The advent of Fintech in the Nigeria financial sector has become lucrative enough that investors from around the world are betting on it with large sums. In 2019, the Nigerian fintech raised $360 million in seed and investment funds, a development that has endeared many to the happenings in that financial space, even banks are taking keen interest.
Guaranty Trust Bank (GTB) is planning to restructure as a holding company to enable it to take on fintech. The bank’s CEO Segun Agbaje made the disclosure during the earnings call for the fourth quarter of 2019.
A holding company is a form of financial organization that owns a controlling interest in other businesses called subsidiaries.
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GTB is popular for diversity in business, investing in a range of industries, from insurance to asset management, until 2010, when the Central Bank of Nigeria (CBN) stopped banks from running non-banking subsidiaries. Now, the bank appears ready to give the fintech industry a try.
“About 10 years ago, we made a decision then looking at the operating environment that we were going to shed all our subsidiaries and become completely focused. Everything we have seen over the last 2,3 years has told us that it’s time to have a bit of a rethink” Segun Agbaje said.
Agbaje seems to foresee a future of fierce competition between banks and fintechs in Nigeria, and has a plan to make hay while it still shines. Although GTB made record earnings in 2019, with a 6.6% profit increase at N231.7 billion ($640.4 million), an increase spurred by the addition of seven million more customers, the CEO appears unimpressed, and sensed bleak future for banks as the fintech industry garner momentum daily.
“Most banks are growing 5% to 7%. We know that’s sustainable,” Agbaje said.
At a time when other banks are talking consolidation, it makes sense that the most profitable bank in Nigeria is worried about the future, and sees fintech as a way out.
Zenith and Union banks are reportedly having a consolidation talk; First Bank is also reportedly in talks to acquire two other smaller banks. In 2019, Nigerians witnessed the Access-Diamond Banks merger. There are all signs of trouble in the banking industry, especially as it affects the biggest banks in the country.
Agbaje believes the weak valuations of banks is a reason to diversify, and the CBN’s regulation of 2010 has made fintech the principal choice.
“When you take GTBank, which has one the best valuations in the banking industry, it is valued at a one-time book. Then you come to the payment space where fintechs and payment companies are being valued at 30x earnings. What is there not to like about this space?” Agbaje said at February’s Social Media Week in Lagos.
While he acknowledged the existence of other profitable businesses, he believes restructuring will help the Guaranty Trust Bank to cash in on the most profitable one.
“There are other lines of businesses that are doing very well. If you look at our financial statement, you will see that our payment business is growing by about 60%. So that is an area we like,” Agbaje said.
Agbaje believed that GTBank has what it takes to compete and win in the fintech space, using the already existing payment products of the bank as an example: GTBank’s lending service and QuickCredit that have been designed to compete with fintechs, have formed solid basis for the CEO’s belief that GTB will scale the hurdle and win the race in the fintech industry.
But as Agbaje hinted at February’s Social Media Week, the focus of the bank is on payment: “About 30% of banking revenue comes from the payment space.”
The payment market has a prediction of lucrative future growth that will hit $20 billion to $40 billion in the near future. According to business consulting firm Frost & Sullivan, Nigeria’s fintech revenues will grow from $153.1 million in 2017, to $543.3 million by 2022.
With the rising rate of partnership between fintechs of Nigerian origin and established payment firms around the world, banks are wary that the future of the finance industry in Nigeria will be overtaken by players in the payment technology.
Agbaje said the projection of Frost & Sullivan means that 30% of banking income is at risk, and the time to act to avoid the pitfalls is now. GTB is not considering partnership with already existing fintechs, but it is building its own app called Habari.
The bank believes that it already has the demographic needed to push its payment products, and will not find it hard to bring Habari to the limelight.
The bank recently launched Beta Health
GTBank Launches Beta Health, Expands Access to Health Insurance for Low-Income Nigerians
As at 2018, more than 90 percent of the Nigerian population are not enrolled in any health insurance scheme, according to the country’s Ministry of Health. This is because health insurance is either too expensive or not very accessible to most people across the country. Beta Health is a response to this pressing national need and the latest offering in the long line of GTBank’s innovative products and services aimed at adding value to people’s everyday lives. To subscribe to Beta Health, all a customer has to do is simply dial *737*52*500*50# on their mobile phones, and they will be signed up on the package within minutes.
People subscribed to Beta Health can walk into over 1,000 hospitals nationwide and get attended to for select medical cases, at no out-of-pocket cost. There are, on average, at least 5 healthcare centres in every local government area under the Beta Health coverage, and the plan also allows for subscription on behalf of a third-party; such as relatives, domestic staff, contract workers and employees of small businesses. This offers an efficient solution for access to basic healthcare services for people in every part of the country and across all works of life.
Commenting on the launch of Beta Health, the Managing Director and Chief Executive Officer of Guaranty Trust Bank plc, Mr Segun Agbaje, said; “We are delighted and proud to launch this healthcare initiative which we believe will have a tremendous impact in people’s lives. Beta Health is more than just a banking product, it reflects our passion for enriching lives and commitment to expanding access to the essential services which everyone needs to thrive.”
He further stated that, “For us at GTBank, this is just the start. We will continue to build on Beta Health to provide greater access to more robust and comprehensive healthcare plans that serve the pressing needs and fit the lifestyle of our customers and people in the communities where we operate.”
GTBank has consistently played a leading role in Africa’s banking industry. The Bank is regarded by industry watchers as one of the best run financial institutions across its subsidiary countries and serves as a role model within the financial service industry due to its bias for world-class corporate governance standards, excellent service quality and innovation. The Bank is also going beyond the traditional understanding of Corporate Social Responsibility as corporate philanthropy by intervening in key economic sectors through non-profit consumer-focused fairs and capacity building initiatives for small businesses
What they need to do is simple: create a digital conglomerate, in the mould of Naspers or SoftBank, with GTbank as one of its subsidiaries; then make Mr Agbaje the president of the conglomerate, since his tenure as CEO is almost up.
The GTbank is running with handbrake on at the moment, so to realise its full potential, the larger business needs to be decoupled from the CBN grips.
The same way we run Nigeria is how we run some of our biggest organisations, and they remained undervalued because of that.