the Business
• Infrastructure
• Market Monopoly and Access
• Investment and Finances
• Tax and Licensing Considerations
• Privacy, Trust and Security of Transactions
Challenges Faced Challenges Faced
• Leverage on existing infrastructure
• Promote education and increase access
to advise and information through the
establishment of a ‘Clinic’.
• Create synergy within the industry
• Set clear guidelines and rules for
governance and interaction amongst
collaborators
Recommendations
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Challenges Fintechs Experience: Regulation
Existing regulation do not fit and regulators have tried to box startups into existing frameworks.
01 02 03 04Lack of clarity on
regulatory requirements
Which licences are requiredfor certain activities? Shouldyou approach the regulatorfor a no objection if youractivity is not expresslyregulated?
Huge and unrealistic capital
requirements
One size fits all regulation
For example, capital requirementfor Mobile Money Operator is=N=2billion, which is higher thanthat of a micro finance bank,which usually has a biggeroperation than an MMO. FinanceCompanies require minimum of=N=100m share capital.
Start-ups should not have to dealwith the same regulations andsupervision as establishedcompanies. The regulatoryburden should be reassessed forstart-ups as they do not have thecapacity (human and financial) tomeet some of theserequirements.
Weak and challenging Intellectual Property
Regime
Registering a mark or process isquite difficult and time inefficient.Startups have had their ideaspoached and stolen by biggerentities who have huge resourcesto register IP rights faster thanstartups can. Our IP Lawscurrently does not recognise therecognition of solutions andintangible innovations.
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Regulatory Framework used in Singapore
Crowd-FundingIn June 2016, MAS (Monetary Authority of Singapore) moved to improveaccess to crowdfunding for start-ups and small and medium enterprises by: Allowing operators of Securities Based Crowdfunding (SCF) to rely on
existing regulations for small offers, raise funds from retail investors andreduce the necessary vetting of retail investors;
Reducing the financial requirements for SCF platform operators that wantto raise funds through SCF only from accredited and institutional investors.
MAS regulates virtual currencies for AML/CFT risks. Proposed regulation ofdigital currency exchanges under provision for start-ups that providemoney transmission and conversion services in August 2016.
Bitcoins
Innovation among banks with regulatory support. Fast and Secure Transfers (“FAST”) in March 2014 – participating banks
make domestic fund transfers to another almost instantaneously fromcomputers or mobile devices.
Retail banks have their own mobile wallets or mobile paymentapplications.
MAS wants to reduce the role of cash and checks in its economy byencouraging switch to digital payments. MAS is asking banks to pass onto consumers the full cost of paper-intensive services, like checkprocessing.
Digital Payments
Disruptive Innovation Center MetLife launched LumenLab in July 2015 with support of government and
EDB to develop disruptive business models in wellness, wealth andretirement.
MAS launched The Looking Glass in August 2016 to allow MAS toexperiment with Fintech solutions for financial institutions, start-ups andtechnology vendors.
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Regulatory Initiatives to Encourage Fintech
REGULATORY SANDBOX A “Regulatory Sandbox” is a safe space where businesses
can test innovative products without immediately incurring thenormal regulatory consequences (e.g., no enforcement actions).
In the UK, the FCA will authorize sandbox firms with restrictions(non-banks only), allowing them to test their ideas.
Singapore issued guidance to establish a regulatory sandbox inJune 2016.
Australia, Hong Kong, Bahrain have also established a regulatorysandbox.
FINTECH BRIDGES Fintech Bridges are cooperation agreements or partnerships
between countries for the purpose of making it easier for Fintechcompanies to pursue new opportunities in both countries andattract investment.
Makes compliance in multiple countries easier and cheaper forFintech companies. Recent Agreements includes:
UK and Australia (March 2016) Australia and Singapore (April 2016) UK and Singapore (May 2016)
INNOVATION AGENCIES/OFFICES UK and Australia both have innovation hubs to help Fintech start-
ups through the authorization process and to provide support incomplying with regulations.
Singapore also has an office designed to help start-ups becomeestablished in the country.
The Hong Kong Monetary Authority created a Fintech FacilitationOffice to build a platform for industry liaisons, to be the bridgebetween the industry and supervisors and to initiate industryresearch.
TAX CONCESSIONS Australia – In March 2016, new legislation was introduced
providing significant tax incentives to promote local and foreigninvestment in innovative start-ups as part of the NationalInnovation and Science Agenda. These incentives included acapital gains tax exemption and non-refundable carry forward taxoffset.
U.K. – The Seed Enterprise Investment Scheme (SEIS), EnterpriseInvestment Scheme (EIS), and Entrepreneurs’ Relief on capitalgains tax.
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How is the Revolution Doing Now?
Financial Institutions are
learning to partner and
integrate.
82% expect to increase
FinTech partnerships in
the next three to five
years
Financial Institutions are
embracing the
disruptive nature of
FinTech
77% of Financial
Institutions will increase
internal efforts to
innovate
88% of incumbents are
increasingly concerned
they are losing revenue to
innovators
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It is becoming obvious that the accelerating pace of technological change is the most creative force – and also the most destructive one – in
the financial service ecosystem. The below are real world implications of FinTech:
Digital becomes
mainstream
Advances in robotics
and AI will start a new
wave of re-shoring and
localization
Cybersecurity will be one
of the top risks facing
financial institutions
Customer intelligence
will the most important
predictor of revenue
growth and profitability
Blockchain will shake
things up
There will be a surge in
funding and innovation
prompting a move from
retail focus to include
more institutional use.
Decades ago, financial
institutions built e-
business units to ride a
wave of e-commerce
interest. Today’s digital
wave has the same
markers: separate teams,
budgets and resources
to advance a digital
agenda
There’d be rapid gains as
new models combine
increasingly powerful and
standard modular platforms
Financial services executives
are already familiar with the
impact that cyber-threats
have had on their industry. In
a Global CEO survey done by
PWC in 2016, 69% of financial
services’ CEOs reported that
they are either somewhat or
extremely concerned about
cyber-threats, compared to
61% of CEOs across all
sectors.
Once, customer intelligence
was based on some
relatively simple heuristics,
built from focus groups and
surveys. Now, technology
advances have given
businesses access to
exponentially more data
about what users do and
want.
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The Future of FinTech
FINTECH IS HERE TO STAY!!!
