Not too long ago, ‘banking’ was something of a dirty word. The 2008 financial crisis damaged trust in financial institutions the world over and, as a result, they became synonymous with greed and risky speculation. The fact that this stereotype is now being eroded is down to the hard work of the banks that have been keen to show off the important work they do empowering businesses and individuals. In fact, the 2019 Edelman Trust Barometer report for financial services found that trust in the sector is at its highest level since 2012.
There are a few organisations driving this improvement, one of which is Nigeria’s Guaranty Trust Bank (GTBank). After commencing operations in 1991, the bank quickly became one of the most respected organisations in the country, winning the Nigerian Stock Exchange President’s Merit Award on no less than seven occasions during the first decade of the 21st century.
“If you look at our history, we have always put a premium on building trust and improving operational efficiency – not just to keep costs down, but to create processes that are scalable, and that add the most value to all of our stakeholders [see Fig 1],” said Segun Agbaje, Managing Director and CEO of GTBank. “We have always been at the forefront of leveraging new technologies to grow our retail base and, most importantly, to serve customers in the best possible way.”
Until recently, strict regulation and the sheer weight of capital required to enter the banking industry has protected it against new entrants
Under Agbaje’s stewardship, GTBank has placed financial inclusion, digital technologies and good governance among its top priorities. Before each new policy or service is introduced, the bank is careful to consider the needs of its customers. It believes that innovation should not be for innovation’s sake – it must be delivered with a clear purpose and vision.
There has been much talk of how digital technologies have caused disruption since they first appeared – particularly for industries that have been in existence for decades. Banking, of course, has lived a charmed life for most of its history; until recently, strict regulation and the sheer weight of capital required to enter the industry has protected it against new entrants.
Today, however, the industry is a much more welcoming place for new players. Established banks have found themselves challenged not only by up-and-coming firms in the financial services space, but also by technology platforms with little industry experience. In the face of this new challenge, banks are left with a stark choice – innovate, or risk being overtaken.
In the developed world in particular, physical bank branches are on the decline, with many individuals rejecting the inconvenience of having to organise their financial needs around the set opening hours of brick-and-mortar banks. With its many e-branches, GTBank has already pre-empted this trend by giving customers the flexibility they are craving – and that’s not the only way the bank is adapting.
“We have decided to disrupt ourselves and not live in denial,” Agbaje said. “At one time, when we did competitor analysis, we only used to look at other banks. Today, we look at fintech businesses, telecommunications firms, and even betting companies – essentially, anyone who offers any form of payment service. And one thing that we have learned is that although people will always need banking services, they may not always need banks.”
As Agbaje emphasised, fintech firms are one of the primary driving forces behind change in the finance sector. These businesses have embraced new developments, including blockchain and cloud-based solutions, to deliver services that are more agile and able to better meet customer expectations. Unsurprisingly, investors are getting excited about these new players: in 2018, fintech funding reached $111.8bn, according to KPMG. This was an increase of 120 percent compared with the previous year.
“We are responding to blurring industry lines by completely redefining ourselves,” Agbaje told World Finance. “We are becoming a single trusted, integrated digital platform, building and leveraging partnerships and collaborations to offer more essential products and services than a traditional bank can.”
Industry lines could become further blurred if recent rumours regarding the well-known technology giants turn out to be true: analysts have speculated that the likes of Amazon, Facebook and Google could one day offer fully fledged banking services. Many already provide peer-to-peer payment solutions and have a huge customer base to call upon. They are also viewed increasingly positively in terms of trust and reliability: a 2018 survey by MuleSoft found that 52 percent of all 18-to-34-year-olds would consider banking with one of today’s tech giants.
The expectations placed upon banks are now changing. If they do not react to this shift, then it is possible that conventional financial organisations will become synonymous with inefficiency and stagnation. Agbaje, however, is determined that this won’t turn out to be the case at his company.
Staying on top
With industry competition growing all the time, GTBank has acted quickly to ensure it stays ahead of the curve. In November 2018, the bank launched its Habari platform to broaden its ecosystem. Rather than being a bank where customers simply come to make deposits and withdrawals, Agbaje wants GTBank to become the payment engine behind a range of services.
Habari’s unveiling showed just how much banking has already changed. Known as Nigeria’s largest platform for music, shopping, lifestyle content and more, the mobile application has been built around people’s needs rather than simply being a generic suite of banking solutions.
“We see GTBank creating value no longer as just a bank, but more like a tech platform offering a wide range of services that cut across people’s everyday needs,” Agbaje told World Finance. “I believe that in the future, most banks will exist in this way: becoming more platform-driven, asset-light and focused on leveraging new technologies to deliver benefits beyond banking. The only thing that will remain constant in the future is that the customer will always expect services to be faster, simpler and more easily accessible. Hence, whoever will dominate the future of banking must always excel in these areas, and that is exactly what we are trying to do.”
Although the transformation currently sweeping the banking sector might be daunting for some companies, GTBank has plenty of experience when it comes to pioneering new services. One such example concerns the field of unstructured supplementary service data (USSD) technology – a global mobile communication system that allows financial organisations to share information with their customers more easily.
“We led the way for banking with ATMs, we are a leader in online and mobile banking services, the industry is still playing catch-up with us in USSD banking, and now we are going after the future of banking with Habari,” Agbaje said. “However, the most important thing we do is continually ask ourselves what is the best way of remaining relevant to our customers when their needs and expectations are always evolving. This is what births and guides our innovations, and is the reason why we have been so successful in delivering best-in-class services and growing our customer base.”
While music, videos and shopping are not the kinds of services that usually spring to mind when people think about banking, the sector – like all others – must evolve to meet changing demand. Organisations like GTBank understand this better than most.
Collaborate to innovate
It must be noted that even with all the talk of disruptive firms threatening to upset established banks, not every new entrant is necessarily a threat. In fact, a number of financial institutions have decided to partner up with fintech start-ups instead of competing with them. Around the world, a number of traditional banks have begun to work alongside neobanks to establish more efficient online tools. For example, Boston-based Radius Bank sought the assistance of fintech firm Aspiration when designing a revamp of its customer sign-up site. Such collaborations are becoming increasingly commonplace.
“By focusing on partnerships, GTBank is diversifying its products and services to meet the evolving needs of customers,” said Agbaje. “I think we have got to admit that we can’t give our customers everything, but we can give them access to everything. That is what we get from our alliances with service providers across all sectors that are relevant to our customers.”
Earlier this year, GTBank confirmed that it was working with digital content firm Publiseer to help African writers and musicians distribute and monetise their works. The collaboration is just the latest in a long line for the bank: last year, GTBank also teamed up with New Works and the Nigeria Immigration Service to streamline the process by which Nigerians apply for international passports.
“Our partnerships inform how we design our products; we ensure that no matter how broad they seem, they always revolve around payments and credit,” Agbaje explained. “So, the only way to diversify our product offering is through partnerships, and underlying this is our focus on building a platform that brings together everything and everyone to meet customers’ changing needs and expectations.”
Banks have access to a broad customer base and a great deal of capital, but they cannot be expected to have all the necessary internal expertise as they begin to offer more diverse services. This is why collaborations are proving to be so important and mutually beneficial to both banks and the firms they’re working with.
A platform for enriching lives
GTBank’s Habari platform offers so many opportunities to collaborate that innovating has become second nature to the bank. After all, it is a financial services firm that lets users listen to music, watch videos, read, shop and more. In fact, the challenge now is ensuring that it continues to remain focused and only introduces new features when they are relevant. In order to ensure that each new deployment meets this aim, GTBank remains in constant conversation with its customers, taking all feedback on board.
“In a nutshell, Habari is everything we have talked about regarding our changing business landscape and what banking will look like in the future,” Agbaje said. “We believe that the bank of the future is a trusted, integrated digital platform that plugs in seamlessly with every aspect of the customer’s life. Habari is our first step towards building such a platform.
“Basically, when you look at the impact of digital technologies in our lives, you see that people are increasingly leveraging mobile and internet services to enable virtually every aspect of their lives, from how they keep the lights on at home to how they get around town.”
With Habari, GTBank’s goal is to leverage the ubiquity of digital technologies to ensure that it can effectively serve its customers’ needs in every instance of their daily lives. The bank is also promoting enterprise in the SME sector by building free business platforms such as the GTBank Food and Drink Festival and the GTBank Fashion Weekend – two events that are having a tremendous impact in terms of uplifting small businesses.
Agbaje told World Finance: “With Habari, as with our free business platforms, we are bringing together service providers and end-consumers in order to create more value for everyone, thereby playing a deeper role in the lives and businesses of all our customers. The impact of these events has been very positive. We have managed to increase the number of retailers and attendees every year since we created these platforms four years ago. This year, we actually doubled the number of participating small businesses at the Food and Drink Festival, increased the number of days that the event was being held across, and had twice the number of food experts in attendance compared with previous years. By the end of the festival, more than 250,000 guests had walked through our gates, leaving all participating small businesses with new best records in sales.”
One thing the industry has learned is that although people will always need banking services, they may not always need banks
Whether it is promoting fashion or food, GTBank is keen to show that it is interested in more than just interest rates and balance sheets. Nurturing the next generation of Nigerian entrepreneurs is also a key objective. The bank’s Habari platform and its free business platforms demonstrate financial institutions’ perhaps surprising ability to inspire and touch people’s lives.
Beyond simply creating value for GTBank’s stakeholders, Agbaje is determined to contribute to the real economy and boost economic growth in Nigeria. “If you look at most countries, especially developing ones, the heartbeat of the economy is its small-to-medium-sized enterprises [SMEs],” he said.
In fact, the role that financial institutions play in fostering business activity can often be overlooked – they provide loans, financial advice and, in the long term, help create social stability. Conscientious banks realise that they are not like other businesses – they have a responsibility to the wider economy.
“What we have started to do in different ways and forms is to create virtual and physical business platforms to help SMEs grow sustainably,” Agbaje said. “We started with a free online marketplace to give small businesses greater access to consumers online, after which we launched the GTBank Food and Drink Festival and GTBank Fashion Weekend to grow their sales and exposure. And as much as these initiatives are about promoting enterprise in the SME sector, they also form a fundamental part of our social responsibility with regards to how we drive economic growth that empowers communities and enriches lives.”
At GTBank, corporate social responsibility (CSR) is taken extremely seriously. The bank has a clearly defined CSR policy that encourages it to intervene in education, community development, the arts and to protect the environment – four areas that it considers to be major pillars in any thriving society. Among the bank’s flagship CSR initiatives are its advocacy for people living with autism and its sponsorship of people in rural communities to design and execute developmental projects for the benefit of their communities. The bank also organises some of the largest grassroots football tournaments in Africa and has been at the forefront of improving educational outcomes via its investment in public schools across Nigeria.
“At the heart of these initiatives is a social imperative: to help people and communities thrive,” Agbaje explained. “In the same vein, we are trying to develop SME sectors that are critical to economic growth, such as food and fashion. Essentially, what we have seen with most of our customers is that spending is often limited to taking care of basic needs – what to eat and what to wear, for example. If we focused on promoting enterprise in food and fashion, we could create a lot of strong and sustainable growth for our local entrepreneurs, thereby growing our economy.”
Although the business platforms provided by GTBank have already had a significant impact on the Nigerian economy, there is a feeling that this is just the beginning. Agbaje said: “These are more or less our first steps to preparing for a world of platforms where things are offered for free, in order to build out more value in the long run.”
The current initiatives are helping the bank better understand how it can create more value for its small-business customers. New products are being developed all the time based on customer feedback and detailed economic research. For example, recently launched bespoke credit facilities for entrepreneurs in the food and fashion sectors have successfully built upon the positive impact already being delivered by its events programme by providing them with single-digit interest rate loans – the lowest ever in Nigeria.
Risk and reward
Of course, undergoing a digital transformation is not the sort of process that can be carried out on the cheap. Legacy architecture will have to be replaced, data will need to be migrated safely, and additional expertise – perhaps from outside the company – may need to be sought.
For banks, the need to innovate comes at a time of fragility. Low interest rates around the world have hit bank profitability hard and left some with little appetite to invest in an uncertain future. However, maintaining the status quo is simply not an option. If investing in new services will require substantial capital now, it will also provide significant rewards in the future.
“At GTBank, we are not overly concerned about the inherent risk involved with our investments in digital technologies, because we are not profligate about how we invest,” Agbaje said. “We work tightly within our budget and we are very measured about how we spend. Our reputation for operational efficiency precedes us and so, for our investments in digital technologies, as with all our investments over the years, we will always ensure maximum value for money.”
Nevertheless, no investment is without risk. Across 2018, retail banks around the world planned to spend $9.7bn on revamping their digital capabilities, according to Ovum’s ICT Spending Predictor (see Fig 2). In particular, banks need to focus on how new innovations can be used to cross-sell and improve customer loyalty.
According to Deloitte’s 2018 Global Digital Banking Consumer Survey, banks are viewed less favourably than many of their customers’ favourite brands, with only 49 percent of respondents believing that their bank knows what they need (see Fig 3). Innovation can help improve this figure, but only if it is carefully considered. Too often, the digital channels being explored by banks are far from cutting edge, focusing purely on transactional activities.
GTBank understands that a digitalisation strategy has to be more than just a token gesture – it is the key method through which the customer experience is optimised. The bank offers a wealth of e-banking services, including online bill payments, international money transfers and a customer referral reward scheme – and, of course, its Habari platform.
A vision of the future
GTBank may be a trendsetter when it comes to digital financial solutions, but other organisations will undoubtedly start to adopt a similar approach soon. Today, growth strategies in the finance sector are predominantly based on the deployment of new digital technologies. In the near future, more organisations in the finance sector are likely to join GTBank in diversifying their products and services as a way of sustaining their profits. By offering entertainment services or SME advice, banks can secure longer-lasting customer engagement and create revenue streams that are not subject to fluctuations in national interest rates.
Banks may decide to expand out from their core businesses, as GTBank has done with Habari. Alternatively, they may adopt more flexible e-services or begin to monetise customer data. Whatever approach they take, they will surely find that they are not alone in doing so. Nevertheless, GTBank has one particular asset that is difficult to replicate: its people.
“We have great and motivated people who are determined to make a difference and build a first-rate African institution that can compete anywhere in the world,” Agbaje explained. “I always say that if you want to know why an institution is performing strongly, you have to look at the ethics and passion of its people, as well as its leadership.”
Certainly, Agbaje has played a pivotal role in GTBank’s success. Coming from a family that was well acquainted with the financial trade – his father worked for the Bank of British West Africa – he decided to leave behind a comfortable accountancy job in San Francisco to join GTBank in 1991. Rather than staying in the US and working as part of a large organisation where he would likely have little impact, Agbaje instead chose to join a relatively new bank where he could have real influence. It turned out to be the right decision.
“At GTBank, we have a great team of people who share a passion for the organisation – who are very focused on doing the right thing and achieving their goals. We have been blessed with great leadership,” Agbaje said. “I’m the company’s third CEO, and the first two were also excellent people. Corporate governance is strong and what you will find is that there is a positive relationship between good corporate governance and strong profitability. That’s what you see with GTBank: a simple, clear vision delivered in a very ethical way.”
In the past year alone, this vision has paid off in a multitude of ways, not least of all through the launch of the bank’s Quick Credit initiative. The product gives customers instant access to personal loans at a monthly interest rate of just 1.75 percent. It is a product that has proven hugely popular: in just four months, it matched its predicted performance for the entire year. It hasn’t only been successful with customers, though: for banking staff, Quick Credit has introduced a host of new efficiencies. By automating the scoring process for the loan, it now takes less than two minutes for customers to request and receive the approved amount.
The success of recent deployments gives Agbaje confidence that he is steering the bank in the right direction. Still, having been CEO for more than half a decade, he is well aware that now is not the time to rest on his laurels.
“My key leadership principle is simply this: focus,” Agbaje said. “As CEO, you must have clarity as to what you are trying to achieve. There will be a lot of noise, but you must have strength of character and moral grounding to remain focused and always play by the rules.”
This noise is only going to get louder as established banks are joined by fintech firms, neobanks and other organisations keen to engage with a more open financial services sector. GTBank knows what it is like to be a new player in the industry, having only received its banking licence in the early 1990s. In a relatively short period of time, the bank has grown to become one of Nigeria’s most respected institutions. By continuing to adopt a forward-thinking approach, it now looks set to become one of Africa’s foremost financial brands.