Ademola: Nigeria Needs Accessible, Cost-effective Digital Banking Services

E-Biz Interview

Managing Director, Branch, a digital banking services provider, Dayo Ademola, speaks about Branch’s expansion into full digital banking services provider and other industry isuues. Emma Okonji presents the excerpts:

What is Branch all about, its service offerings, application and entrance into the Nigerian market?
Branch is a financial services app, which started out as a quick loan app essentially a digital lender. We have been operational in Nigeria since 2017 and operational globally since 2015. Branch basically is available in three regions – Nigeria, East Africa and India and we are headquartered out of San Francisco in the US. Like I mentioned earlier, we started off the business as a digital lender, but particularly here in Nigeria and eventually all our markets, we are expanding into full digital banking services. Here in Nigeria, in addition to lending, we offer a 20 per cent annual investment return, which is one of the most competitive rates in Nigeria. We have flexible investments where customers are able to withdraw their funds at any time as needed, but we also have fixed investments. We pay out 20 per cent annually and the accrued interest is paid out to our customers weekly. In addition to that, we have a wallet feature on the Branch app that allows customers to do P2P transfers – so a customer can transfer to any customer within and outside Branch, in any financial organisation in Nigeria. Customers are also able to make bill payments such as internet bills, airtime purchase, pay cable bills, buy electricity vouchers and so on. Customers are able to do all of these within the Branch wallet and all of these transactions are commission-free, which is essentially the value-add we provide to our customers.

Branch started out as a digital lending App and later expanded into a full digital bank. Can you tell us what the process has been in expanding into a full digital bank and what motivated the expansion plan?
The process typically starts with upgrading our license. So, whilst we are fully licensed by the Central Bank of Nigeria (CBN), as a finance company, we are also looking to upgrade our license as we go along. As a finance company, we are able to offer all these services that I spoke about earlier versus the money lender license we were previously operating under. This gives comfort to our users to know that we are fully licensed and regulated by CBN. Another thing we have been able to do is to build user-friendly, value-added products, which are the typical banking products. For instance, customers need an account, a store of value, which is what our wallet offers. Customers need the ability to send money to other customers whether they be within Branch or in other banks or financial institutions in Nigeria. We then have investment products, which ables customers to save money and earn interest on that money to grow wealth. Thus, what we have done is develop these products and services that we are deploying to our customers in a cost-effective and easily accessible way.

You said Branch had been in Nigeria since 2017 and globally since 2015. Can you speak about your market share and customer base, and how you intend to grow your customer base in Nigeria?
Since commencing operations in Nigeria, we have given out over three million individual loans in Nigeria, some of those are repeat loans to the same customers, and that is a good metric to understand the size of our customer base. The growth of our customer base, which continues to increase daily, particularly as we are in recovery mode after a severe slow down because of COVID-19, is simply because customers see value in the products that we bring to them and the more we are able to share that story, the more customers use our products – be it our loan products, investments, wallet, bill pay or transfers. They see value, they see user-friendliness and they also get great customer service from us at Branch. So that is what helps us grow and scale our products as well as grow our customer base in Nigeria.

Most Nigerians are skeptical about carrying out digital payments because of the financial risks involved. How will Branch encourage and address the fears of such customers about the usefulness of digital banking?
Well, the first thing I will push back at, is that I don’t think the skepticism runs as deep as we sometimes think it does. Our engagement with our customers has actually proven that the skepticism isn’t necessarily for digital versus brick and mortar banking. The skepticism is in trusting the organisations themselves. So what we have done at Branch is to go about building that trust day-on-day with our customers. There are a lot of FinTechs around today and a relatively small portion of them are actually licensed and regulated by the Central Bank of Nigeria. We are regulated with the same parameters as any commercial bank by the CBN. Before you can get to the point where you are regulated by the Central Bank of Nigeria, there are certain things that needed to be put in place, and that is the first thing we do to prove our credibility to our customers.

The second thing is if you examine our backers – the investors in Branch internationally, you will notice the kind of names we are associated with like A16z, which is Andreessen Horowitz and Visa International. A16z are the funders and backers of some of the largest and most successful tech companies in the world including Twitter, Facebook that recently changed its brand identity to Meta, and a bunch of other companies. Also, everybody knows Visa International, the financial services company. A lot of people have Visa credit cards or debit cards in their wallets – these are the caliber of investors that have backed and have staked their claim on an organisation like Branch. That gives our customers comfort to know that we are doing the right thing and will not disappear with the funds that they have entrusted us with.

The third thing is that we have built a reputation as being one of the most ethical and customer-friendly lenders in this market. As we have gone about lending money to people, we are also an organisation that does not engage in sharp practices when it comes to our loan recovery methods, i.e., sending text messages to people in your contact list, sending nasty messages, charging you late fees, among other. For us at Branch, first of all, we do not charge any late fees for our loan repayments, we will never contact anybody on your contact list, we will never send you unpleasant or harsh messages asking you to repay because at the core of our company is an ethics. So doing this year-on-year, month-on-month, week-on-week, and day-on-day, we are continuing to build our customers’ trust and that’s how I believe we can overcome whatever skepticism exists. Like I said, I think that’s where the real skepticism lies and not necessarily a pervasive skepticism of brick and mortar versus digital banking, particularly given the demography in which most of our customers sit because they are already digital natives so they are used to doing a lot of things via their phones or their computers.

You have been in Nigeria for some time now and you understand the digital space in terms of banking, but despite the payment channels available to Nigerians for digital transactions that will make us embrace a cashless economy, Nigeria is still regarded globally as a cash-based economy. How can Branch change this narrative?
I can answer that question a couple of ways. The first thing I will say is that the onus doesn’t necessarily sit with private organisations like ourselves to completely solve that problem. Let me define for you who we envision our customer base to be – our customer base is not the unbanked, because our business model does not necessarily cater to solve the issues that keep people unbanked, which ranges from accessibility to digital devices and internet to much lower-income levels that are at play in certain areas. These are issues that Branch is not equipped to solve and that’s not where our business model lies. There are a lot of people working today whose business model is to solve those problems but it’s not ours. Our customer base is the underbanked – which actually brings me to another issue that keeps people unbanked, which is digital identity – having access to getting a Bank Verification Number (BVN) to identify who you are digitally.

Our customer base really is the underbanked people who have a BVN or some other form of identification, they have a bank account, may be just a savings account but are essentially locked out of the rest of the full suite of banking services. These people don’t have access to credit because your typical commercial bank today will not necessarily lend to them because they are not employed or they might be self-employed and they are small business owners. They don’t have access to investment products that give them good returns on their hard-earned money because again the focus of most commercial banks is for wealthier customers and the cost of accessing these products is just too high for a certain level of Nigerians. Then you look at things like buying airtime, transfers and trying to pay bills, commissions are charged for all of these transactions. So, all these banking products become unreachable for these people and that is Branch’s sweet spot. To be able to say:

You are a digital native; you are technically banked but are actually severely underbanked – That’s our target audience. You are able to build your credit score with us as an organisation as well as meet your short-term financial needs by having access to credit that you won’t get from a commercial bank. Our target is bringing banking services that are typically reserved for the wealthy in Nigeria to the average Nigerian; that is where we operate and that is the impact that we are making.

What are the specific products and services that Branch offers and how will these products and services impact on the Nigerian economic?
Just to list out a couple of our products and services – we have Unsecured Lending, meaning we are able to give unsecured loans to people, with no collateral required and very limited paperwork involved. You download the app and fill out what you are asked to fill out to apply for a loan and if it is approved, your loan is disbursed to you within a matter of minutes. Secondly, I mentioned we have an investment product which gives customers a return of 20 per cent per annum and not only that, we are able to pay out your interest to customers every week. So, every Monday morning, customers will get their accrued interest for that week paid into their investment account. With this, customers are able to watch their funds grow on a weekly basis. The third product that we have is a Wallet product which I described as a store of value that customers can keep funds in. With the funds in the wallet, customers are able to perform person-to-person transfers either with another Branch customer or anyone with any financial institution in Nigeria, as long as they have an account and an account number. These transfers are also commission-free, which means if I need to send N1000 to a customer, the N1000 will be deducted from my wallet and the customer will receive N1000.

Also with customers’ wallets, they are able to pay their bills, and there is a full list of bills on our platform whether it’s airtime, electricity or cable. The other really cool thing is that we are continuing to innovate on our products, so we have new features coming out as we hear back from our customers, as we continue to improve our products. We also have a product road map for future releases and we will be releasing debit cards soon so that people will be able withdraw physical cash.

How I see it impacting the Nigerian economic initiatives is this – like I mentioned earlier, the more we are able to pull people into the banking system, by giving them a full suite of products, the more value they are able to have. For instance, when we are talking about Nigeria’s cash economy, and if a 26-year-old small business owner needs to borrow some money to help fund his/her business, they will typically have to go and borrow cash from somewhere else because the regular bank will not give out the loan. However, if people get a loan from institutions like Branch, they will be able to build their credit score with us, which will help pull more people into the digital economy. They are also able to be less reliant on physical cash, which in turn helps with our drive for a cashless Nigeria. People are also able to grow their business as well as income which, then again, has an impact on everything from the Gross Domestic Product (GDP) of the country, down to people being able to pull themselves into higher income brackets within the country.

Let’s take a look at SMEs. What is your support for SMEs and Start-ups in Nigeria?

Our products are geared towards individuals, so we are a full retail solution. What we do find is that quite a huge chunk of our customers, while they are taking out personal loans from us, are using those funds to help grow their businesses. We are not optimised to lend to businesses directly, for instance “Dayo and Sons LTD” cannot apply for a Branch loan but Dayo as an individual, can. At this point, we are a full retail solution, but we do know that – and this is from heavy engagement with our customers. We do know that the credit we give to our customers is being used to build their businesses so we have an indirect impact but we do not lend to SMEs directly.

Can you briefly talk about your background and your role at Branch?
My name is Dayo Odulate Ademola and I am the Managing Director for Branch in Nigeria. My experience has largely been in Technology and Financial services. I have worked for a few technology companies in the US and here in Nigeria. On the financial services side, I have worked in the banking industry first in strategy and later, retail banking. I managed a FinTech investment fund for a Social Impact Organization called Enhancing Financial Innovation Access (EFInA). That is the synopsis of my career before joining Branch earlier this year. My role at Branch is to manage the business in Nigeria and manage its function across the region and also to lead and grow the Nigerian business. That is a short summary of my role here in Branch.

With your position as the managing director of Branch since February 2021 and with your background in technology, what are the innovations you are hoping to bring to the Nigerian market?
Branch’s main goal and the centre of our business is that we innovate around our customers and what it is our users need and how we can best possibly serve them. Branch does not release a new product or feature without doing any extensive research and by extensive research, I mean we go as far as physically meeting with our customers to find out what their needs are, to understand what the blockers are. We often find out that the stigma of borrowing from friends and family to start a business is what many of our customers want to avoid. So, we are bringing out products that actually solve problems and that is why our tagline is “Branch is better than your Bank”. We do not just say that, we have the facts to prove it.

What are some of the online security tips that you will like to give to your customers that will enable them to stay protected online?
For starters, I will say – make sure your phone is password-enabled. Secondly, make sure your SIM card is also passcode-enabled, meaning that if you put the SIM card into another device, it will request for the passcode. The third tip is do not share your personal identity number (PIN) with anyone, whether it is the PIN for your phones, cards, passwords to your Branch app or to any other banking app you have. Ensure the PINs are unique and you are the only person that knows them. The fourth thing is do not share your details with anyone. One of the biggest scams in Nigeria is receiving strange phone calls – even I have gotten such phone calls before, requesting for your passcodes. There is no legitimate financial institution today in Nigeria that will ever make a phone call to customers, send a text message, WhatsApp message or an email, asking the customer for sensitive information. It will never happen, so those are the main things I can say and advise customers on.