Banks operating in Nigeria today can be classified into three sets. Although the newest set of banks are not making any effort to distinguish themselves in any other way apart from their names, it is clear that banks in Nigeria are in three broad generations.
Some also classify them into four categories of “First Generation”, “Second Generation”, “Third Generation” and “Fourth Generation”. While this is valid, it became more convenient for Nigerians to broadly basket the banks into three categories. Those who began operations before the middle to late 1980s were lumped into the category of the “Old Generation Banks”. The ones that began operations from around 1985 through the 1990s were classified as the “New Generation Banks”.
Once you mentioned the old generation bank, people immediately understood the ones you were referring to. Same was the case when you mention the new generation banks.
Nigeria’s new generation banks are primarily distinguished from old generation banks by their adoption of technology, superior customer service, and innovative, agile banking practices. The old generation banks were often government-influenced institutions and often said to be established to promote indigenous business, new generation banks were built upon the liberalisation of the industry.
Some of the key distinctions of the new generation banks include:
Technology and automation: The new generation banks (e.g., Zenith Bank, GTBank) pioneered networked systems, enabling “on-line, real-time” banking in the early 1990s — allowing customers to deposit in one branch and withdraw in another. The old-generation banks relied on more traditional, branch-based methods.
Service and customer orientation: New generation banks were designed to be customer-centric, focusing on efficiency and speed to gain market share against established players. In contrast, old generation banks were perceived as slower, having been established in an era of fewer competitors.
Ownership and structure: Many old generation banks were established as joint ventures between foreign investors and state or federal governments (e.g., Afribank, UBA). The new-generation banks are generally privately promoted, more agile, and initially had smaller, leaner branch networks.
Marketing strategy: 3rd generation banks introduced aggressive marketing and retail banking, focusing on high-net-worth individuals and corporate entities with modern financial instruments. They had pool cars and went after deposits in very unusual aggressive ways; visiting customers in their offices and offering incentives in exchange for deposits.
While some old generation banks have since modernised and adopted technology to become part of the modern “Tier-1” group (e.g., UBA), they were historically distinguished by these factors. UBA in particular, gets increasingly mentioned as a new generation bank, on the strength of the merger between legacy UBA and Standard Trust Bank, which introduced a new management style that transformed UBA in such a way as to make the public see the soul of the old Standard Trust Bank, on the face of the UBA brand.
But today, there are a set of banks in the terrain that the public has not been able to classify. They, of course cannot be old generation banks, but for reasons of age, cannot also be classified as New Generation banks. Many of them are difficult to recognise and there are hardly any group characteristics that could trigger any broad classification.
Let us attempt to list them. Parallex Bank, SunTrust Bank, Premium Trust Bank, Globus Bank, Alpha Morgan Bank, Tatum Bank, Optimus Bank and Providus Bank. I am not sure I have all the names of the new banks yet, but they have all met the CBN new capital requirements and are operating as international, national or regional banks.
But the broad categorisation along the lines of national, regional and international banks have not worked in the minds of the public. Nobody really remembers which ones belong to which category, what with the online, real time borderless operations of all the banks these days that enable customers complete transactions from anywhere around the world.
It’s not like the banks are desperately searching for a group identity. They are not, but the public might have a need for such identifiers, just for the heck of it. There are no visible pegs on which to hang the new banks as far as broad identification is concerned.
In technology, they have pretty much followed the path of the hitherto new generation banks. Even the old generation banks have all caught up in technology adoption. This means that without cutting-edge differentiation, growth that would be comparable to those of the new generation banks might be difficult.
Chasing and winning huge public sector deposits will not make any of them become big. Riding on the same technology as used by the new generation banks would also make them continue looking like just another bank.
Truth is that in terms of perceivable positioning, the newly registered banks are making themselves look like the new generation banks. In building their branch networks, they are adopting the same intimidating architectural designs – look big and strong and powerful, targeting high traffic areas. A lot of them are also investing in similarity in looks of their buildings in order to present to customers the uniformity of quality of service across branches.
But these are values that were enjoyed by the customer from the new generation banks. They are looking for something different, measurably tangible that they can take home.
Bank customers in Nigeria have seen speed. They can get that from any other bank. Customers can travel to Sokoto with nothing in their pockets, but they could get cash transferred to them from anywhere in the country, or they could use their apps on their phones to have access to cash.
A bank like Premium Trust Bank has been spending heavily on their digital banking application, with billboards and lampposts everywhere. But its differentiation here won’t cut quite deep, just like it is with all the newly registered banks.
The banks can look for their differentiation among a plethora of opportunities that include one, some or all of the following:
Free fees and charges: Nigerians have been groaning about the fees and charges imposed on them by their banks, especially in money transfers. Once you open your app and close it; once you log on to your bank’s USSD, money flies out. These new banks can begin to offer their customers free fees and charges on some or all of these transfer channels. It will delight the customers and make them come. Although Sterling Bank has introduced this to its customers, it could form a group differentiation for the new banks, should they go this route in noticeable large numbers.
Size and number of branches: The new generation banks leveraged big and intimidating branches to grow and at least create the illusion of being big. Some believe they may also have leveraged their sprawling branch networks to prop their assets. But bank branches must not be that big. The market has shifted and now demands fleet-footedness and efficiency, rather than a big branch that communicates size and strength but lumbers in movement and response to customer needs.
They can therefore begin to build smaller boutique branches like it is the case in many West African countries. That way, they would be more fleet-footed, be nearer to customers and not appear aloof as they currently look.
Such smaller branches would cost a lot less, and be possible to replicate in a lot more places in a short time, enable them to be closer to customers and engage in smaller businesses that aggregates to big deals at the end of the day.
Banks may claim they do not need many physical branches because technology has come to make them virtually ubiquitous, but they still build branches here and there. This means that they still need physical presence to reinforce their digital presence. Smaller, easy to manage, easy to replicate business offices in hard-to-reach parts of the country can put them in positions to capture businesses from the unbanked parts of the country. Expertise in providing banking services for the unbanked and underbanked can be a powerful statement of purpose for the new banks, and could help give them some measure of recognition.
The non-interest branding route: Non-interest banking has been made popular in the Muslim world and it has come into Nigeria. While a number of the newly registered banks are positioning along the non-interest route, existing banks like Sterling Bank are also anchored on that with one of its subsidiaries. Again, it is important to note that most of the newly registered banks were not registered as non-interest banks, meaning it might be impossible to position along this line.
Support for micro-enterprises: There are community banks all over the country at the moment and I suspect their purpose is to capture the rural areas and the unbanked. But nobody says the main, regional or national banks cannot play in these areas. Banks who capture this segment can win in the short to medium term. In communities, there are business people who require just N100,000 to N500,000 to be actively doing their thing on a daily basis. These people can get shorter, cheaper, easier credit and grow to be powerful and big. If the facilities are cheaper and easier than those of the community banks, it gives the banks an edge.
Yes, it operates as a microfinance bank, but Nigeria doesn’t have her own Grameen Bank yet. Nothing says a national or regional bank cannot position itself as a Grameen Bank in Nigeria. The country is in need of a financial institution that would unlock the growth potentials trapped in many rural environments. Nothing says some of these new banks cannot position for such purposes and see themselves grow filling that gap.
The point we are making is that the chances of their growth is slim if they continue doing the same thing the big banks are doing. The new generation banks took hold of technology and made banking feel different for customers. They witnessed tremendous growth and many of them have grown bigger than the old generation banks. These new ones must offer something different to the market to be seen to be different and it is only in being different that such growth can ever be possible.
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Ikem Okuhu, a journalist, author, PR professional, brand strategist and teacher, is the Executive Producer of C-Suite Cafe podcast as well as CEO of BRANDish, publishers of BRANDish, Nigeria’s first nationally circulating Brands and Marketing magazine. He has a career that has traversed print media, oil & gas, banking and entrepreneurship. Ikem is the author of the book, “PITCH: Debunking Marketing’s Strongest Myths”, a dispassionate exposition of the dos and don’ts of successful engagement in the marketplace, especially the Nigerian marketplace. He can be reached on + 234 8095121535 (text only) or brandishauthority@gmail.com
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