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How Creative are Nigerian Banks?
- By Business World
- Published August 16th, 2010
- MoneyWorld
- Unrated
Creativity in product offering and service delivery ought to differentiate one bank from another. OKEY NWANKWO argues that domestic banks not only lack creativity in product development but clone each other’s product.
BANKS operating in the domestic economy need to reinvent themselves if they are to regain full public confidence as well as ride the crest of the ongoing uncertainties in the financial services sector. Public confidence in banks plummeted following last year’s sacking of executive management team of eight banks by the Central Bank of Nigeria (CBN) for alleged infractions. The sack was described by the apex bank as reforms designed to save the sector from systemic distress.
The domestic banking industry is not new to reforms. From its earliest days, the Central Bank of Nigeria (CBN), has engaged in a number of reforms which shaped the structure and look of today’s banking industry.
However two reforms stand out in terms of their impact on the economy and public discourse generated in their wake. They are the consolidation programme of Prof. Chukwuma Soludo and the present reforms championed by Sanusi Lamido Sanusi, the current CBN governor.
Sanusi assumed office on June 1, 2009 following the expiration of Soludo’s tenure.
The consolidation saw the motley crowd of over eighty banks reduced to 25 with the surviving institutions expanding quickly in terms of deposits, branch network, profitability and employment generation. It was hailed as the best thing that ever happened to the domestic banking industry with the local banks hauling in one award or the other on a global scale.
But the bubble burst with the coming of Sanusi. He ordered a special audit of the banks and declared that some of them never raised real capita. He said “We found that some of the consolidated banks say they raised N100billion but in actual fact they never raised any capital but they took depositors money and through many schemes turned it into capital. Some got stockbrokers to borrow the money and buy the shares of the banks then the banks buy the shares back through a subsidiary.”
Sanusi’s reforms have thrown the spanner into the works of banks and now it is time for them to reinvent themselves. They need to devise means of being creative as to retain their customer base as well as garner new ones.
How creative are domestic banks?
A major problem with banks operating in the domestic economy is lack of creativity in developing new products. Once a bank introduces a product, others queue up with variants of the same product meaning that most banks do not pay attention to product and service development. This attribute has resulted in almost all of the banks having the same cache of products with different names but the same features. There is no product differentiation. The only difference lies in their names and the banks that have them.
Without product and service differentiation, banks will not be able to create their niche and be apart from the pack. Some banks go as far as stealing product ideas of fellow banks and launching it before knowing the full details. When Ecobank introduced the Naira creditcard, before it could conclude arrangements on the official roll out of the product, another bank quickly called a press conference to announce the introduction of Naira creditcard. In the conference the bank proudly introduced itself as the first issuer of a naira denominated credit card. But Business World Intelligence gathered that the bank up till now has yet to introduce any naira denominated credit card.
The race to be the first to announce the introduction of a credit card in the local currency is part of the problems in the domestic banking sector where cloning or outright usurp of each other’s product thrives. Other banks are equally guilty of going public with products and services that are not in existence. They will perform a public launch of a product with fanfare only for customers and clients to call at the branches and discover that such products are not in existence.
A particular bank introduced the sale of Joint Admission and matriculation board (JAMB) forms and developed a scratch card for online registration, other banks jumped on board and now almost every bank branch displays signs saying ‘JAMB forms on sale’. Ditto for collection of utility bills like Power Holding Company of Nigeria (PHCN), water bills, and Waste disposal bills, every bank now is a collection agent for all these bills.
In the past only a few banks paid attention to children banking but now every bank offers a wide range of children banking products.
Almost all banks adopt the month of May as children banking month. The concept of having a month devoted to children banking was introduced an innovative bank only for others to adopt the concept. A review of children banking products from different banks indicates that almost all of them have the same attributes.
Without mentioning bank names, a children product from one of the banks has the following features; it comes with opening balances as low as N1, 000 and developed with the intention of creating banking awareness in children and encourages a savings culture from an early age. Account is a children’s savings account. It is designed with special features that benefit parents seeking to save for their children’s education and other needs. It is a fabulous way to get children saving. Balances above N5, 000 attract interest rate of 1 percent above prevailing savings rate.
A children product from a different bank has the following features; Opening balance of N5000, Special interest rate of 1 percent above savings rate. a product flyer from another bank has the following features; With as low as N5,000 minimum opening balance, and regular monthly deposit, you and your children can achieve financial independence over time. You earn a competitive interest earning of 2 percent per annum on credit balances accrued daily and paid quarterly.
A quick review of the content of the flyers above indicates that there is not much differentiation in the children product offering from different banks. The products have the same features but different names. In essence, if the names are removed, even the bank staff would not be able to differentiate their products from others in the market.
The same scenario is repeated among products meant for adults. The banks are not offering anything different from others. It is still the same products decked in different names. A bank (name withheld) introduced a savings product having the same features as a current account. Now almost every bank is offering variants of savings account with current account features. Spring Bank introduced a product known as COT +, meaning that the bank pays COT on the account instead of the holder paying COT. A number of banks followed suit and introduced their own array of COT+ products.
Banks’ cloning of competition products erodes the original creator of a product of benefits and economics of scale that it would have enjoyed.
Stakeholders’ reaction
Godwin Utop a brand executive believes that Nigerian banks have yet to find their depth in product and service development. According to him, most banks just copy products developed by others changing only the name and one or two features. However, he said it is only through creative design of products and services that domestic banks could win the confidence of those who are still having issues with the system.
Conclusion
Innovation is necessary to be ahead of the pack. Nigerian banks need to be more innovative in the design of product offerings that should differentiate one bank from another. Every bank should not be a centre for sale of JAMB form and scratch cards. Rather, banks should develop products, ensure secure the rights to the new products before launching them. This will help in a great way to reduce cloning of products as is obtained in the sector.
BANKS operating in the domestic economy need to reinvent themselves if they are to regain full public confidence as well as ride the crest of the ongoing uncertainties in the financial services sector. Public confidence in banks plummeted following last year’s sacking of executive management team of eight banks by the Central Bank of Nigeria (CBN) for alleged infractions. The sack was described by the apex bank as reforms designed to save the sector from systemic distress.
The domestic banking industry is not new to reforms. From its earliest days, the Central Bank of Nigeria (CBN), has engaged in a number of reforms which shaped the structure and look of today’s banking industry.
However two reforms stand out in terms of their impact on the economy and public discourse generated in their wake. They are the consolidation programme of Prof. Chukwuma Soludo and the present reforms championed by Sanusi Lamido Sanusi, the current CBN governor.
Sanusi assumed office on June 1, 2009 following the expiration of Soludo’s tenure.
The consolidation saw the motley crowd of over eighty banks reduced to 25 with the surviving institutions expanding quickly in terms of deposits, branch network, profitability and employment generation. It was hailed as the best thing that ever happened to the domestic banking industry with the local banks hauling in one award or the other on a global scale.
But the bubble burst with the coming of Sanusi. He ordered a special audit of the banks and declared that some of them never raised real capita. He said “We found that some of the consolidated banks say they raised N100billion but in actual fact they never raised any capital but they took depositors money and through many schemes turned it into capital. Some got stockbrokers to borrow the money and buy the shares of the banks then the banks buy the shares back through a subsidiary.”
Sanusi’s reforms have thrown the spanner into the works of banks and now it is time for them to reinvent themselves. They need to devise means of being creative as to retain their customer base as well as garner new ones.
How creative are domestic banks?
A major problem with banks operating in the domestic economy is lack of creativity in developing new products. Once a bank introduces a product, others queue up with variants of the same product meaning that most banks do not pay attention to product and service development. This attribute has resulted in almost all of the banks having the same cache of products with different names but the same features. There is no product differentiation. The only difference lies in their names and the banks that have them.
Without product and service differentiation, banks will not be able to create their niche and be apart from the pack. Some banks go as far as stealing product ideas of fellow banks and launching it before knowing the full details. When Ecobank introduced the Naira creditcard, before it could conclude arrangements on the official roll out of the product, another bank quickly called a press conference to announce the introduction of Naira creditcard. In the conference the bank proudly introduced itself as the first issuer of a naira denominated credit card. But Business World Intelligence gathered that the bank up till now has yet to introduce any naira denominated credit card.
The race to be the first to announce the introduction of a credit card in the local currency is part of the problems in the domestic banking sector where cloning or outright usurp of each other’s product thrives. Other banks are equally guilty of going public with products and services that are not in existence. They will perform a public launch of a product with fanfare only for customers and clients to call at the branches and discover that such products are not in existence.
A particular bank introduced the sale of Joint Admission and matriculation board (JAMB) forms and developed a scratch card for online registration, other banks jumped on board and now almost every bank branch displays signs saying ‘JAMB forms on sale’. Ditto for collection of utility bills like Power Holding Company of Nigeria (PHCN), water bills, and Waste disposal bills, every bank now is a collection agent for all these bills.
In the past only a few banks paid attention to children banking but now every bank offers a wide range of children banking products.
Almost all banks adopt the month of May as children banking month. The concept of having a month devoted to children banking was introduced an innovative bank only for others to adopt the concept. A review of children banking products from different banks indicates that almost all of them have the same attributes.
Without mentioning bank names, a children product from one of the banks has the following features; it comes with opening balances as low as N1, 000 and developed with the intention of creating banking awareness in children and encourages a savings culture from an early age. Account is a children’s savings account. It is designed with special features that benefit parents seeking to save for their children’s education and other needs. It is a fabulous way to get children saving. Balances above N5, 000 attract interest rate of 1 percent above prevailing savings rate.
A children product from a different bank has the following features; Opening balance of N5000, Special interest rate of 1 percent above savings rate. a product flyer from another bank has the following features; With as low as N5,000 minimum opening balance, and regular monthly deposit, you and your children can achieve financial independence over time. You earn a competitive interest earning of 2 percent per annum on credit balances accrued daily and paid quarterly.
A quick review of the content of the flyers above indicates that there is not much differentiation in the children product offering from different banks. The products have the same features but different names. In essence, if the names are removed, even the bank staff would not be able to differentiate their products from others in the market.
The same scenario is repeated among products meant for adults. The banks are not offering anything different from others. It is still the same products decked in different names. A bank (name withheld) introduced a savings product having the same features as a current account. Now almost every bank is offering variants of savings account with current account features. Spring Bank introduced a product known as COT +, meaning that the bank pays COT on the account instead of the holder paying COT. A number of banks followed suit and introduced their own array of COT+ products.
Banks’ cloning of competition products erodes the original creator of a product of benefits and economics of scale that it would have enjoyed.
Stakeholders’ reaction
Godwin Utop a brand executive believes that Nigerian banks have yet to find their depth in product and service development. According to him, most banks just copy products developed by others changing only the name and one or two features. However, he said it is only through creative design of products and services that domestic banks could win the confidence of those who are still having issues with the system.
Conclusion
Innovation is necessary to be ahead of the pack. Nigerian banks need to be more innovative in the design of product offerings that should differentiate one bank from another. Every bank should not be a centre for sale of JAMB form and scratch cards. Rather, banks should develop products, ensure secure the rights to the new products before launching them. This will help in a great way to reduce cloning of products as is obtained in the sector.
