Ahmed: Our Goal Not to Replace Banks

Razak Ahmed

Cowrywise is a fintech company building products that democratises access to premium financial services. In this interview with Solomon Elusoji, the CEO and Co-founder of the company, Razak Ahmed, talks about the company’s mission and some of the challenges it is currently attempting to surmount. Excerpt:

What’s Cowrywise’s vision for Nigeria’s financial sector?

Our vision is extremely simple, though very powerful as well. It rests on the fact that we want to make access to investments and quality savings something an everyday man can be proud to do. So, democratising access to savings and investments, to an average person, is our vision. Currently, even though about 38 million people have bank accounts, a lot of people don’t do more than make and receive payments. So there’s still lots more in financial services that an average person should have access to. So we are making that extremely simple for anyone to be able to do.

You help people invest?

Yes. The way it works is very simple. For example, treasury bills are issued by the Central Bank of Nigeria (CBN) and bonds are issued by the Debt Management Office, on behalf of the federal government. So what we do is to automate the entire savings process and we give people returns; the returns are generated from the investment that the savings are used for. So when we invest in treasury bills and bonds, we generate returns. A greater portion of those returns is transferred to customers as returns on their savings. It’s practically what the banks do. But they keep the greater portion of the proceeds to themselves, to maintain their operations and make a profit.

Are you going to replace the banks?

We are not replacing the banks, but expanding the pie. For example, the majority of our users are people who are actually saving and investing for the first time. So, it’s not that they don’t use the bank, they do, but they are not using the bank for these sets of products that we are offering. You have a bank account, but when it comes to appropriate financial planning, saving purposefully, and investing consciously, banks don’t provide those kinds of options. So those are the kinds of options we are providing, to ensure that an average person has access to everything that has to do with investment and savings. So it’s about making the pie a lot bigger.

What’s your expansion strategy?

Our expansion strategy focuses on two things. The first is geographic and the second is along different verticals.

We started out from Nigeria, but the vision is to be a pan-African wealth manager for young people. So that means we will allow an average person, anywhere on the African continent, to be able to invest in any securities across the African continent. So it’s like you are chatting with your friend who is in Kenya; you should be able to do the same when it comes to investing in Kenyan or Ghanaian securities. For now, we have operations across the country.

Also, payments are an integral part of what we do, but of course we are leveraging on other payment companies who provide the service for us to be able to structure financial products on top of that. Payments is not something we want to focus on; it’s just an enabler for us to be able to deliver the financial services that an average person needs. But there are lots of verticals that we can structure around. Currently we have savings, investments in mutual funds, which has huge opportunities that are yet to be tapped. Currently, there is about $2 billion in mutual fund value; technically that value should be multiple of that. And the reason why that value is at that low level is because many people still don’t understand what mutual fund is. So our focus is, how do we break down mutual funds, so that an average person understands it. And when an average person understands it, they can make a decision to actually invest in it. The second is, how many people actually have retirement accounts in the country – about eight million. So we still have millions of other people who don’t have access to retirement accounts. How do we make it very simple, with the recent micro-pension opportunities that’s been released; how do we ensure that people have access? Mortgage is non-existent in Nigeria, but it’s a financial product problem. How do we structure financial products in such a way that people can actually have access to real estate? It will not only enable people build houses, it will also help us solve some of the housing deficits we have in the country. So there are lots of verticals that can be explored. If payments is solved, then a major enabler has been unlocked; so we can then structure a lot of financial products on top that can make life a lot easier for everyone.

How optimistic are you about payments being solved?

We haven’t solved payments 100 percent. But the payment opportunity is big enough for companies to focus on. As payments get solved, there are 1001 problems that needs to be solved. So we have interesting companies doing interesting things in the payments space. But there’s a still a lot that needs to be done. For example, we still have a substantial chunk of the money in circulation outside the banking system. Most people still deal with cash. So the point is, how do we convert them to be able to do more cashless transactions, because it is more convenient and cheaper. So those are the challenges that the existing and new payment companies will have to solve.

Apart from payments, a huge problem with financing in Nigeria is the lack of a credit identity system . . . ?

There’s something we have on the platform, which we actually incorporated from day one. We call it Savings Score. And the score is primarily your financial identity. It tells you how you are behaving. Although right now it’s only available to the users, the whole idea is to build a database of savings score that can then serve as a leverage for people to have additional financial opportunities. So imagine you have a savings score of two to three years, that should count for something, because it tells us about your savings behaviour, how regular your income is, how disciplined you are, and those things should count when it comes to offering you financial services like loans and all of that. We haven’t done a lot as a company, and even the industry, as a whole, in terms of building credible credit history, and the reason is very simple: most of the credit in the Nigerian system today goes to corporates not individuals. The banks just leverage on deposits from the retail market, but a sizeable proportion of the loans go to corporates. So people don’t see loans as a thing; so there is no data to build on. But with the emergence of fintech companies that focus on lending, that should help in terms of building the credit history.

There is also the issue of identity. How do I identify people currently? This was one of the major issues that BVN was meant to solve; so many things can be built on BVN – we can make it a unique identifier for everybody. Why can’t we structure in such a way that BVN is at the centrepiece of everything that has to do with government identity, from driver’s license to voter’s card.

How difficult has it been building Cowrywise?

As difficult as you can imagine. (laughs) It’s tough building a brand from zero up, especially when it comes to a brand that holds people’s money. How do you convince Mr A to part with his money when the company is not a First Bank or a GT. It’s been tough, but I think the results are quite encouraging; the level of adoption and the amount of success stories we’ve been able to hear from users, in terms of how the product works; I think those are comforting enough to ensure that we don’t really focus on how difficult it is to build. Of course, nothing good comes easy.