Entrepreneur and investor, Eric Osiakwan, is urging banks to relook at customer segmentation to enable them compete with financial technology firms.

According to him, the convenience of transacting money on mobile platforms has given fintechs a competitive advantage over banks.

Speaking at the 4th Strategic Leaders’ Summit he said “the reason why the venture capital firms started funding that space is we realized that there is a huge market of transactions that were not happening in the banking space. The market segments that fintechs are targeting are now the markets you are targeting as a bank and so you need to start relooking at your customer segmentation”.

“But banks will not be able to directly do this because of their segmentation”, he added.

Mr. Osiakwan also indicated that venture capital firms are shifting to investing in fintechs because of the huge transactions on mobile money platforms.

 “In Africa, debit and credit cards did not really take off with banks and the fundamental reason is that, the platform in entering credit history was not available. Mobile money became the way through Safaricom. So based on that, it became the reels on which payment happened.”

“Fintechs have become dominant because they are serving a certain need that the banking sector did not serve. The banking sector did not serve that need not because they didn’t want to, but because they were not structured to do that. And the fundamental important difference is that when it comes to mobile money, you actually prepaid so technically the risk is minimised because you’re spending money you have already,” he said.

Also speaking at the summit, Chief Executive of Universal Merchant Bank, Nana Dwemoh Benneh indicated that investors are only willing to part with funds when they know that benefactors are disciplined and can easily convey the fundamentals of the business.

According to him, most investors now want direct value for their investments.

“In the past, investors used to give SMEs monies without a lot of focus on monitoring what the returns would be. These days, a lot of people who have these funds actually need a lot of detail of SMEs. They want to understand what their plans are, what they’ve done to ensure that it is a viable plan and their forecast of when they think they will make money.”

Mr. Benneh further urged SMEs to be disciplined and communicative of their ideas.

“The key thing any SME should consider when looking for investments should be some level of discipline, some skills to project themselves well and providing information in a way that convinces that they actually know what they’re doing,” he stated.

Meanwhile, Founding President and Executive Dean of the Nobel International Business, Professor Dr. Kwaku Atuahene-Gima is projecting a difficult period for SMEs under the African Continental Free Trade Agreement.

According to him, SMEs cannot compete with the already established firms because of their greenness on the market.

He believes SMEs need to discard old rules of innovation, and develop new mental models to be able to fully benefit from the agreement.

“I have the feeling that SMEs are going to have a really hard time under AfCFTA. I read an article by the Institute of Security Studies in Dakar and the conclusion of this study is that, although there are a lot of benefits from this Free Trade Area for SMEs and startups, these firms are going to have a big problem. In the sense that, they will lack competitive advantage because of the various problems and the liability of greenness. The big firms are the ones who will benefit greatly.”