Clifford Niemand, Chief Operations Director, Knox Wire, a real-time gross settlement company that processes cross-border payments, in an interview with BusinessDay’s Ebunoluwa Ladipo discusses the role it is playing in helping African banks make remittances for global transactions and bridging the dollar supply gaps in the payment market.
There are a number of other organizations doing what you do, what are the products you offer that distinguish Knox Wire?
Yes, there are a lot of payment platforms in the world but what makes Knox Wire unique is not only the scope of our network but also our reach, our extensive link to different currencies as well as our infrastructure that allows for up to 30,000 financial institutions globally, that are able to actually become part of the Knox Wire agents.
This not only opens up for the entire world to onboard onto Knox Wire and be able to do real-time cross-border transactions between countries, but also our system provides what we call bi-directional messaging information. This is where a bank receives payment from a client to a beneficiary in America and what happens in most normal infrastructures currently in the market is it’s a one-way messaging system.
Once the payment has been sent on the actual web service, they have to wait for the bank in America to inform them that we have received the funds, and we’re now paying your beneficiary. We are a very unique system when it comes to our scope together with foreign exchange and information that is a lot more important than anything else, especially for banks.
Talking about foreign exchange, how have you been able to navigate all through the challenges moving forward?
In Nigeria for example, the challenge that is raised is Nigerian Naira unfortunately is not recognized or utilized in most other countries across the globe. So we are currently in the process of actually putting infrastructure in place for U.S dollar (USD) liquidity. What that will do is basically allow banks to onboard onto the Knox Wire network, fund their accounts with Nigerian Naira, and then convert it to USD.
Everywhere in the world, anybody accepts dollars. So once the naira has been exchanged for dollars, they can use it anywhere globally. Regarding exchange rate, currently, we are linked to the American Interchange. For example, at the moment foreign exchange stands at about 1.6 percent on the dollar, that is the actual cost.
In the process of loading a transaction to send a cross-border payment, it actually generates a quote. If you’re going to do foreign exchange, it will tell you at that point the global foreign exchange cost, and what it’s going to cost you to exchange funds from dollar to pounds.
How do you manage issues relating to fraud that are associated with payments?
We have got various contingency plans and policies in place. Firstly, we’ve got an anti-money laundering (AML) policy, which is a global standardized policy. Secondly, we have got our banking license that is actually registered in Canada. Now our actual fraud prevention cybersecurity platform that we use is a world-renowned company that uses artificial intelligence.
What that basically does is any client or bank that we onboard, and we allow them access to the platform, the artificial intelligence cybersecurity in the bank starts learning the habits of that bank, monitoring it and if any anomaly takes place, it immediately blocks the transaction. Not only will the bank be informed about that transaction, but it will notify us until we investigate it.
Now the cybersecurity that we’ve put in place is of such caliber that we have been running it for governments. We’ve been doing a lot of e-government. We’ve got an actual product called Knox e-government, among others. In the last five years, we’ve been processing transactions through our platform in excess of about $10 billion and we haven’t recorded one fraud.
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Are there policies or government restrictions that hinder your business operations in Nigeria?
We got a lawyer who specializes in the finance sector from Nigeria to do an extensive investigation. We gave him our full business model and asked that according to his legal opinion, please do research and get back to us with regards to what policies need to be in place, and what licensing is needed among others.
Since our first contact with some financial institutions, we found that they all are scared of the government anomalies and there is no real regulation that permits any fintech company to provide a service to a financial service provider.
Bearing in mind that I cannot deal with you as a Nigerian citizen directly because then I would have checked policies and licenses, what I can do, and that is our basic business model, is I can have your bank use our platform to facilitate your payments. The reason for that is mainly because the banks are regulated very stringently by the KYC rules. For us as a remittance messaging system that facilitates cross-border payments.
With the KYC all done by the banks, we are just the middleman. So we can’t deal with Nigerians directly, but we are able to deal with any financial institution within the industry. Also, we’ve seen the global norm and have gotten the requirements. Now, dealing with each country where we operate, especially those in Africa, each country has its own requirements and we are up to date with them currently.
What are your projections for the Nigerian payment industry?
I read up on a few statistics on the payments industry in Nigeria actually, largely consisting of online payments or web payments. Having said that, I also saw statistics stating that year-on-year, they predict 7.7 billion in the volume of transactions up until the year 2025, more than what is currently being done. So Nigeria as a country is definitely ready for payments; not only within the country but globally.
Further statistics show that about 67 percent of banks in Nigeria specifically are pro-technology. They are adapting it to allow them to facilitate cross-border payments and network payments within their country.
So, as long as we as a cross-border payments platform adhere to and stay within the strict rules and regulations regulated by your country, we can put the banks at ease and I think we can have a very good future whereby foreign exchange can in the very near future not be a thing of the past.
What is your global outlook for the payment service sector?
Currently, we see that there is such huge growth in remittances, global transactions, and payments being done. People want to deal with other people, countries with other countries, as well as banks want to deal with other banks across the globe. That is the era we’re living in and we need to connect those banks, financial institutions, and people on a financial level to be able to firstly efficiently make remittances for global cross-border transactions.
Secondly, to be able to make transactions timely because a lot of fintech platforms actually have a lengthy delay due to restrictions of steps that need to take place in order for the payment to process and eventually reach the beneficiary.
Because of our scope and our connection to the various foreign exchanges, our real-time gross settlement saves time, is quick, and easy, and when it comes to the actual saving of funds, those settlements take place within the network.
