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What is digital banking? See the popular digital banks in Nigeria

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What is digital banking?

It is the twenty-first century and disruptive innovations are substantially sweeping off traditional banking systems. Who would have imagined, 20 years ago, that, today, it would be possible to send money to someone living miles away, pay utility bills, and get bank loans within a few seconds, without passing through the walls of a bank? The advent of digital banking has transformed the way banking services are offered. It is still rapidly unfolding and more advancements are underway. Nigeria has largely embraced the potentials of digital banking. Even traditional banks are now opting for the adoption of a digital bank, with Standard Chartered Bank and others like Wema, with ALAT, joining the league.

What is Digital Banking?

Digital banking is an innovative improvement to the banking system, and it involves the digitization of traditional banking services. What this means is that, via digital banking, regular banking activities like withdrawal, money deposits, transfers, loan application and management, can be done over the internet, thereby, eliminating the need for a physical  bank.  Digital banking puts a bank into everyone’s hands, anywhere and at any time. 

The Difference Between Digital Banking and Online Banking

Digital banking is very synonymous to online banking, and they are often used interchangeably. However, there is a fine margin between both banking systems. Although online banking allows anyone to perform several transactions without visiting a bank, it still does not completely eliminate the need for a physical bank. It merely complements the services that traditional banks offer. Services like transfers and deposit of large sums of money still require customers to visit a physical branch of a bank. 

Digital banking, on the other hand, encompasses online banking and other services that totally eliminate the need for a physical banking infrastructure. A digital bank is like an invisible bank. Every transaction can be carried out through a digital bank without customers ever having to step into the four walls of a bank.

Why Do We Need Digital Banking?

Visiting a bank is commonly associated with experiences of inconvenience and discomfort, from the long queues to the hours spent on processing a basic transaction. With digital banking, all of these can change. The banking experience no longer has to present uncomfortable encounters. You can be on your bed and experience the ease of accessing financial services that would normally require a visit to the bank. Digital banking offers convenience for banks and its customers. 

So much money is spent on developing and maintaining physical banking infrastructures. So many people, in rural areas and some other areas, do not have a physical bank branch with reasonable proximity to them, hence, they are excluded from the benefits of the financial system. Many even have to travel several miles to visit a physical bank in order to perform a basic transaction. Digital banking presents a means to cut down operating costs of banks, improve the experience of customers, and enable extremely fast execution of transactions by eliminating the need for a physical bank branch.

Advantages of Digital Banking

  1. Uninterrupted Access to Banking Services

Since digital banking does not rely on physical banks, it is not affected by closing office hours, public holidays or any circumstance that, in the case of traditional banking, would interrupt access to financial services. Digital banking allows customers to have round-the-clock access to financial services.

  1.  Reduced Costs

Digital banking eliminates the dependence on paper forms for transactions, as this is substituted with electronic transactions. This, and the elimination of running costs associated with a physical bank, reduces the expenditure of banking platforms and, in turn, reduces the cost required for customers to access banking services.

  1. Convenience

The ease of performing any transaction without having to visit a bank makes the banking experience of customers much more convenient and time-saving. Customers can put the time saved into other productive activities rather than enduring the time-consuming long-waits at traditional banks.

Top Digital Banking Platforms in Nigeria

Here are some of the popular digital banks in Nigeria

  1. ALAT, by Wema Bank
  2. Kuda Bank
  3. Rubies Bank
  4. Standard Chartered Bank
  5. Sparkle

What The Future Holds

What we have experienced so far with the rise of digital banking is just a taste of what is yet to come. As technology continues to advance, the future will see better versions of the digital banking experience with improved personalized services, smart banking assistants, better interface, interactions and usability, plus the birth of a plethora of innovative banking services which will be readily available at everyone’s fingertips.

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Kehinde is a driven human who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.

News

Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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Learning Guides

Understanding Speculation and Crypto Volatility

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Everyone who dabbles in the crypto industry learns almost immediately that the market is very volatile and oftentimes things can change very quickly. That volatility is the fundamental reason why some investors make absolutely stunning gains in so short a time and others lose a lot of money as well. Trading in crypto is one of the riskiest ventures any person can undertake and as they say, it’s not for the faint of heart. The risks can be mitigated of course and sometimes depends specifically on the coin or crypto asset being traded on, barring general market trends.

Nevertheless, to get to the bottom of the volatility concept, one must understand speculation in the market. To start off, the concept of speculation isn’t limited to cryptocurrencies, on the contrary, speculation has existed for as long as economics and trading has. But it is worth saying that speculation is often a feature of novel sectors, assets, commodities and the like. So, even though cryptocurrencies have been around for more than a decade, they’re still in their infancy as far as markets go. One could say that the market is still trying to find its feet.

One of the fundamental reasons why cryptocurrencies are so volatile is that they are fundamentally backed by nothing of value outside the attention that they get. Unlike many fiat currencies which are either pegged to another currency’s value or whose value is unilaterally determined by a central authority, cryptocurrencies only derive value as a function of how many people are willing to use is to transact, i.e. trust in the asset because other people trust it. As a rule of thumb, the larger the number of people who accept the asset, the more valuable it becomes.

This is one of the hallmarks of speculative trading. In the crypto world or in any market that’s novel and untested, many people are in it to win it which means their strategies in trade has the objective of making as much profits as possible in the short term. Therefore, the market enters a subtly dangerous cycle of rapidly changing prices of assets. Basically, investors typically buy assets when prices are low and wait. As more investors are attracted to the commodity for its low prices, it sets off a cascade where more people buy in, causing the price to steadily rise. 

However, all good things must come to an end and it almost always gets to a breaking point whereupon the price gets high enough for investors to begin to sell. This reverses the earlier cascade and as more and more investors pull out, the prices can fall dramatically causing even more to sell off in fear of losing whatever investments they have left. The prices having fallen resets the game and primes investors to begin buying again.

Volatility has been one of the talking points of many critics of cryptocurrencies often comparing it to a Ponzi scheme. And in certain cases, persons of interest with large pulls and audiences can substantially affect the rate at which prices rise and fall. Other factors include government regulations. Volatility at its core reflects the often chaotic nature of trade and market interactions and human hopes and fears.

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Market Watch

What China’s crypto clampdown means for investors

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Over the weekend, China, the biggest crypto mining country once again, began to clamp down on cryptocurrency. Ten Chinese agencies including the central bank and banking, securities and foreign exchange regulators have vowed to work hand in hand to expose illegal cryptocurrency activity.

China has always placed stricter rules on cryptocurrencies but the new rule has made all crypto-related activities illegal. According to the People’s Bank of China (PBOC), it is illegal to cryptocurrency trading and anyone that does so will be severely punished; this includes those within China that are working for overseas platforms. To fully phase out the cryptocurrency mining sector, the National Development and Reform Council (NDRC) said that it would launch a nationwide crackdown on cryptocurrency.

Over the years, China does not recognize cryptocurrency as a legal tender. In 2013, the Chinese government referred to Bitcoin as a virtual commodity that individuals are allowed to freely participate in. This freedom, however, precludes banks and payment companies from providing services that are Bitcoin related.

In 2017, Initial Coin Offering (ICO) was banned. The ban was also extended to the conversion of legal tenders to cryptocurrencies by trading platforms which led most of the platforms to shut down operations in China. The crackdown led 88 trading platforms and 85 ICO platforms to withdraw from the market as of July 2018.

To China, the crackdown on cryptocurrency is necessary as the country is trying to launch its official digital currency and the need to fulfil its 2060 climate targets. The crackdown was necessary as cryptocurrency was seen as infringing on people’s properties and ‘disrupting the normal economic order.’

The statement by PBOC on Friday was unequivocal as the current crackdown is distinct from the previous ones. In his statement on Friday, PBOC called Bitcoin, Ether and Tether ‘legally irreparable’ and should not be used. The new regulations forbid financial institutions, marketing and IT providers from supporting crypto-related activities. The activities of both crypto holders and miners are now considered illegal. This is what Henri Arslanian, a PwC crypto leader termed as “No ambiguity. No room for discussion. No grey areas” in his tweet.  

What does this mean for crypto holders worldwide?

The major effect of China’s crackdown on cryptocurrency is the increase in price volatility. While volatility is a common phenomenon in the crypto world, a crackdown initiated by the world biggest cryptocurrency mining country will have a huge effect on market price.    

After the PBOC interview, Bitcoin fell by 4% within 24 hours and is currently trading at $43,320. Ethereum fell by 6% and it is currently trading at $3,036. With the Evergrande debt crisis and the huge blow bedevilling the crypto market, a clampdown by China would most likely keep the market price on the red until another good news crops up.

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