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Latest report released by PricewaterhouseCoopers (PwC), has cautioned Nigerian financial institutions to get rid of analogue mindset and embrace smart solutions so as to seamlessly escape from looming industry threats on their operations.
Already, the rise and influx of financial technology (Fintech) firms within the banking ecosystem are raising apprehension amongst banks that are reluctant to adopt smart solutions and analysts say the fear may be much when telecoms takeover mobile money services very soon.
However, the report was quick to identify six areas where financial institutions can focus their productivity efforts to boost sustainable profitability, including better understanding of the workforce, rethinking change functions and embracing the platform economy.
Others are improving workforce digital IQ, bringing an agile mind-set to the mainstream and mastering digital labour.
The PwC report titled ‘The Productivity Agenda – Moving Beyond Cost Reduction in Financial Services,” was quick to advise bank managements to make hair while the sun shines so as to align with unavoidable transition from analogue to digital banking space to remain in profitable market share in the nearest future.
The report argued that even though the expected digital reforms come with inherent limitations, banks that wish to stand the test of time must “Look beyond the realm of cost-reduction and restructuring measures for profitability and long-term survival.”
PwC further warned that as the disruption of Artificial Intelligence (AI) in the industry has come to stay, the earlier banks adjust relative to separation of roles between human and AI, the better for the technologically threatened industry.
Giving further insights to the report, the Financial Services Leader for PwC Nigeria, Sam Abu, averred that “The cost cutting agenda adopted by many institutions since the financial crisis has, in essence, de-globalised the industry to make it more local or national, shrunk global footprints, divested businesses and shed clients.
He observed that “However, this process has run its course. If profitability is to get anywhere near the highs of 15 years ago, what is needed now is a fundamental focus on building a sustainable productive business model that can compete with both incumbent institutions and digital-only competitors.”
PwC also made it clear in its report that “As people live and work longer, and unemployment rates remain low, digital training and retraining of existing workforces is particularly crucial. Despite its importance, research shows that current efforts are not achieving the desired results.”
“Of the financial-services leaders polled in PwC’s 2018 CEO Survey, 75 per cent reported they were concerned about shortages of digital skills within the industry.
“To keep up with digital-only competitors and rapidly deliver a seamless and instant customer experience, 77 per cent of financial institutions are turning to agile somewhere in their organisations…
“Over 50 per cent of CEOs believe AI will have a bigger impact than the Internet. Getting the balance right between tasks performed by AI and tasks performed by people will be key to future success for financial institutions.
“With banks struggling to improve their return on capital, many institutions are being forced to restructure and cut costs. Even in the asset management industry, where return on equity is higher than the financial services industry as a whole, there is downward pressure on margins and profitability.
Some of the leading financial pundits who reviewed the PwC report said the advise contained in the document for financial institution are in line with current global realities in the money market.
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