Verve, one of the leading payment technology and card business in Africa, last week in New York, launched the Verve Global Card, which allows cardholders to transact business in more than 190 countries and territories. In this interview, the Managing Director, Interswitch Group, Mitchell Elegbe, spoke on the product, the evolution of financial inclusion in Nigeria as well as how the adoption of technology can change the face of the country’s electoral system. Obinna Chima who covered the event brings the excerpts:
For those that already have the Verve Classic Card, what does this new Verve Global Card mean to them?
First thing, let’s talk about the Verve Classic Card. The Classic Verve Card is a card that works in Nigeria today. Now, bank issue those cards to customers with the promise that those cards with the promise that it will not work abroad. Now, when cards go international, sometimes you face all sorts of challenges such as fraud, etc. The way we designed the Verve Classic Card, we are in control of the card in Nigeria; we know the Nigerian environment and so we know how to deal with the issue of protecting it from fraud and others.
If somebody says he or she has a card that works in Nigeria , it wouldn’t be nice if one day he hears that, that card was used abroad to commit fraud. That would amount to jeopardy because the man doesn’t have a lot of money, also he has never gone to an Embassy to ask for visa to travel abroad and thirdly, he didn’t go to the airport, but suddenly you see that your card has been used for international transactions. You can never accept it. So, we have left Verve Classic Cards as cards that work in Nigeria and even though those cards can work abroad too, for now we are going to limit it to ATMs. Why? That is because at an ATM, you must enter your chip, your card and put your pin. So, it is likely to be more secured. For the Verve Global Card, we are targeting another segment of customers. These are those we call the affluent and mass-affluent and people who travel regularly abroad. So, we need to be able to use our card abroad. This is a different card. In the case of Verve Global, it can work on point of sale (PoS), for merchant operations and you can also use it at an ATM.
What are the benefits of the Verve Global Card?
Let’s look at it from three perspectives: People have been telling Interswitch and Verve that they like our products as well as the way we have priced it, but that they want something that can also work internationally? That was the first question. The second was from the banks who told us that they wanted a card that is easy understand so that they would know how to target their customers and of course the third one was Interswitch that has a vision to not only remain in Nigeria, but to go Pan-African and ultimately international. So, if we are going to achieve that, we need to create a product such that as our customers move around, they would be able to carry out transactions seamlessly. I will give you an example, we have offices in Kenya, I should be able to go to Kenya and use my card, because the card is linked to my account in Nigeria. So, those are the few things. Of course, if you look at Verve Global, there are a lot of interesting things we are doing around it, that is why the partnership with Discover, is very important. There are special deals that they have that we would bring to bear. So, those are some of things we are looking at and as soon as we get back to Nigeria, we are going to begin to educate Nigerians and basically show them all the additional benefits that we have put around card.
Charges is always a concern for cardholders, are there additional charges attached to this Verve Global Card?
I can tell you straight away that it is not supposed to be more expensive than any other card. We understand our people very well, so you need to put a card that the pricing won’t be an issue. We haven’t finalised the pricing, but I can talk to you about the pricing principles. The philosophy is that it should be a card that is cheap and cheerful, a card that has lots of benefits and loyalty, a card that we live on and one that you will not want to leave behind because of all the benefits. You know benefits vary from person to person. What to you is a benefit, the other person may not see it that way. Part of what we are doing is to look at all our customers and to begin to determine the kind of benefits we need to design for each category of customers.
How will you access Nigeria’s financial inclusion journey?
I think we have come a long way. I don’t think collectively we would say we have achieved what we want to achieve. It is a journey and part of that journey is to learn along the way. There are few things we have done very well and there are some we have not done very well. And so, what we usually do from time to time is to go back and re-tweak the strategy. So, we target it. For instance, if you say you want to do something that 100 people would like, maybe at the end of the day 50 would like it, that means there are still 50 people you have not talked to. So, you have to ask that other 50 persons why they didn’t behave like the other 50.
So, when you get insights about the remaining 50, you have to go and modify the products and give a new solution. Maybe this time around, an additional 30 persons would take the product, but you still need to go back to the remaining 20 because no two human beings are exactly the same. Even when you design products, not everybody would want to use it the same way. But overall, I think there has been lots of improvement and new policies are coming out from the CBN. You have heard about the Payment Service Banks (PSBs), which is targeted at the telcos because of the distributions that they have. All again, these are the things that the central bank is tweaking to ensure that more people get involved so that it can achieve the financial inclusion targets we are looking at.
So, what are the barriers to achieving the targets set by the CBN in terms of financial inclusion?
I will give you an example. Firstly, when you say you want someone to be financially included, there is a fundamental assumption you have made, which is that he has money that he wants to bring on-board. But the truth is that most people don’t have this money. So, for some people, financial inclusion is totally unnecessary. For some others, it is in and out – as money is coming in, it is going out, so why should I save it. So, what that basically means is that the kind of transaction you need to do for them to be financially included should be an in and out kind of transactions, because they don’t have enough money to save. I will give you an example: there are people that every day they would leave their houses to collect items from distributors, go to the roadside to sell them, like the hawkers in traffic.
Those guys live from hand to mouth. If you tell them to bank their money, you would be wasting your time because their bank is in their pocket. The only way they would even listen to you is if you can create a product that looks at what they do. For instance, they always have issues with ‘change’ when someone buys from them in the traffic, that is why you see them always chasing cars. But if you give them a solution that eliminates the need for ‘change’ they would adopt it, because you have solved a problem for them. But what is happening is that some of us who wear suit and tie are designing products for people who don’t wear suit and tie. We don’t understand their lives and what they need most. But you can see that sometimes if you understand the way people live, it is easier to find solutions for them. So, one of the learnings for me is that if you want to solve my problems, you need to understand my problems and you need to feel it. Once you do that, then it is easier.
But another concern around alternative banking channels, especially through cards is fraud, how best do you think the industry can address this?
Fraud is a global phenomenon and because it is global phenomenon, if you learn from fraudsters, you will understand that they cooperate a lot. It is a global network, they have resources and they have technology. The people who have the technology are not the ones who commit the fraud, they just enable others to commit the fraud and they benefit from the process. We have to learn from the fraudsters and try to be better than they are. One way is that they collaborate, so we also have to collaborate. Secondly, we need to share knowledge because technology changes and it is not static. Thirdly, we need to make investments.
They are investing and so we also need to keep investing to keep getting the latest technology to combat fraud. In the specific contest of Nigeria, we need to enable and empower law enforcement agencies because at the end of the day, if there are fraud cases, they are the ones to prosecute. We need to understand the payment system and the kind of risks involved. And this calls for us creating dedicated funds to educate policemen and people in the Economic and Financial Crimes Commission (EFCC). If you commit fraud and you get away with it, you will do it again. So, we need to make sure that those who can help us prosecute them and the policemen who can chase these men and arrest them are empowered so that they can do the job very well. If there is no way to deter them, it would continue, like kidnapping today. So, we need to increase what we call the work factor by making it extremely difficult to embark on fraud by clamping down on people.
Has your firm ever considered developing an electronic solution to address the challenges in Nigeria’s voting system as well the traffic situation in Lagos which appears to be worsening, don’t you think a digital solution can be developed to address that as well?
Let’s start with elections. Elections can be done better. There are easier ways to carry out voting that would not cost the entire country what it cost us today. Today, it is too expensive to conduct an election. So, like you rightly said, we have a combination of technology that can be used. There are people that have registered for national identity card, there are people who have Bank Verification Number (BVN), driver’s licence and so on. So, once you know these people, we now have to make the various data base talk to each other, so that you can easily find out if someone has voted using his driver’s licence and he is attempting to vote again using his BVN. So, because you can see that person from the data base, you disallow that. We all know about blockchain. One of the big uses of blockchain is called the Single Source of Truth, which all of us can see what is happening because of the way it is designed. Blockchain will be a good solution to use for elections.
I must be honest with you, every time we have elections, when I see the challenges we go through, I think about technology. But because elections happen once every four years, once it goes, we forget about it again until the next four years. The truth is that there is a way to make it happen and there is technology that can be used to make it a lot easier. Should it be driven by government? Maybe. But even if the government does not, nothing stops the private sector from building something for the government to use. Whether they use it or not is a different story. Now, transport and health are areas we are interested in. The way we look at opportunities is such that whether you are young or old, Christians, Muslims or pagans, whether you have a job or you don’t have a job, you must move. Transport is one area that every human being can move. So, if you are looking at national development, if you can make your transport system very efficient, the productivity gains would be huge.
So, there is no doubt in my mind that we need to sit down and look at transport as a whole. So, to make transport work, there are few things you need to consider. You need what is called a multi-modal and multi-operator system and I can explain that. There are different modes of transport. For instance, in ticketing, you have to look at the different modes. When I get into a bus or a taxi, the same payment card or mechanism I used for the bus should be what I should use for taxi. For instance, if I want to go to Ojuelegba, I should be able to say as part of my journey, I am going to be on a train and from train I take a taxi and from taxi I take a bus.
The same payment token should be able to work for all the routes, that is why it is called multi-modal. Even within each mode of transport, there are different modes. Then, there is also what is called multi-operator. Let us assume I am going from one place to the other, even only with bus, if I come out from one bus, the same ticketing system should also apply for other buses. This can be done. The only challenge we have in Nigeria presently is that most of the major transport buses are controlled by the government. When government is involved, sometimes you have to struggle to get approvals. Many years ago, we wanted something in Abuja with the bus system, as soon as one government left and a new government came, they were not willing to honour the contract. So, today our transport system is still controlled largely by the government and like everything that has to do with government, you have to factor the risk involved when one government leaves and another comes on board.
But have you engaged the government on this?
No. We don’t have a solution yet. I told my team ones to look into it, but I am almost certain they haven’t because of other pressure. But it can be done. But, whether government can accept it, is a different thing.
There are complaints of excessive charges by banks, what do you think should be done to put to stop to that?
I can comment only about transactions charges through the channels. In the United States, a few months ago I stayed in a hotel in Houston and my card from one of the global networks was not accepted because my bank configured the card for chip and pin. Although they claimed at the hotel that they have chip and pin terminals, it didn’t work. I was there for three days. So, every day, I would go to the ATM to withdraw cash, just to make sure I am not stranded. Guess how much I paid as fees for withdrawing cash? I paid over $3 and as you know, one dollar is N365. In Nigeria, that same ATM transaction is N65. Interswitch has been in operations for almost 17 years and in that 17 years, we have not increased the price of ATM withdrawals, instead it has come down. Every year, inflation goes up. So, in real term, if you look at the last few years where inflation has been above 10 per cent, we have been giving Nigerians effectively, a discount of 10 per cent every year in the last 17 years.
Why we were able to do that is because we expect volume to grow. So, Nigerians are actually enjoying when it comes to charges. If you look at PoS, what we charge merchants is one of the lowest in the world. So, when you talk about charges, I cannot speak about bank charges, but I can speak about payment charges, it is the lowest. And it has to be low because we know people don’t have the purchasing power. Don’t forget, all of the payment terminals you see in Nigeria are imported and we pay duties. We bring them from the countries where they are made, where they charge $3, we import it, pay duties, provide power, inverters and we still charge N65. So, I don’t think the issue in Nigeria is cost. Don’t forget where we are coming from, when we would go to a bank and queue, collect tally number and if you get to the bank at 12noon, you may not come out before 5pm and the rate of robbery then was high.
Did Interswitch apply to the CBN for a Payment Service Bank licence?
Yes, we have applied, whether we get it or not, is a different story.
Verve, your flagship product will be 10 this year, how has the journey been so far?
Verve is a child of circumstance. When we first started at Interswitch, we did want to own a card scheme, we just wanted to have a solution that can work on the networks, so we had magnetic strip cards. But around 2009, we started having fraud in the system and the central bank then said we should move to chips and pin. And if you are moving to chips and pin, with the likes of the international card schemes around, you have to build a brand. So, we started from ground zero. We observed that less than five per cent of Nigerians travel abroad, so we decided to develop the right card for the other 95 per cent. Prize was a big issue for them and being able to use it in different ways, being flexible on prizing and being able to adapt the card to meet various requirements. So, Verve was to give us the freedom to do things for Nigerians and that was why we called it the domestic scheme. When we started, a lot of banks supported Verve to do very well in the market. It is now 10 years and if a product is in the market for 10 years, then it is safe to assume that the market has accepted it. If a product gains market share year-on-year, it is a sign that the market has accepted it, so there must be something we are doing right. As I speak to you today, Verve Card is being issued in eight countries in Africa and it is accepted by about 26 countries.
So, there must be something we are doing right. So, we thought that at 10 years, it is a good time to go to the next level and the next level for us, is to take Verve Card international. So, Verve Global is an attempt to create a card brand and a product for a segment where we hope that we can position it in a way that the banks would be interested in it to issue to their customers, secondly, that their customers would love it and thirdly, you will hear that abroad, in some jurisdictions, during summer periods, Nigerians are among the top people that visit, that opportunity is something Verve can tap into and that is why we created the Verve Global Card.
What is your outlook for Verve in the medium term?
We have launched Verve in the United States, our relationship with Discover takes us to about 195 countries. Apart from the United States, the United Kingdom and the Unit Arab Emirates are other places Nigerians visit a lot, so, we expect that in the next five years we should have launched Verve Cards to be used in the UK and in the UAE. Of course, very soon you will be hearing about our moves in the North African countries, where we are trying to ensure that Verve Cards are also used in those countries.