Nigeria’s GTBank key enabler which has helped it to run efficiently delivering industry-leading 40.2% cost-to-income ratio (CIR) will anchor its scalable advantage into the digital domain. At this low CIR number, the bank is strategically positioned to lead the new ecosystem of banking: digital. Simply, when the cost of doing business is cheap, a firm enjoys huge advantage in the competition. Yet, this digital banking competition is still open.
Yes, any Nigerian bank or fintech can win the digital banking competition. The key element is managing your marginal cost to be as low cost as possible, thereby making it possible to enjoy scalable advantage. Once that is done, other benefits will fall in line. If the marginal cost does not tend to zero, the fintech or bank will struggle to enjoy a huge scalable advantage that will deliver scale within the unbounded distributed internet channels.
Internet makes it easy to have low marginal cost, a major contributor on top of the broad ICT productivity gains we already enjoy on our businesses. With the low marginal cost, digital products do better. This ability to scale massively on internet via possibly zero cost is the reason why blockchain poses a threat to the banking industry. Blockchain technology can attain that zero marginal cost thereby moving customers to blockchain-based platforms. The key competitive weapon is any technology that delivers zero or near zero marginal cost. I recommend for Nigerian banks and our fintechs to critically examine the adoption of blockchain in their business processes.
Back to GTBank, it may be having a CIR of 40.2% but blockchain can make digital banking to deliver 5%. If that happens, you have changed the basis of competition. When that happens, you are talking of disruption. Any bank or fintech that gets ahead will have an immense advantage. I expect these evolutions as Internet matures.
- Remittance: As internet matures and the core elements developed, the world will have one “currency” and the elements of remittance will not be needed. Besides, the transfer of funds, if necessary, can be done without fintech in the midst. We already have companies doing remittance for free between U.S. and Europe. In future, that will not be a service because technology will make Internet to get all nations and their currencies to converge.
- Within a decade, moving money around the world will be free. It is already done. Circle which received funding from Goldman Sachs allows Americans and Europeans to move money at zero fee across the Atlantic. And that reminds me, if you have a technical team, put efforts to see how blockchain can improve your business process and save you so much money
- Payment: In a blockchain, no one will need a bank or fintech to facilitate payment. The buyer and seller can exchange blockchain transactions to effect deals. It is going to be an advanced mPesa where buyer pays seller through the mobile number, except that mPesa is not owned by any corporate entity
- Lending: With most frictions gone, lenders will lend to borrowers and all contracts sealed in the open general ledger of blockchain. The need for fintechs and banks will be limited.
What To Do
You must find a technology strategy to have a marginal cost as close to zero for you to win. Blockchain may be that path today.