Experts charge banks to increase investment in tech

Experts have stressed the need for banks to accelerate investment in technology and step up innovations to enhance cost efficiency.

The experts spoke at the official launch of Proshare Impact Report on Nigeria’s banking sector titled: ‘Reassessing Tier 1 Banks – the Class of 2023,’ in Lagos at the weekend. They maintained that for banks to achieve cost optimisation and survive present reality, it must invest heavily in technology.

Speaking on the theme: ‘Banks are Dead, Banking is Reborn: Bridging Regulatory Compliance, Changing Business Models and Rising Expectations’, they noted that banks are now competing with nimble technology innovators with lower costs and more appealing products.

Presently, smaller FinTech companies have rapid and low-cost access to newer cloud-based technologies and are developing innovative, best-in-class solutions that address a number of the issues that are costly for traditional banks to deal with.

Chief Financial Officer, EcoBank Nigeria Ltd, Mrs Ibukun Oyedeji, said there is a need to reduce costs through investment in technology to remain in business.

She said such investment would help grow the bank’s capital base and liquidity to enable them to remain in business.

Oyedeji also added that banks must learn how to replicate the Fintech model to play actively in that space.

Founder and Chief Consultant at B. Adedipe Associates (BAA Consult), Dr Biodun Adedipe, said the major problem facing the country currently is the issue of devaluation of the naira.

He pointed out that whenever there is a change in the exchange rate, it affects the entire economy.

Adedipe urged the Central Bank of Nigeria (CBN) to resolve the issue of exchange rate volatility and pay more attention to it to forestall future occurrences.

Speaking at the panel, the Group Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, said capital pressure and increase in transaction cost will compel banks to shore up their capital base and operating capital to finance bigger businesses, noting that banks can generate higher returns even in a difficult environment when compared with other investment class.

“The banks have a compelling need beyond increasing their liabilities and to also increase their operating capital because of the shift in exchange rate. If you look at the Nigerian capital market performance as of Oct. 12, the All-Share Index had gained 30.93 per cent, the banking sub-sector had gained 60.43 per cent, which is far higher than the all-share index.

There’s no other investment class that will give more than 60 per cent return like the banks. So, in the interest of investors, it makes more sense for them to give their money to the banks because they can read the market, trade and generate better returns even in a difficult environment,” he said.

Meanwhile, the 2023 edition of the Proshare Bank Strength Index (PBSI) revealed that Access Bank, Guaranty Trust Company, United Bank for Africa and Zenith Bank retained their ranking as Tier 1 banks.

The report stated that Stanbic IBTC and Fidelity Bank dropped from the Tier 1 ranking to Tier II.