Lidya, Can Nigeria’s First Digital Bank Compete?

Lidya, Can Nigeria’s First Digital Bank Compete?

One of the most exciting news after today’s business day is that Nigeria will be having its first digital bank called: Lidya, a surprising but welcoming development.

Lidya is a brainchild of Tunde Kehinde and Ercin Eksin. They had both left Jumia in 2014 to start Ace Logistics. Ace is digital driven contract logistics service that has probably made profit and it is now a sustainable business.

Frankly speaking, the idea of a digital bank is not really new to the global banking scene. In April, Goldman Sachs, the world’s second largest investment bank by asset floated GS Bank, a totally digital bank that allows anyone to open an account with as low as USD1. The bank also offered high interest rates to its customers.

However, in Nigeria’s financial services sector, Lidya will be the first truly digital bank because it will be specifically offering all its services via digital channels of mobile, tablet and online.

Still, Lidya will be facing a flurry of ‘force awakening’ in the banking and allied sectors as direct competitors and indirect competitors.

Anatomy of Direct Forces

Nigeria’s banking landscape is getting turbo-charged for digital transformation. Tier 1 and 2 banks have for over the last three years developed their digital banking capabilities. Therefore Lidya would nott be having a filled day. The competition to compete and command the digital banking market would only become tougher.

It would be recalled that SunTrust Bank had began operations last month, laying claim to a positioning as a ‘technology bank’. However, the theme, thrust and look and feel of its communication looks generic and does not push the position.

Access Bank has also invested into a separate mobile app banking product called PayWithCapture. Initial roll out of the platform had not yielded tangible user and customer base. The comeback of PayWithCapture is also riddled with a cacophony of features that might end up confusing first users.

After making good numbers from its mobile money transfer product called ‘737’, GTBank PLC has now rolled out the USSD banking product as a full-fledged mobile banking platform for non-customers. The challenge with such approach is that mobile money products find it hard to convert non-customers in Nigeria especially in urban and ‘over-banked’ markets such as Lagos. GTBank might be targeting the wrong demography.

The Chameleonic Forces

This segment should be a serious source of concern for Lidya founders. Many of them are not claiming to be digital banks, but in ‘silent mode’, they more or less do what a digital bank does.

Social Lender is a practical example. The startup provides micro-credit to anyone who applies via their Facebook page. Social Lender’s unique offerings and viability has won it a covetous space in the Techstars Barclays Accelerator in Cape Town. Social Lender has gone ahead to start operations in South Africa. The coming of Lidya to the scene might push the company to go on the offensive.

Also worthy of mention are digital credit and savings providers. Some have brick and mortar operations, while some are socially-digitally focused. PayLater App by One Finance provides a minimum of NGN1,000 to anyone with a Facebook account. The fact that its services are similar to Social Lender gives it a direct adversary as far as social lending is concerned.

In a nutshell, the competition against Lidya are enormous and amorphous. From USSD, Mobile Apps, social lending and online banking services, this new ‘kid on the block’ has its work cut out.

However, a look at the merits and flaws of existing competitors implies that Tunde Kehinde and Eksin can at least put their minds to rest that Lidya might not find it hard to compete.

However, the company will need to simplify its products, release features in a step by step manner that makes the product cultivate its users, iterate features to meet customer preferences and demands.

With the way and manner they built Ace Logistics, it would not be surprising that Lidya will not be pushed in an overtly aggressive manner when compared to the marketing weighting deployed by PayWithCapture and 737.

After all said and done, the market is open for all, let the competition begin!