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Traditional banks may not exist by 2025 – PwC

By BusinessNews Staff on August 5, 2014

A new report by Pricewater-houseCoopers has suggested that between 2025 and 2030, a market economy without banks of the traditional kind may exist.

The report entitled, ‘The future shape of banking’, said the barriers for non-banks to provide ‘core’ banking services had continued to decline.

“However, banks retain some substantial advantages to help them to prevent this from happening: Banks’ brands and reputations remain powerful, shored up by familiarity, experience and regulation,” the report added.

The Head of Financial Services, PwC Nigeria, Mr. Gabriel Ukpeh, was quoted in a statement on Sunday, as saying, “The status quo is no more but the need for banking services remains. Corporate history is full of cautionary tales about incumbency advantage being lost at the turn of technological cycles.

“Banks still have advantages and alternative providers suffer from a lack of trust but to be part of the future, banks need to invest heavily, rediscover and reassert their core role in society, and secure the ongoing support of policymakers.”

According to him, the success of M-Pesa in East Africa has been attributed to speed, convenience of completing transactions and its ability to reach the region’s banked and largely unbanked population in both the urban and rural areas.

M-Pesa offers a branchless banking service; and users a able to complete basic banking transactions without visiting a bank branch, he added.

Ukpeh said similar trends had crystallised in the Nigerian market space with the use of eTranzact’s PocketMoni and Quickteller platforms.

The PwC official said the financial inclusion strategy of the Central Bank of Nigeria, the drive towards a cashless society and its availing opportunities were evidences of changing landscapes and opportunities for a financial sector whose borders were changing with the entry of new players and cultures.

He said, “The biggest danger for banks is if they lose sight of customer transactions to other players in the value chain, thereby also losing insight into customer behaviours and allowing the power of their brands to diminish.

“In April 2014, the Financial Times reported that Facebook was on the verge of securing approval from Ireland’s apex bank to become an ‘e-money’ institution. This would allow Facebook to issue units of stored monetary value that represent a claim against the company.”

He further said, “New non-bank entrants and technological advances will challenge banks’ business models and fundamental change is inevitable. The only question is how much of banks’ traditional territory the new entrants will occupy.

“Banking services will migrate increasingly away from physical, tangible distribution into technology enabled channels. Banks will have to redefine the power of their brands as a less risky and more reliable platform if they are to remain competitive in the fast paced markets of today.”

[Punch]

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