E-Financial
Blockchain, Fintech and the Future of Banking
By Austin Okere
“Customers besiege banks on first day of partial lifting of COVID-19 lockdown: As early as 8 am, bank premises were already full of people seeking to gain entrance into the banking halls for one transaction or the other. And by 11 am, Twitter was filled with so many posts warning Nigerians about the risks of visiting any bank branch due to the mammoth crowd.” This was Dateline May 04, 2020 on Nairametrics.com. Other blogs had similar screaming headlines.
I wrote this article three years ago on May 04, 2017 when Blockchain and Fintechs finally seemed to be gaining traction in filling the gaps left by traditional banks – and surprised that we are still where we are even today. what will we learn from this, and how will we be better prepared not to be caught desperately unawares again?
Even though cryptocurrencies such as bitcoin tend to steal the limelight, it is their underlying blockchain technology that is proving to be of practical benefit. This technology, which goes beyond financial application, is expected to disrupt global supply chains by boosting transaction speed across borders and improving transparency.
Essentially, the blockchain is a shared virtual public ledger where encrypted transactions are confirmed by outside parties. Confirmed transactions are placed in a “block” and added to the chain, hence the name Blockchain. It is this technology that Fintechs are leveraging to disrupt the traditional banks
Here in Nigeria, blockchain can help to unlock the immense capital locked in Land Assets that are not enumerated because of an antiquated system of land administrated, which is very ripe for disruption.
The most disruptive application of Blockchain Technology, however, is in the Financial Sector; and this will form the focus of my discourse. The consistent complaint about banks has reached a crescendo in recent years. Is this justified?
Should Banks be changing?
Dateline, May 04, 2020 on Niarametrics.com After centuries of conservatism in receiving deposits and making loans, there are two main issues stirring the yearn for change:
- The first being that it is a very difficult Club to join as a customer, and hence the large population of unbanked adults.
- Secondly, even for the members of this elite club, the relationship is acutely skewed in favour of the banks
They have carried on as protected monopolies with no serious challenge or competition, resulting in very little innovation over the decades.
The biggest threat to the banks has been precisely their seeming success. Centuries of relatively significant higher returns, even during economic downturns that adversely affect the real sectors, has engendered an attitude of invincibility and pomposity, characterized by a loss of touch with their customers.
Considered too big to fail, they take it for granted that they will be bailed out with taxpayers’ money in the event of any missteps – this is a perfect set-up for disruption.
Fintech – the new kid on the block
Today, there has emerged a powerful force of the challenge from Financial Technology companies or FINTECHs, as they are more popularly referred to. The promise of Fintech is great. It is shaking up a stodgy banking system and helping to build a more efficient one, especially for consumers and small businesses.
Emerging Markets showing the way in Fintech
For years, emerging economies have looked up to developed countries for ideas about how to manage their financial systems. When it comes to Fintech though, the rest of the world will be studying the experience of the emerging markets, embodied by the widely successful MPESA mobile money system, championed by Safaricom in Kenya.
MPESA has made it possible for a large swathe of the population to gain financial inclusion by providing the opportunity to transact financial services via your mobile phone, on a continent where typically 70% of the population is unbanked.
MPESA today has more than 60% of Kenya’s 33 million mobile users and in 2015 transacted $28m on her platform. Similar applications have metamorphosed across Africa, and Mobile Money services are today generating 6.7% of Africa’s GDP.
Nigeria is no exception with Fintechs such as Interswitch, CWG, Paystack and Flutterwave holding sway. Take for instance, Diamond bank with 7m accounts after 23 years was able to add an additional 6m accounts in just one year after the launch of the Diamond Yello Account in collaboration with CWG and MTN.
China is the undisputed World leader in Fintech
By just about any measure of size, China is the world’s leader in Fintech. It is by far the biggest market for digital payments, accounting for half of the global market, according to the Economist Magazine. A ranking of the world’s most innovative Fintech firms gave Chinese companies four of the five top slots in 2016. The largest Chinese Fintech company, Ant Financial, has been valued at about $60b, at par with UBS which is Switzerland’s biggest bank.
Today, digital payments account for nearly two-thirds of non-cash payments in China, far surpassing debit and credit cards. Peer-to-Peer (P2P) lenders in China grew from 214 to over 3,000 in 2015, and P2P loans increased 28-fold from 30b yuan in 2014 to 850b yuan in 2016. This shows what is possible in Nigeria.
Austin’s Five Forces Model and the future of Banking
In the face of the fierce challenge facing banks, I developed a model for analyzing the future of banking called the Austin’s Five Forces Model. There are indeed five major forces at play here:
- The banks – traditional and established, best with cash and ancillary instruments
- Fintechs – the new kid on the block, disrupter, mostly telecom roots, best with digital currencies and mobile services
- Regulators – Central Banks, regulating traditional banks; and Communication Commissions, responsible for telecoms regulation (and thus Fintechs)
- Currencies – traditional, such as cash and cheques; or Digital, including Bitcoin or other cryptocurrencies
- Customers, and the weight of their new-found voice. Typically, they clamour for whatever will give them convenience, security and lower costs.
Customers are the most significant force, and represented by the outermost sector of the concentric circles. As they tend more towards a preference for digital currencies, the Fintechs will tend to assume a more prominent role in the new face of banking, and the Regulatory regime will inadvertently tend towards the Communication Commissions under whose purview the Fintechs fall.
This will introduce a regulatory imbroglio, as future ‘Huge Banks’ may fall outside the regulatory ambit of Central Banks as seems to be the case with the MPESA.
Safaricom, the telecoms promoter of MPESA ironically falls under the regulation of the Communications Authority of Kenya rather than the Kenyan Central Bank.
If the customers however, maintain a strong appetite for traditional instruments of financial transactions such as notes & coins, cheques etc. then the current status quo will remain. The face of banking will thus be more of the same, and the regulatory authority will continue to be Central Banks. Between these two positions may be many variants, depending on the appetite and preferences of customers, and the pace at which they are willing to embrace change.
Retailers are jumping into Financial Services
Fintechs are not the only ones challenging traditional banks for turf. Retailers are also jumping into the financial services fray. For instance, Amazon has launched Amazon Cash, a way to shop its site without a bank card. This product is meant to appeal to the those who get paid in cash, don’t have a bank account or debit card, and who don’t use credit cards.
Google is also rolling out a new integration on mobile called Google Tez, which allows audio QR Codes and thus opens the door for more basic phones other than smartphones. Users of the Gmail app on Android will be able to send or request money with anyone, including those who don’t have a Gmail address, with just a tap.
Banking is going Mobile
In most emerging markets and developing countries, the current formal financial system only reaches a minority of the working-age adult population. Smallholder farmers, self-employed households, and micro-entrepreneurs have to rely on the age-old informal financial mechanisms such as rotating savings clubs (Isusu or Ajoo). These mechanisms can be unreliable and very expensive.
In Nigeria for instance 84.6m people, accounting for 47% of the population are unbanked. In sharp contrast, mobile phone penetration is very high at 94.5 per cent; a perfect set-up for the Fintechs to exploit in their mobile dominated financial services offering.
The digitization of retail payment systems and financial services has become an important economic development priority. It offers the prospect of reaching far more people at far lower costs with the broader range of financial services they need to build resilience and capture opportunities. This speaks to inclusiveness
What will be the scale of change of the Blockchain technology?
The changes coming with Blockchain will be as large as the original invention of the internet, and this may not be overstated. Who would have imagined a decade ago that e-commerce, championed by Amazon and Alibaba will be displacing high street retailers, or that ride-hailing will be dominated by UBER, a technology platform?
There seems to be a seamless change happening in the Financial Sector. According to Anthony Jenkins, former CEO of Barclays, bank branch traffic has halved in the last five years, and bank profitability could collapse by 60% in the same period. A 2015 Goldman Sachs report estimated $4.7tn of financial services revenue was at risk of displacement from Fintech groups.
Regulators are now helping Fintechs
Fintechs are getting a lot of support from Regulators, believing that Fintech firms are small enough for any problems to be manageable, and on the other hand, might produce useful innovation (the sandbox approach). The intention is to lower market entry barriers for fintech companies. For instance, France’s Central Bank has announced opening up a new innovation lab, aiming to collaborate with blockchain startups.
In December 2015, Nasdaq executed its first trade on a blockchain, through its Linq ledger. The exchange said the blockchain promises to expedite trade clearing and settlement – all the steps needed to transfer the asset from seller to buyer including recording the transaction — from three days to as little as 10 minutes. That’s because the trades remove many manual processes and bypass third parties.
As such, “settlement risk exposure can be reduced by over 99%, dramatically lowering capital costs and systemic risk,”. Other stock exchanges tinkering with the blockchain include Australia, Germany, Japan, Korea, London,Toronto and Myanmar.
The Future of Fintechs
The future of Fintech seems bright. Accenture recently released a report which found that investment in Fintech around the world has increased dramatically from $930 million in 2008 to more than $12 billion by early 2015. Fintechs employ Artificial Intelligence, Big Data and Machine Learning to glean the credit habits of customers from their mobile usage, and so have mitigated against the risk of default.
The lucrative Transfer market will be significantly impacted
The lucrative global transfers markets are major targets by Fintechs. International money transfers, which have long been a thorny issue, are getting easier. For smaller transactions, services like PayPal automatically convert currencies, so it’s easy for a customer to purchase goods from anywhere in the world.
More importantly, a service called TransferWise is streamlining international money transfers, significantly disrupting that sector by offering a 90 per cent discount on traditional bank transfer fees. According to the founder, Taavet Hinrikus, the idea was borne out of his personal frustration in money transfers. ‘It typically took 3-4 days to receive transfers, albeit the exchange rate used by banks was exorbitant, leading to a loss of almost 10% of the value of money sent’.
In this exorbitant regime, Western Union and HSBC typically earned $600m and $800m per annum respectively in profits from only transfers. These huge contributions to their bottom-line will be dearly missed when displaced by TransferWise and their co-travellers. In Taavet’s view Fintechs will command about 40% of the global Financial Services market in the next 10 years.
Banks and Fintechs’ collaboration for mutual benefit
Fintech companies in emerging markets have shown that with blockchain technology, it is possible to leapfrog to new forms of banking.
Truth be told, Banks are best placed to continue to influence the future of Financial Services because of their huge branch network, solid reputations, and risk controls, as well as years of customer cultivation and loyalty. They, however, have to radically change the mindset of ‘we win when you lose’.
The big take awayThe ubiquity of broadband and the pervasiveness of mobile phones, along with breakthrough technology such as Artificial intelligence, Big Data and Blockchain are expanding the frontiers for business models in ways that were hitherto not possible, and levelling the playing field in the process.
Any bank that does not read the signs and join the innovation train will definitely be disrupted and left behind. Remember that there was a time when the Post Office was at the centre of our lives. When was the last time you visited a post office?
Austin Okere is the Founder of CWG Plc, the largest security in the technology sector of the Nigerian Stock Exchange & Entrepreneur in Residence at CBS, New York. Austin also serves on the Advisory Board of the Global Business School Network, and on the World Economic Forum Global Agenda Council on Innovation and Intrapreneurship. Austin now runs the Ausso Leadership Academy focused on Business and Entrepreneurial Mentorship.
African fintechs hoping to sign up the continent’s next billion users will need to rethink the industry’s long-running growth playbook, according to Musty Mustapha, Managing Director of Kuda Microfinance Bank, who says cashbacks and incentives may drive downloads but rarely help build sustainable businesses.
Kuda MFB MD
Speaking at a fintech panel discussion on scaling digital financial services across Africa at Tech Revolution Africa, a gathering of tech leaders, investors, operators, and professionals which was held at Landmark Event Center on January 31, 2026, Mustapha objected to what he described as the “growth at all costs” culture which has defined much of African fintech so far. While incentives can quickly inflate user numbers, he said they often fail to create the kind of trust and consistent usage that keeps customers long term.
“It is easy to buy users,” he said. “But if you grow without creating real value, you’re only solving for today’s numbers and ignoring whether the business survives tomorrow.”
His comments come at a time when many startups are under pressure to demonstrate stronger unit economics as venture funding tightens and investors shift attention from rapid acquisition to profitability and retention. In that environment, Mustapha argues that reliability, not marketing spend, will determine which fintechs endure.
Contrary to common assumptions, he said African consumers are not resistant to technology but cautious, shaped by years of unreliable services and weak infrastructure. Products that work seamlessly elsewhere often struggle locally because they fail to account for that trust deficit.
“They’re not digitally naïve,” he said. “They’ve just operated in low-trust environments. If something fails even once or twice, you lose them.”
That focus on trust has influenced how Kuda Microfinance Bank has approached its growth. Launched in 2019 as a digital-first bank, it expanded from roughly 100,000 customers within its first year to nearly 300,000 the next, before surging past 2 million customers in 2021. Today, the microfinance bank serves more than 7 million Nigerians, Mustapha said, describing the journey as less predictable than the numbers suggest.
“The reality is, you can’t forecast scale neatly,” he said. “You can wake up and suddenly have a huge spike in users. If your systems and people aren’t ready, you crumble.”
In his view, the strain on a fintech typically shows up first behind the scenes, not on its app. As volume increases, back-office functions such as reconciliation, chargebacks and customer support can quickly become chokepoints, eroding the trust that fintechs are trying to build. Founders, he said, often underestimate these operational demands in the early days while prioritising product development.
“Anything you don’t pay attention to in your first six months will come back to hurt you at scale,” he said.
External constraints add more complexity. Payment rails, power supply, and connectivity remain outside the control of most fintechs, making outages and delays inevitable. Rather than trying to outspend those limitations, Mustapha said companies must design around them by building redundancies and multiple pathways for critical services.
“You don’t assume perfection,” he said. “If one channel fails, there must be another. That’s how you stay reliable.”
As traditional banks, telcos, and startups increasingly compete for the same mass-market customers, Mustapha expects the winners to combine the strengths of each group — the capital base of banks, the distribution reach of telcos, and the speed of fintechs. But regardless of the model that dominates, he believes the fundamentals will remain the same.
For millions of first-time or underserved users, the deciding factor is simple: whether the service works every time.
“There’s this idea that the average customer can’t use sophisticated products,” he said. “That’s not the issue. What they want is something they can trust.”
As fintech chases its next phase of growth, trust, rather than incentives, may prove to be the sector’s most valuable currency.
Majority Nigerians do not trust the government to properly utilise their tax payments for good use, according to a survey by SBM Intelligence across nine cities.
The survey highlighted why recent tax reforms have triggered widespread anxiety and resistance.
“Survey data from 200 respondents across nine cities indicate that 68.5 percent of Nigerians completely distrust the government’s use of tax revenues, whereas only 27.5 percent view the reforms as beneficial to the country, ” SBM intelligence said in its recent report titled Taxing Patience.
Nigeria’s 2025 Tax Reform Acts took effect in January, introducing the most comprehensive overhaul of the tax framework in decades. The reform has created more awareness among Nigerians than ever before, increasing their further distrust in the government’s use of tax revenues.
The distrust reflects years of poor service delivery and weak accountability, shaping public doubt toward the new tax system despite assurances that the reforms are designed to ease burdens and improve fairness.
“In the past, people avoided tax because they felt the government wouldn’t provide basic amenities,” businessday quoted Okanlawon Hakeem, a Lagos-based businessman, as saying.
“You drill boreholes yourself, pay for public transport yourself, and sometimes fix your local road yourself. So, you ask yourself what the government is doing with the tax money.”
The SBM Intelligence report noted that access to reliable electricity, improved security and better roads were the clearest signals that would make tax compliance worthwhile.
“46 percent of participants identified improvements in roads and security as their primary motivation for tax compliance,” SBM Intelligence noted, explaining that service delivery, rather than enforcement alone, is likely to shape taxpayer behaviour.
Government officials have defended the changes as necessary to improve public finances and reduce Nigeria’s dependence on oil revenue, pointing to the country’s historically low tax-to-GDP ratio.
With a tax-to-GDP ratio of less than 10 percent, Nigeria has lagged behind regional peers such as Ghana and Kenya. Taiwo Oyedele, chairman presidential fiscal policy and tax committee, hopes the reforms will lift the ratio toward 18 percent over the medium term.
Public sentiment, however, has not moved in step with these fiscal ambitions. According to the report, only 27.5 percent of people believe that the new tax laws are good for the country.
The report also suggests that greater awareness of the reforms often coincides with stronger skepticism rather than acceptance.
Distrust cuts across regions and occupations but is especially pronounced in major commercial centres.
The report mentioned that people in Lagos and parts of the Northeast have the strongest resistance and protest sentiment, reflecting concerns about enforcement, fairness and legislative integrity.
In its Year Ahead 2026 outlook, SBM Intelligence projects that protests are likely as the real impact of the new framework becomes clearer. The report points to the June 2024 youth-led protests in Kenya, which resulted in a reversal of the policy.
In Nigeria, where inflation is only just beginning to show signs of easing, the tolerance for perceived government excesses, including lavish convoys and budget padding, is at an all-time low.
Business owners, traders and informal workers expressed particular unease, fearing the reforms could deepen the problem of double taxation. Many worry that government levies will exist alongside rather than replace the fees already collected by unions and non-state actors.
“ Nearly a third of business respondents said they expect to pay both official taxes and union fees,” the report stated.
For informal workers such as market traders, drivers and artisans, this fear is grounded in experience. Many already make daily payments to unions or associations, often under pressure.
Without a clear plan to eliminate these parallel charges, new government taxes are widely viewed as an additional burden rather than a simplification of the system.
In Lagos, Kano and Onitsha, constant electricity emerged as the strongest trigger for compliance. In Abuja, Port Harcourt and Bauchi, respondents prioritized roads and security. Across cities, the message was consistent: willingness to pay is conditional on visible outcomes.
Analysts warn that without clear improvements in service delivery, stronger enforcement could harden resistance rather than improve compliance.
The report stated that without rapid, visible improvements in public services, the government risks collecting more money while winning.
Femi Otedola, group chairman, First Bank Holdings, has justified the company’s decision to write off N748bn in legacy non-performing loans, saying the move was a deliberate strategy aimed at securing long-term financial stability, even though it significantly reduced reported profits.
Femi Otedola, group chairman, First Bank Holdings,
Otedola made this known in a post on his X handle, where he explained that the large-scale provisioning led to a 92 per cent drop in the holding company’s profit figure.
According to the billionaire investor, the write-off was in line with the Central Bank of Nigeria’s directive encouraging banks to confront non-performing loans openly instead of postponing the issue.
“At First HoldCo we decided to clean house properly. We took a huge one-time hit of N748bn to admit old bad loans instead of pretending they do not exist. That is why profit looks like it crashed by 92 per cent. Painful headline, but it is a serious long-term move,” he wrote.
He noted that the decision was taken to finally address problematic loans accumulated over previous years and to strengthen confidence among stakeholders.
“Why do this now? Because the CBN is pushing banks to stop kicking problems down the road. So First HoldCo basically closed the chapter on messy loans from past years which sends a clear message that borrowing has consequences and it helps rebuild trust,” Otedola added.
Despite the scale of the write-off, Otedola maintained that the bank’s core business remained solid, stressing that strong earnings demonstrated the institution’s underlying financial strength.
He disclosed that the bank generated N2.96tn in interest income and N1.91tn in net interest income, figures he said were sufficient to absorb the clean-up while keeping operations stable.
“The key point is this: our business itself is STILL strong. It made N2.96tn in interest income and N1.91tn in net interest income, which gave it the strength to take the cleanup and still stay standing,” he stated.
Looking ahead, Otedola expressed confidence in the bank’s future, saying the balance sheet clean-up has positioned First Bank well for recapitalisation and sustained growth.
“Now at First Bank and beyond we go into 2026 lighter, cleaner and better prepared for the recapitalisation era and serious growth. Bad loans cleared + strong income engine + long-term thinking = real value creation,” he concluded.
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