‘Partnering tech start-ups is important for growing FinTech in Nigeria’

Disruptive innovations are becoming a norm in the Nigerian FinTech ecosystem, and there are presently diverse innovations from both established institutions as well as start-ups, all working assiduously to offer newer service offerings as they attempt to meet up and even exceed global standards. Uzoma Dozie, Group Managing Director/Chief Executive Officer, Diamond Bank Plc in this interview with Caleb Ojewale, talks about the bank’s vision to be a hub for innovations in the financial sector, while partnering with talented tech start-ups to increase innovations and drive growth.

How is FinTech changing the way Diamond bank interacts with its customers?

FinTech is meant to be a disruptor from the fact that it makes it more convenient for people to do whatever it is they have to do. I think the Nigerian context is different from for instance, the European context. There infrastructure is ok, they have banking rules and regulations that have excluded other people from going into the banking industry so for customers it is; either take it or leave it. They (i.e in Europe) also have different advanced channels where payments are made in various forms but when it comes to the Nigerian context, you cannot use that same model in the Nigerian market. Because if you do that you’ll only have a limited amount of customers, and for us what we’ve seen is that consumer banking is saturated, same for corporate banking, but there’s this pool of people that are in the rural areas, (and we ask) how do we get to them? It cannot be the traditional way, it has to be mobile, taking banking from the office, and going to the market place which is what we have done.

We have two products with new propositions that offer a new type of banking. There is Beta Agent where we go into the market space by coming up with a new banking application that addresses those types of customers. The current mainframe banking cannot be used to do that. Even our Diamond Yello offering with MTN is an application to serve those types of markets.

The Nigerian banking environment has embraced FinTech because we can, and need to address that last mile. While in other climes, FinTech is like a threat because it has been a regulated industry, for us, we embrace it because it is needed to actually go the places where we can’t access with the existing banking applications that (for instance) are built in India and not in Nigeria.

The Access to Financial Service Survey in 2016 reported that 40.1 million Nigerian adults, representing 41.6 percent of the adult population are financially excluded. Looking at your service offerings such as the Diamond Y’ello account and Beta Agent, in what ways can these innovations and more of them be used to bridge the financial inclusion gap?

That is part of what we are doing right now, but we are also looking at our business from not a product or branch network perspective. It is like, what are the platforms that we have for customers to access services including banking. And so we have three main platforms. We have the branch platform, the mobile banking platform, and then the Diamond Yello platform. If for instance a customer is told the reason to open a Diamond Yello account is because of banking services, however banking services for someone in a rural area will only be a small percentage of their total life. But if I say you can do utility, and put more things on that platform including lifestyle and utility tied things then it becomes a platform where it is not just about banking but also communication, paying utility bills etcetera and it becomes a different proposition.

If you want to access all kinds of services, whether it is branch network, from a convenience perspective, mobile banking platform or the Diamond Yello platform for financial inclusion, we have a more convenient price plan especially when it comes to documentation issues. The reason why people are in Diamond Yello is because of the KYC issues. Building that platform, we are beginning to see successes. The Beta Agent proposition is about displacing the old way that people were doing things. We are not saying people were not doing financial transactions, but we are providing a way that is more cost effective, safe, and guarantees the future, so we are not reinventing the wheel here but we are giving a digital platform which not only reduces the risk in making things easier but also gives the opportunity to create more products.

Another example is ‘Esusu’ which is not even new; we just enhanced it with technology. What we observed is that, people are doing it manually with many pinpoints so we decided to put it on a platform. The fact that it is being put on a platform now means you can do more things with it that you couldn’t do in the physical world.

Today there are many technology start-ups springing up with all sorts of financial technology solutions, in what ways are you providing support or collaborating with this tech community to achieve more innovations in promoting FinTech in Nigeria?

There are many things that we are going to be doing (with Tech start-ups) because it is important we do so, and I think there’s an opportunity for FinTech and small businesses. A classic example is a service like PayStack which is providing payment solutions that are more cost effective for small businesses where you can just plug and play, and we are creating avenues for that. I’ll give you an example; we recently sponsored an event for people in the cosmetics industry. As they came to register, we asked them to also register for mCash which is a USSD payment solution for merchants and individuals. What it does is first of all; provide a convenient way for merchants to accept payments and they get their money instantly.

On that day, some of our customers who have heard of mCash before but didn’t know what it does, got to register and were encouraged to make payments. Everyone also has a mobile number so they are already tied to a mCash account. With this, someone can make payment to a small merchant without POS and they are getting the money immediately.

So today, you can set up a business; you can be online and set up a payment system to start receiving payments from people immediately. Those are the kind of things that encourage lending to such customer. This is because, if your payments are coming in electronically, it means it is possible to monitor cash flow and viability.

Cash payment doesn’t tell me who paid you, how they paid, and when they paid. Electronic payment on the other hand provides this information and it helps to get better data. This means better information, and more confidence to even lend to such small businesses since it is possible to see a steady stream of revenue.

Still on innovation, there is this widely quoted estimate from a Santander InnoVentures report predicting that Blockchain could save global banks $15 to $20 billion per year by 2022, is Diamond bank looking at blockchain technology in anyway, and what options are you considering?

For us at Diamond bank, the most important thing is that we are in a ready state, and we have the resources to make sure we know all the innovations taking place so that we can see how they benefit our customers or improve our services.

If we come across any solution on the back of blockchain that will be more cost effective for our operations, then its adoption is a no brainer.

There are concerns about security when technology and money are mentioned in the same statement. A recent report even suggested about N216 billion has been lost by banks through electronic breaches between 2000 and 2016, so what in your estimation needs to be done to instil greater confidence in the public?

The beauty of digital is that you know how much attempt was made. But, tell me how much cash was lost within the same period? Nobody has put a figure to cash, so you’re dealing with the unknown. There is certainty because you know what the potential threats are and you can safeguard against it. If a small business moves from cash payment to digital payment, it will reduce its operational risks because cash brings with it, human, storage, transportation, and other logistical risks.

In digital, the points of failure are limited, but with cash there are multiple points of failure.

One of the value propositions of Diamond Bank is that we are not just asking people to come and bank with us, but we are making them see the reason why they should bank with us, and it is the fact that we promote digital payments, and this saves cash for you. Cash based transactions limit you from 24/7 based banking.

Given all this discourse in using technology to drive financial services, what will be your appraisal of the entirety of this sector and especially bearing in mind what hindrances you think exist for you to scale up?

I think we’ve done very well from innovation perspective. If you look at all the banking products available in Nigeria, there is none abroad (e.g in the UK) that you won’t find in Nigerian banks as well. We have it all, and we have even innovated some products.

However, for us to scale up, part of what we need is standardisation. Secondly, regulation has to create an enabling environment. The cost of handling cash in Nigeria is huge, and not that cash will disappear but then there should be regulation of what people can do with cash; people should not be withdrawing as much as N100,000 in cash.

There is also a need for the deregulation of some things that are presently heavily regulated. For instance, why should a bank be mandated on what it can price its good and services? The market will find its own level because fixing prices across board is not allowing new innovation to come in. If I think the maximum I can make from deploying a certain business is XYZ, then I’m not going to come in.

What is required is regulation to change behaviour, and deregulation to stimulate certain areas for increased activity and innovations. This, I believe will also catalyse scaling, because it is when we scale that we will get the benefits of all the investments we have made.