The Divisional Chief Executive of Payments Processing, Interswitch Limited, Mr. Akeem Lawal, in this interview noted that with the right vision, Nigeria could become the Fintech hub of the continent. Nume Ekeghe presents the excerpt:
What are the recent innovations and products that had been introduced by your firm?
One of my core values as an individual is to solve problems using technology; specifically to use technology in innovative ways to solve problems. And I think that is what I have done throughout my career and in all of my roles at Interswitch. So, if you are talking about innovation, Interswitch as a company is innovative because we are looking for new ways to solve problems that exists. One of the projects I am working on right now which we launched in the middle of last year was an attempt to solve the problem of lending to under-served customers in Nigeria.
Lending to the under-served has always been a problem because if you are self-employed, a small business owner, or a low salary earner and you needed to borrow money in Nigeria, it is alwaysdifficult or impossible. You are left to borrow from friends and families and informal lenders which could be embarrassing as well. We decided to solve that problem by leveraging on the capabilities that Interswitch has and the capabilities the industry has developed over the last few years. So, we built the Interswitch lending platform to provide a solution for any individual who has an electronic footprint in Nigeria to be able to borrow monies from as low as N1,000, to as high as N100,000 instantly.
The platform leverages on data on the customers and it uses it to decide if the customer is credit worthy or not, as well as decide their capacity to borrow and their willingness to repay.
How has the reception been since your firm launched this programme?
We launched about 11 months ago and it has been extremely successful. In April, we disbursed more than 60,000 loans worth over N600 million with an average loan amount of about N9,600. The repayment is also excellent and the default rate is extremely low compared to the default rates of banks’ non-performing loans (NPLs). The feedback that we have from customers that have borrowed has been extremely positive. We have feedback from people using it to cover hospital bills for family members, working capital for their businesses, meeting urgent family commitments. And they pay back.
Is this platform just secluded to Lagos?
No, it is nationwide. Our lending service is available to customers using many channels. Right now, we have customers who can dial USSD string and access the loan, also they can access through mobile banking, and it is going live on quickteller this month. And as we roll out, you would also see them on ATMs with the option to select if you need to get a loan.
Are there any plans to expand in Africa?
The inter in Interswitch also means international, inter-operable, interconnected. So, from day one, we have always planned to be international. Our focus is Africa and my personal vision is to build a payment network that connects Africa. A payment network that supports trade and a platform for payments that would help individuals, communities and businesses to prosper by being able to do payments, do businesses and trade with one another across the continent.
We still have a challenge with doing payments across the continent. Why do transactions between Nigeria and Ghana have to go international first? I know there are a lot of challenges in terms of regulation and political restrictions but despite that, Africans have found a way to trade and one of the big problems they continue to experience is payment. Fix that and we will be able to boost trade. So, at Interswitch, one of our big focuses is to try and address that problem.
Is there a timeline to solve that problem?
It is an on-going process. As you might be aware, Interswitch is present in a few countries across the continent already. We have operations in Kenya, Uganda and Gambia. We have customers that we are supporting in 22 countries across the continent already. And we are already beginning to facilitate cross border payments through Verve international – the domestic card scheme that is operating not only in Nigeria but is being issued in eight countries across the continent. People, who carry this card, are able to go from here to Ghana or Kenya and our other countries using their Verve Cards. So, it is an on-going journey and our vision is to eventually make that a Pan African initiative and cover the entire continent.
How would you access payment solutions in Nigeria compared to the rest of the world?
Nigeria has done extremely well if you compare to where we were 15 years ago to where we are in now. Not only have we covered the gap in terms of not being able to provide electronic payment solutions to the average consumer or user. And by user I’m talking about not only individuals but also businesses and government. The adoption of electronic payments has gone hand in hand with the innovation and the technology that has been built to support it. And Interswitch has been at the forefront of this. I think it is probably interesting that some of the things we are doing in Nigeria like instant payment is what the United States of America is just pushing out as faster payments whereas we have been doing that for 9 years.
So, in many areas in terms of payment technology, we have gone ahead of the curve but in a few areas, we are still behind. So, there is a lot of room to improve but I think by far the biggest room for improvement is in terms of penetration. Getting this to more people, not only in Nigeria but across the continent. We are providing payments services today to more than 40 million customers in Nigeria in terms of being able to do either payments with a card, mobile banking, USSD and so on.
But what we have not been able to do is access the remaining 80 per cent of the population, many of who are unbanked, who also require payment services. Many of the players in the industry today are basically competing for that 20 percent of the population that are currently banked and a few players have started looking at the unbanked and the under banked but there is still a lot of work to be done there.
Talking about the percentage of the un-banked population, what do think can be done to bridge this gap?
I want to point out four things that are required to bridge the gap and topmost on that list is the identity problem. A lot of the technology that has been built today to support payment systems requires some level of identity and that identity is managed by bank accounts or BVN. When you start trying to apply that to consumers who do not have BVN or bank accounts then you have a problem because the technology is not designed to work where the KYC requirements don’t match what is currently available in the bank.
Now do we have an identity database that covers the over 180 million Nigerians, the answer is no. Strangely, the largest identity base that exits today is SIM registration and the SIM registration database is inadequate for payments today. So, the first problem to solve is how we can identify the unbanked customers in a way we can use the technology that exists to address them.
So, once you solve the identity problem, you solve a large chunk of what is preventing the growth of financial inclusion. The second is the economics. The Indian story of financial inclusion was solved by the ‘Prahalad’ ideology which basically says there is a fortune at the bottom of the pyramid, but the way to find that is to develop business modules that work for the bottom of the pyramid. In Nigeria, we don’t have that flexibility.
Designing business models that work for the bottom of the pyramid cannot be done by trying to use business models for the banked to support the unbanked. That would not really work. So, having the flexibility to develop business models that allow organisations offer services at the bottom of the pyramid would be crucial to solving that problem as well. Government and the regulators can do a lot to create the flexibility and even stimulate the segment. But ultimately, I think it is private enterprise that would be able to reach the unbanked Nigerians. But to do that they have to be profitable to do it. One of the things that used to be a challenge, but I guess is no longer a challenge now, is technology and communications infrastructure.
Telecoms have covered quite a large part of the country because you can almost reach anyone now through a mobile phone. Technology that can be built on the existing telecommunication infrastructure to support payment and financial inclusion already exists. We have payment solutions that are built on USSD and other mobile technology today which is accessible to anyone who has a mobile phone. We also have agent network infrastructures being built to allow people face to face interactions to support unbanked and under banked customers. However, it is still grossly inadequate and must be increased. Interswitch for example has a financial inclusion business that has been rolled out in just about a year and a half now, with 15,000 agents across 36 states of the country. But this is still grossly inadequate. We need to get to 500,000 agents before we can get the type of impact that you need to have nationwide.
So, the technology is there and businesses that are willing to do it are there. I think there needs to be an explosion in the scale. So whatever kind of stimulus that might be required to allow people like InterswitchFinancial Inclusion ServicesLimited (IFIS) and others in that space to scale would be extremely useful. I think those are the key things to get the financial inclusion problem solved.
Earlier you talked about successes in the Fintech space, are we going in the right direction or should there be a Fintech vision for Nigeria?
We need to first recognise that we have done quite a lot. One of the few things we don’t do well as Nigerians and Africans nowadays is that we don’t tell our stories. In Nigeria today, we have Fintech companies using USSD to do lending and are able to make lending decisions in seconds and can credit customers account inthree minutes. We have Fintech companies providing customers with the ability to create online businesses and attached payment to it and they can do that in 30 minutes or less.
We also have companies who are providing solutions using a microfinance model to serve customers at the bottom of the pyramid and are solving problems in that area with savings, loans, collections and payments. We have Fintech companies doing amazing things, but no one knows, and we don’t spend enough time telling their stories. Telling those stories would allow them to attract the investment that they need to scale, grow and improve. And indeed, also encourage others to build new innovative solutions that can solve the many problems that we have.
We can start by crafting a vision for Fintech in Nigeria. A vision that dreams how we can make Nigeria the Fintech hub for the continent and how we can make sure Nigeria attracts the most investments from Fintech investors globally and how do we develop a local investor community in Nigeria. A vision that should guide us to develop the scale and competence of the human talent that exists and how we can support that talent to scale with the right infrastructural policies that would help them grow and expand to the rest of the continent.
We need to look at these things and consider and develop them as the building block for a Fintech vision for Nigeria. The other countries around the world that have succeeded in technology did not happen by accident, whether it is the US Silicon Valley or Israel. They did it deliberately. So, it is absolutely critical to develop a Fintech vision for Nigeria.
Going forward, what should we expect from your firm?
More innovation, we are constantly looking at what innovative things we can do to solve real problems. We are constantly looking for how we can take what we have done in Nigeria to the rest of the continent so that we can solve the same kind of problems we have solved here. We are also looking for how to position Nigeria as a country from which you could build good things and export to the world. So that our story and the story of other companies like us can inspire others to build and grow to become African giants. Also expect that we would collaborate more with other Nigerian companies who are growing Pan-African as well because they share the kind of vision that we have.