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To grow financial inclusion we need to take offline transactions to excluded Nigerians

TeamApt, a payment gateway provider focused on providing digital banking services to millions of Nigerians without access to financial services, reached a milestone when it secured $5 million from Quantum Capital, a Nigerian private equity company. Prior to then, it had bootstrapped for many years. Tosin Eniolorunda, CEO of the company speaks to BusinessDay’s Frank Eleanya on how the operating landscape has changed for fintech companies and why increasing financial inclusion should remain Nigeria’s priority in the post-COVID-19 era.

What has happened after raising $5m from Quantum Capital?

We took a good look at our business in the direction of our mission and vision, like what we really set out to do in the first place when we started out the business, which was financial happiness. We saw many opportunities in building solutions for the financially underserved. We built about three different products in that direction. One is Moniepoint which is an agency banking solution. Another one is Monify which is our solution for businesses; a payment gateway; and another one is AptPay which is our payment platform. The major theme around them is how can we use technology to make people find happiness with their money.

We have grown over the years. Moniepoint is one of the largest providers of agency banking and we are also one of the youngest. Monify is the payment gateway for account transfers today. AptPay is also coming up.

You’ve had more than 3 million customers and 100,000 merchants. Tell us about that?

The 3 million customers and 100,000 merchants are through our partnering banks. That is a metric that we had on our website. These are customers who use our Moniepoint platform every day to do their transactions. The 100,000 merchants are those that use our platform through our banks to service their businesses. We are however working on an initiative that will help the underserved. Underserved to us is defined as people that have accounts and people that don’t have accounts. As long as you do not have the level of service that we think that you are supposed to have. An example is regular people that have to go and queue in banks to get service. That is something that is still prevalent today especially in the dense urban areas. Another example is people in remote areas that have bank accounts or do not have bank accounts. For the ones that have bank accounts, many of them have to travel kilometres to get service. For the ones that have bank accounts probably because they do not yet have the required documentation such as a valid ID and BVN that will make them get the bank accounts.

We are doing a tour of some Nigerian cities and one of the things we are realising is in the southern part of the country, financial inclusion is certainly increasing like Oyo State could be as high as 70 percent. It is in the northeast and northwest that you have high exclusion rates. The real problem that Nigerians have is access and not just the problem of inclusion. It is access that will drive inclusion.

How do you define access?

It is being able to get convenient financial services which start with being able to conveniently operate your account – opening it and getting it funded and having a means through you can be using that account, which today is the card. Secondly, when you have the card it means you can access the account. The reason why you need electronic money is that cash is harder to deal with in terms of storage, second, having electronic money gives you access to credit because you have records that people can look but if you don’t have electronic money we will need to find harder unscalable ways to appraise you for credit. It is easier to move electronic money around.

Getting access is opening an account and having a way to access that account which in Nigeria is a card, USSD, or mobile app. The problem that we have is how can we carry this electronic money to these people for them to open an account, for you to operate a full account in-country you need to have a government ID and BVN. A government ID means you either have an international passport, NIN, or voters card and many of these financially excluded people do not have them. For the ones that have it, for instance in Oyo State there is a town called Iseyin, it is a big town but there are satellite towns around it. For people in those towns to get to a bank, they will need to travel kilometres which is why we have many people not having access.

How do we address these challenges?

I think financial inclusion will soon rise a lot more. We grow it by ensuring that we can carry offline transactions to people who are excluded where they can actually create accounts and operate accounts. That is how to grow it. I do not think that Nigeria is going to change the fact that to open an account you need a government ID. There is a reason we got there; the country is peculiar in terms of fraud. For someone to open an account you need to have a government identity as well as your biometrics.

The solution is already being done which is to licence fintech startups and banks to be able to have the BVN machine with government ID opening and right there allow people to have access to their money. Prior to now, a lot of the agency networks have focused on creating agents and getting a market share of the agents. These agents are only servicing the clients that already have an account. But at the moment because that part of the business is growing and perhaps will soon enter maturity, the focus will now move to those who do not yet have an account. I think fuller banking services are coming to agent networks soon and once that happens you can do everything you can do in a bank hall with an agent. This means that agents can carry those services there. I project that in about two years of three years’ time, those numbers will grow faster than they are growing now. It is more like the latent work is being done. The biggest expense is the BVN machines which are supplied by NIBSS. If one of them is like N600,000 you will need 100,000 of those machines. That is a really expensive undertaking. I think that is one of the biggest limitations.

Does investment in telecommunication infrastructure play a role?

As long as you have a telecommunication network at the location, you can do transactions. I don’t think the limitation is the network, I think Nigeria already has very coverage. A minimum of EDGE (2G) can perform transactions. It may not be able to do Facebook or social media but it will do transactions. I think the limitation is entrepreneurial investment – getting the right people that have the right knowledge and the ability to execute and backing them up with funding is what is needed. There are some eligible people already in that space.

Do you think the policy environment is growing alongside?

I think the policy is growing alongside. The only concern is a rumoured increase in shareholders’ funds requirement by the Central Bank for fintech companies. That might put a significant strain on existing fintechs to meet that requirement which will make them take their focus off the core business to look for capital raises or mergers and it can scare off new people from coming in because the capital raise is high. In terms of regulatory posture in giving licences, maintaining licences, and putting structures and frameworks in place in the financial inclusion I think it is favourable.

You said Monify is the largest account transfer gateway, by what percentage?

Going by a publication on June 8 this year, Flutterwave had done over 400,000 transactions to date, at that time we had done 2.2 million transactions.

How many agents do you have on Moniepoint and what is the spread?

We have agents all over the country and quite well distributed. In counts, we have many tens of thousands.

What has 2020 been for you as a business?

2020 is the up-and-down year. I think it was positive for us mostly because the pandemic made a lot of people realise that electronic banking as well as agents are viable methods of doing transitions. For that singular reason, it was a net positive. But there are also downsides, the exchange rate of the country plummeted which meant that many of our forex expenses went up significantly. It also meant that we have a lot more competition for technical talents especially engineers. Engineers can work from anywhere today and a lot of them are now being approached by foreign companies to work for them. This means that you need to pay engineers in the naira equivalent of the dollar they would have earned. Many of the engineering costs therefore tripled in that time. The recent riots also affected some sales. The agency business grew because a lot of agents sprang up in many places. At that time too, a lot of people who would have gone to bank ATMs to queue had to use the agents.

What are the trends you see emerging from the pandemic?

It is going to be electronic. We all know what happened to Zoom. it is going to be a global trend. People already know that they hate going into bank branches, I think it is a trend that will continue and they will be finding alternative ways where they can get financial services to support without going to queue in branches. Also, the remote working culture is likely to go on the increase. We as a company were already experimenting with remote working culture before the pandemic began. We had people that were remote-based but the whole pandemic accelerated it. While I will not say we have settled into 100 percent, we already know that it is a viable way of work. One just needs to solve a couple of problems like the culture problem and another one is performance appraisal problems.

What do you mean by cultural problems?

When we were all working from the office it was easier to set a culture because there was more physical interaction and body language communication was much more pronounced. That generally sets a tone of the culture. Culture is more like the little things that we see around ourselves every day that forms culture. When you reduce that interaction it is easy for you to become soulless – like robots that are just connected to something without a core reason for why we do this or all the emotions that go around the work that you do. Because your point of interaction is your daily meeting and just doing the work, it could lead to a mechanical environment which is not one of the best places to keep people for a long time. We are social beings. It also can lead to a reduction in innovation because a lot of problem-solving happens when people interact. There is a problem that most companies will have in terms of fostering a cohesive remote environment.

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