The need to deliver efficient financial transactions and reduce the vulnerability of banking systems is driving investment of financial institutions in digital solutions. IFE OGUNFUWA examines the growth of investment in software by Nigerian banks Ten Deposit Money Banks reported fresh investments valued at N46.2bn in software in the first three months of the year in order to deliver hitch-free digital banking services to customers.

Findings by The PUNCH showed that in the first quarter of the previous year, the same banks spent N3.76bn on computer software they developed and purchased outside the country. This is an increase of 1129 per cent in software investment compared with the same period in 2019.

The banks surveyed are Access Bank Plc, First Bank of Nigeria Plc, Fidelity Bank Plc, First City Monument Bank Limited, Guaranty Trust Bank Plc, Sterling Bank Plc and Zenith Bank Plc, Others are Union Bank Plc, Ecobank Transnational Incorporated (the parent company of Ecobank Nigeria) and Wema Bank Plc.

Experts described software as digital products, which form a critical asset of the financial institutions to carry out transactions, streamline banking processes and protect customers’ funds. They stated that the new software acquisitions could be linked to the COVID-19 pandemic that had forced customers to reduce their visits to physical bank branches and adopt digital banking platforms as their new normal.

This, according to them, necessitated an increased level of preparedness of financial institutions to handle the huge volume of transactions on digital platforms such as the USSD, banking apps, Point of Sales terminals and Automated Teller Machines. An analysis of the first quarter unaudited annual reports of the banks ending March 31 showed that the software procurement spending of First Bank was the highest during the period, recording N37.6bn in the first three months of the year.

This amount represented 11,423 per cent increase in software investment as against N32.63m in the first quarter of the previous year. To drive digital banking services, Access Bank acquired new software worth N1.44bn, as against N22.91m in the first quarter of the previous year, recording a 6,185 per cent rise in software investment.

Analysis of Ecobank’s financial statement showed an investment of N3.74bn in software in the first three months of this year, which increased by 190 per cent compared to N1.29bn in the same period of 2019.

The GTB’s software purchase increased by 82 per cent from N229.23m spent in the first quarter of 2019 to N418.33m in the first three months of this year. Union Bank, which invested N301m in the procurement of software in the first three months of 2019, reported an increase by 358 per cent in software spending (N1.38bn) from January to March 2020.

According to the Sterling Bank’s financial statement, N82m was invested in procuring new software in the period under review as against N265m in the first quarter of 2019, recording 69 per cent reduction in investment. The FCMB’s spending on computer software increased by 77 per cent from N292.02m in the first quarter of 2019 to N517.33m in the three months ended March 31, 2020.

Wema Bank grew its software investment by 129 per cent from N10.5m in the first quarter of 2019 to N24.02m in the first quarter of 2020. For Zenith Bank, spending on new software dropped by 86 per cent from N1.02bn in the first quarter of 2019 to N138m in the first three months of the year.

The President, Institute of Software Practitioners of Nigeria, Dr Yele Okeremi, said global trends showed that more financial transactions could happen online with the deployment of robots. According to him, financial institutions need to invest more in digital solutions that do not require human knowledge but utilise data and artificial intelligence.

Okeremi said, “Banking must be able to happen without physical contact as much as possible. So banks need to innovate as much as they can and invest more in things that can make that happen.

“They need to introduce digital solutions, including artificial intelligence, because looking at quite a number of things we do today, that we think we are working, we cannot beat machine in doing them. “We are just deceiving ourselves if we think we can do them better. Actually, machines are better than us. Banks need to begin to revisit their strategies in that regard.”

He stated that a lot of disruptions had happened in the financial industry due to technology and predicted that there would be more disruptions in the manner in which financial services were rendered to customers. He said Nigerian financial technology firms had disrupted access to credit as many people could now apply for and receive loans in few minutes.

Okeremi predicted that future innovations to look out for would be in foreign exchange as some countries had started automotive forex trading using robots. He added, “Now, there are quite a few things that we think we do because we have the knowledge but a good number of those things are not necessarily true. Take for instance, some fintechs and banks do credit today when customers use the USSD to apply through the portal.

“Within few minutes, you have the credit in your account. Who is making those decisions? They are taken by machines and data. That is the power of big data. “I see the possibility of those things happening in so many other areas like foreign exchange. If we look at other markets such as the United States, they are already doing automated trading using robots. Those are the kind of things that will probably begin to happen.”

Speaking on the protection of customers’ funds, the President, Nigeria Computer Society, Prof. Adesina Sodiya, explained that globally, there had been an increase in reported cases of cyberthreats, which had forced many organisations to increase the allocation of resources to cybersecurity.

According to him, due to the increase in the use of digital platforms, improved security solutions are being introduced Sodiya said, “Many organisations are now increasing their commitment to cybersecurity and many of them are devoting their resources.

“Organisations all over the world are now spending more money on trying to improve cybersecurity and coming up with additional solutions to improve the security of their systems. “Of course, we know that we have found ourselves in a situation where so many things can now be done online as well as financial transactions.

“We have to first encourage financial institutions to provide more digital solutions so that more people will stop going to the bank.” Accordino create a platform for resolving issues that force people to visit the physical branches.

Source: Punch