Guaranty Trust Bank or Guaranty Trust Holding Company Plc as it is known today has always been known for innovation.
The youth-friendly and focused bank recently unveiled its latest offering, Squad, a payment processing platform aimed at helping small businesses collect payments.
Squad by GTCO enters the fintech market scene at a time when it seems Nigerians already have a wealth of options when it comes to payment processors.
Since 2007, when the Central Bank of Nigeria (CBN) launched the Payment Systems Vision 2020, which identified a set of pointers that can help make payment system infrastructure more resilient and encourage the adoption and use of electronic payment methods, The country has continued on an upward trajectory in its quest to simplify digital payments, deepen financial inclusion and generally transform Nigeria into a truly “cashless economy”. This has been achieved by reducing the amount of physical cash in circulation and encouraging the adoption of electronic transactions.
Despite the progress recorded in this regard, the country still has a long way to go.
This is because mobile payment adoption is still low, which in turn causes an overall lag across the ecosystem. Despite the abundance of payment processing startups in the country, the situation is far from easy and seamless.
With a smartphone penetration of 56%, an internet penetration rate of 51.0 percent as of 2021 as reported by Dataportal and confirmed by Statista, and with only 3% of the population owning a credit card, this means that currently more than half of Nigerian adults have no access to financial services.
The implication of this data is that while the internet allows business owners to access a broad market and expand their offerings, receiving payments remains a major hassle for many.
With this in mind, GTBank’s newly formed squad appears poised and possibly well-positioned to offer additional value to their prospective clients, especially when compared to what is currently being offered by other players in the industry.
One problem that has been recognized is that with other fintechs that have previously been in the payment processing space, the users, i.e. the companies, have had to continue to process and rely on traditional banks for payment processing.
Basically, what these fintech companies had was that they made arrangements with the regular banks and they (fintech companies) simply acted as intermediaries between traders and the banks.
While connected to the customer on the front end, fintech companies could use switching gateways to interact with the customer’s banks, retrieve payments and then deposit them into the merchant’s own account. Because they are the interface and the “engine” through which these payments were initiated and processed, they charged a processing fee which is basically their own contribution to the overall scheme of things.
All of that appears to be changing with the launch of Squad, touted as an integrated payment solution set to revolutionize digital payments not just in Nigeria but across Africa.
Following a 2010 regulatory directive from the Central Bank of Nigeria (CBN) that required banks to divest their non-bank subsidiaries or restructure as a holding company if they preferred to remain with those subsidiaries, GTBank went in as well as the reorganization a Holdco over other banks like Acces Bank, the most recent. First Bank was also reorganized under a holding company in 2012, while Stanbic IBTC and FCMB also followed suit.
According to Segun Agbaje, CEO of the bank, now CEO/Mng Dir at Guaranty Trust Holding Co PLC., the restructuring will allow the bank to develop other businesses beyond its core business.
Apparently the bank had seen the handwriting on the wall and decided to act quickly as well. According to consultancy Frost & Sullivan, Nigerian fintech revenues will grow from $153.1 million in 2017 to $543.3 million this year. Essentially, this means that around 30% of bank earnings may be at risk.
Prior to the directive, GTBank had introduced a range of non-banking services. It had GTB Asset Management, which provided capital markets services, and GT Assurance, its insurance arm. It has since sold these subsidiaries.
Now its goal is to play a big role in the burgeoning fintech space by developing its own fintech products and growing its payments and fintech divisions.
Speaking on a earnings call in 2020, Segun Agbaje said, “About 10 years ago, when we looked at the operating environment, we made a decision that we will divest all of our subsidiaries and focus entirely on banks.”
“Everything we’ve seen over the past 2, 3 years has told us it’s time for a little rethink.”
As it turns out, one of the results of the rethink is what’s now known as Squad, GTCo’s attempt to shake up the waters in the fintech space.
Payment processing has so far been the exclusive preserve of fintech companies, with the likes of Interswitch, eTranzact and Systemspecs (remita) leading the way, giving way to others like Flutterwave, Paystack and a host of other new entrants.
According to the company, Squad is a one-stop payment solution for any business in Africa. It is a single product that uses technology to create a user experience that makes satisfaction an everyday experience. It is essentially designed for micro and small business owners such as digital sellers, online merchants, tech talent and even large corporations.
In fact, payments is the next frontier, as even Agbaje notes that about 30% of bank revenue comes from payments and is expected to grow between $20 billion and $40 billion over the next few years, and fintechs, as they are, are already eating into this big cake.
And GTBank is aware of this and is doing everything it can to get a good slice of this big pie.
The question, however, is how well positioned this new initiative from the orange brand really is to compete with the plethora of fintech brands dotting the Nigerian payments landscape.
Wole Oluyemi, a senior financial analyst and strategy consultant, believes the brand actually has all the makings of a feather ruffle.
Speaking of Squad, he said: “With Squad, GTB is certainly looking to compete with other fintech startups in Nigeria while leveraging the bank’s technological infrastructure and client reach. We could be on our way to seeing a truly profitable fintech unicorn in Nigeria.
From the looks of it, the company seems to have done its homework well with the launch of Squad, which offers value-added services like bulk payment capture, automatic offline and online payment reconciliation, fraud prevention tools, and instant settlement, among other things.
Squad’s goal is to empower any business and enable them to receive payments from their customers, be it online or offline, which has to be appreciated given the ins and outs of Nigerian terrain. Another game changer it offers is the Soft POS feature. This allows merchants to accept payments directly on their phone or device, with no additional hardware or software required.
Backed by the fact that it connects directly to the bank’s infrastructure, merchants should enjoy seamless reconciliation with increased payment success.
With Squad, GTB is certainly striving to match and compete with fintechs while offering merchants a new payment experience.