Founder of Kudi Capital Management Ltd., a FinTechcompany that is currently driving the Kudimoney initiative, Mr. Babs Ogundeyi, spoke with Emma Okonji on how the initiative could accelerate the CBN’s cashless policy, while addressing online security issues. Excerpts:
What is Kudi Capital Management all about?
Kudi Capital Management is a FinTech company focused on using technology in making financial services more accessible. We are currently working on a full online service for Nigerian banks, called Kudimoney.
You recently announced the launch of kudimoney.com – an online lending platform. Tell us about it?
The online lending platform is a key component of what we are building at Kudimoney.com , lending is a key pillar of what a bank does, as such we took the bold decision to commence with this side of the business. The first loan product is a lending product for salary earners, to those we describe as HENRYs – High Earners Not Rich Yet. So you have a reasonable salary, but because everything in Nigeria is paid for upfront, sometimes one to two years for rent for example, there is no way of meeting such obligations. I am yet to meet anyone that collects their salary one month upfront let alone two years upfront. Our technology enables us to automate most of the processes involved from origination, to disbursement, to setting up repayment, therefore allowing us to speed up the issuance of loans. We currently issue short-term loans of 6months maximum, that is up to N1 million, with same day disbursement. If there are no issues or if you are a repeat customer we can disburse cash within minutes of application. We are working on several other loan products that cater for other demographics, such as business people and SMEs, with the core emphasis still being on speed and convenience. We will release more of these innovative loan products over the coming months as well as the full garment of banking products being offered by Kudimoney.com.
How will Kudimoney complement CBN’s cashless policy?
The CBN’s cashless policy is all about curbing excesses of handling cash in Nigeria. We are still a few years away from making non-cash financial instruments the go to mode of payments for all goods and services. Until infrastructure for payments become wholly reliable people will still feel more comfortable with holding cash. Just think how many times the Point of Sakes (POS) machine has let customers down because of network issues. Although Kudimoney is not a payment company, our philosophy still promotes a cashless society. Our lending product is totally cashless, we credit accounts directly and repayments are done directly from a customer’s bank account or debit card. Our core banking platform, when it is launched will encourage alternative modes of payments over cash payments.
Agency banking is coming up to drive cashless in rural areas of the Nigerian economy. How will Kudimoney collaborate with agency banking to further drive cashless policy?
Agency banking is a key driver of the cashless policy in Nigeria, and Kudimoney is already in discussions with them and it is actively seeking additional partnership opportunities with organisations in that space. We are already witnessing a significant shift in the usage of smart phones, even in rural Nigeria. With the various initiatives aimed at reducing and in some cases eradicating the cost of data, Kudimoney is positioned to serve even more Nigerians.
Online security has always been an issue to address among most customers who still see the cashless policy as a threat to business. What is your advice for such kind of customers?
Online security is always a hot debate, and will always be a concern, particularly for the older generation. However great strides have been made by online companies, not just banks in promoting and putting to bed some of these concerns. There are various security features to protect customer data and assets. At Kudimoney, we use encrypted codes and secret one-time passwords to ensure that we are giving access to the right customer. We also have biometric features for certain devices. In fact, I would argue that it is now more difficult to penetrate a bank account online, due to the various levels of security that need to be met. Walking into a bank branch and forging a signature is distinctively easier to execute than forging someone’s biometric data.
What is your view about emerging technologies that are designed to cause disruption in the Nigerian banking industry?
Banking generally seems to be the preserve of the more privileged, particularly on the lending side. For example it is near impossible in Nigeria to get a loan without some kind of substantial collateral, usually real estate with perfected documentation, yet less than 10 per cent of Nigerians own their own property and much less own property with the required documents that banks desire. Similarly on the deposit side, the High Net-worth Individuals (HNIs) and big corporations are able to negotiate bank rates and charges, sometimes to near zero fees, a cost which the masses eventually pay for. In many Nigerian banks today, more than 80 per cent of customer deposits is made up of deposits of less than N1 million, but only about five per cent of these customers get a loan approval, the bulk of the loan books are for high ticket loans which obviously benefit a rather small minority of the population. As a FinTech focused company, when I talk about disruption it is not necessarily to take on the banks and drive them out of business, because with their history and size this would be mere fantasy. The banks must work with the FinTech companies to find ways to make various aspects of banking fairer and more inclusive. Everybody can win if we all collaborate.
Most global banks are pursuing some form of digital or mobile strategy. Why is this necessary?
It is not just the global banks that are pursuing a digital or mobile strategy, Nigerian banks are doing the same also, and they have been doing so for a couple of years now. We cannot ignore the rise in the usage of mobile devices and increased access to the internet, it would be imprudent not to jump on this wagon and look for ways to take advantage of the growth in that sector. However as a bank, simply providing an online banking platform or having a sexy website does not actually equate to making the perks of banking accessible to all. The fact remains that you still cannot get a loan without providing unrealistic collateral, and even when collateral is provided, it usually takes weeks to months to conclude the transaction. Banks still charge exhorbitant fees, and give very little reward for taking depositors money.
What has been the most important new development for digital banking in the past year and why?
In Nigeria, it has to be the introduction and enforcement of Bank Verification Number (BVN). This goes a long way in ascertaining identity, a key component of risk management in any area of banking. The BVN cuts out a significant portion of the manual processes required for ‘Know Your Customer’ (KYC), for both credit and deposit customers.
How is the consumer appetite changing and how can banks adapt to the change?
The world is shifting towards instant service delivery and customers of many industries are demanding more and more instant gratification for services being rendered to them, and rightly so. There is now a generation of consumers who are tech savvy and highly adapted to the online world. Customers also want an alignment with their existing lifestyles as well as more transparency. These are some of the key elements we work with at Kudimoney.com whilst delivering service to our customers.
How can SMEs take advantage of Kudimoney and how cost-effective is it?
We have products we have designed for SMEs, which will give them access to much needed credit when they need it. We are already running a small pilot, but I will be able to reveal more once tests have been concluded. There is a lot we have planned for SMEs, some of which they will start witnessing as the year progresses.
What are some of the key features of Kudimoneydigital banking solution?
As a full service online, bank in Nigeria, Kudimoney.com is looking to change the perception of banking not just in Nigeria but also in Africa. We are creating a bank that will cater for all your needs, by connecting people to their money more quickly, accurately and efficiently with innovative uses of technology – both on the deposit side as well as the loan side. We are creating a bank with digital platforms that will allow customers to open accounts instantly, 247 by the click of a button, with easy access to loans for both individuals and SMEs. Ultimately, the fundamental principles behind what we are building is a bank that understands the need for speed and convenience in all aspects of banking.
Will the digital bank be focused only on millennialsand the younger generation?
Kudimoney.com is a bank for anybody that is comfortable using their phones and computers for making life’s daily decisions. Be it grocery shopping, to hotel and flight bookings, or even where and how to work out. We strongly believe that with the continuous reduction in the cost of the internet and the ever increasing use of mobile devices, Kudimoney.com is positioning itself to be a banker for the emerging generation.
How would Kudimoney help to enhance customer banking experience?
Our current loan customers can already testify to a user-friendly customer experience, with a multi communication channel, and an ability to deliver fast and convenient loans. These attributes will also be evident with our deposit customers once we launch our current and savings account products. Without giving too much away, our current and savings account holders can expect a bank that will double up as a personal financial adviser, so not just a place of safely of money, but also a place where customers receive regular money management advice.
What is the biggest change that will take place in the banking sector in the next five years?
We will not witness one big change but a series of changes and enhancements to the changes already occurring. It is no longer a secret that banks will need to take full advantage of the global digital revolution, but much more than this, the successful banks will be the ones that continuously put the customer first and have a full appreciation of customer needs. This means banks will need to have deeper understanding of the data available to them and find new ways of obtaining accurate customer data. Speed of delivery will become an essential commodity in all areas of banking. Digitalisation and automation will no longer be the exception but will become the norm, traditional banks will either need to revamp their old structures and legacy systems or partner/acquire emerging players in the financial services sector.
What does the bank of the future look like?
We are already seeing a semblance of the bank of the future today, with less emphasis on brick and mortar and more emphasis on data. Successful banks of the future will have the ability to open 24 hours a day attending to whatever issues that customers may have at any given time and resolving those issues on the spot. The bank of the future is about connecting people to their money more quickly, accurately and efficiently. However, the fundamental principles of banking will remain – transparency, keep my money safe, give me a loan when I need it, and let me pay my bills with ease.
How will the future of digital bank engage with the consumer?
Consumer engagement is a critical success factor and there are now many ways to talk to customers. Social media is now a must have for any serious company, not just the banks, and this will only grow going forward. We will probably see the rise of robotics and artificial intelligence with regards to consumer communication. In essence the future of banking is digital.