Finding a channel sweet spot for a Nigerian bank

Genesis was commissioned by a Nigerian bank to conduct a channel optimisation study, which involved an analysis of 65 million transactions across the bank’s customer base. This took into account global trends in channel usage, cost and best-practice channel optimisation, and considered the relevance of these international trends within the context of the Nigerian market.

The increasing sophistication of banking technology has reduced the need for physical infrastructure and has enabled banks to reduce costs by leveraging off electronic channels and by giving customers the convenience of ‘anywhere banking’. Physical channels are, however, not obsolete.

As in many other developing countries, cash remains king in Nigeria, particularly in the lower-income consumer segments. Physical channels, which can be very costly, therefore continue to play a key role in the process of managing cash and of providing cash-related services. Changing this culture of usage is not easy and depends on the strength of a bank’s retail card-acquiring infrastructure, and it was for this reason that the study was undertaken.

The project team then analysed the bank’s channel costs and developed a projection of cost savings that could potentially be achieved by migrating customers to the right segments and by moving transactions to lower-cost channels.

The team found that, in order to optimise its channel infrastructure, the bank would need to adopt a holistic approach, which would integrate different components. This would need to include strengthening agency banking; driving POS usage and acceptance; improving cash-in-transit relationships, refining forecasting and planning; developing the ATM network strategically; redesigning the branch infrastructure; fostering greater industry partnerships; and focusing on advocacy.

The findings of the project were presented at a combined board and exco strategy session. Based on the recommendations presented by the team, the bank developed a five-year strategy that defined the targets to be achieved as well as the desired contribution of the respective channels.