Report: Banks Need to Rethink, Remodel, Restrategise Operations to Meet Changing Customer Demography

Obinna Chima

The Nigerian banking sector stands at a critical crossroads as shifting customer demographics, digital disruption, and evolving lifestyle preferences continue to reshape expectations, a new report has warned.

It stressed that traditional banking models may no longer be sufficient to serve an increasingly youthful, tech-savvy, and experience-driven customer base.

With Gen Z and millennials rapidly becoming the dominant segment in financial services consumption, analysts at Proshare Limited, a research and business information organisation, in a report titled: ‘Tier 1 Banks Report: Getting Bigger, Braver, and Dominant – The Class of 2025,’ launched in Lagos, yesterday, urged to rethink, remodel, and restrategise their operations to remain competitive and relevant in a fast-changing landscape.

It pointed out that the now larger banks would need to meet “the requirements of baby boomers who are wealthy but now in retirement or preparing to retire, and the millennials and Gen Zs that are growing new wealth from different economic sectors and business channels.”

It added: “For example, several young Nigerians are generating money from software development and coding skills, therefore, banks will need to identify the needs of these digital natives and design methods of supporting them.

“Beyond programmers and software developers, Nigeria is witnessing an explosion of young talents in music and movies, these gifted individuals require a bouquet of banking services ranging from personal financial management, small and medium enterprise funding, to wealth management and assurance services.”

The Proshare report suggested that the now “bigger-sized” banks need to be imaginative, agile, and flexible if they are going to support the scaling up of the Nigerian economy into a $1 trillion continental behemoth by 2030, as envisioned by the federal government.

It further pointed out that scaling up banking sector activities over the next half decade will align with the growth aspirations of the federal government, but would require local banks to deconstruct Nigeria’s 46 sectors into what Proshare researchers identified as 14 sub-economies.

With increasingly larger equity bases and untroubled by liquidity and the cost of bank deposits, banks are expected to find more creative ways of offering medium to long-term financing options to emerging growth sectors as they rebalance their lending portfolios, it noted.

Proshare analysts believe that sub-economies that may benefit from the recapitalisation of banks include, but not limited to, the marine and blue economy, the entertainment and arts economy, the hospitality and real estate economy, and the mineral mining and energy economies.

“With an avalanche of sectoral data and greater proficiency in using Artificial Intelligence (AI), credit decision-making could be better and faster. Upscaling the interaction between technology and ‘fuzzy’ human logic and knowledge should lead to clever lending outcomes. The transition to ‘headless’ banking, for example, would improve both frontend and backend banking operations

Banking as a service (BaaS) is becoming an increasingly dominant theme in the financial services sector. Banks are transitioning from brick-and-mortar service providers to digital intermediaries between customers, retail vendors, wholesale providers, and manufacturers. The whole commercial economic ecosystem is shifting to digital platforms to improve efficiency, reduce costs, and meet customer service expectations.

“Banks’ digital incomes as a proportion of their gross earnings have steadily risen, with some banks growing faster than others. In this report, the analysts note that traditional bank service delivery has gone from face-to-face credit and non-credit service administration to digital platforms for the processing of specific customer requests.

“If all loan application spreadsheet fields are filled, banks can verify the data and embark on a physical inspection of commercial or production sites, Credit Appraisal Memoranda (CAM) are faster to process, and loan approval mandates are easier to give.

“The new digital realities enable banks to offer their customers improved service journey experiences. This means that banks with better technology attract improved patronage, generate higher earnings, and provide their investors with superior equity returns (ROE),” it stated.

At a time of banking recapitalisation, the report highlighted that banks are forced to make certain strategic decisions, some of which it listed to include: “Grow the business organically or grow inorganically, which means that a bank could grow its business by setting up new branches, or it could simply take over the branches of other banks it acquires. Both approaches have their benefits and costs.

“Create uncommon relationships with fintech companies in an environment of ‘Co-opetition’ or cooperating while competing or acquire fintech expertise and domesticate it within the bank itself as a wholly owned foundry.

“Choose between a national or international license. This has become a knotty problem. While the prestige that comes with an international authorisation is admirable, the cost could be weighty. A Nigerian bank with a national license would need a tier 1 share capital of N200 billion, while an international license would require a tier 1 share capital of N500 billion.

“The problem here is about business scale and potential ROE and return on capital employed (ROCE). The larger the bank capital, the larger the required returns on business activities. Banks may need to balance the pressure for higher earnings with the state of growth of the overall economy and the impact high interest rates have on business investment and development.”

In his opening remarks at the event, the Chairman and Founder, Mr. OlufemiAwoyemi, said: “Earlier this year, at the launch of our Nigeria Capital Market Report on January 15, 2025, I had highlighted the importance of addressing a crisis of confidence in the economy.

“I observed then that ‘the difference between those who succeed and those who do not, is revealed in how the sovereign strategy, structure, and systems are designed to help the people overcome the difficult times.

“Those without a strategy do not have a destination, those without structure do not have an implementation spine, and those without a resilient system cannot go far. We now have a pathway for Nigeria, and despite the gloom, we appear primed to confront the hard choices needed to deliver the change we seek; and for those who desire growth, pursuing purpose over popularity must be the basis of engagement.

“My prognosis still stands: As I pointed out earlier in January 2025, for the economy to benefit the largest number of citizens equitably, ‘It is clear that the time has come for those of us in the private sector to seek a new way to engage – a mind shift where our truths must be delivered through a solutions-based mindset.’

“The need for this mental shift has set the tone for Proshare’s continued interrogation of data to gather and process the correct numbers and narratives, providing an appropriate analytical interpretation of business facts distinct from fiction.”