The Chief Digital Officer, Alat by Wema Bank Plc, Mr. Dele Adeyinka, talks about the evolution of digital banking in the country and how it will drive economic growth in this interview with JESUSEGUN ALAGBE
Some years ago, nobody thought we would be conducting banking transactions via mobile phones. What factors do you think were responsible for the fast rate of mobile banking adoption in Nigeria?
The adoption rate leverages the arrival of telecommunications companies in the country in 2001 after the approval of former President Olusegun Obasanjo. When they came and the telecommunications industry was deregulated, several other opportunities arrived and Nigerians started browsing the Internet on their phones. The advent of mobile data further fuelled the rise of the Internet banking in the country. So, technology was the bedrock upon which all of the banking solutions arrived.
The advent of mobile banking disrupted the way banking had always been done, but now you are talking about another disruption in the banking industry called digital banking. What is the difference between mobile and digital banking?
Today, almost every bank in the country has digital products to enhance services to their customers on the bricks and mortar structures. When we talk about mobile banking, you already have an existing account and you have access to that account through a mobile app developed by the bank. Usually, when you are using a mobile banking app, you still have to walk into the bank either when you are initiating or concluding certain transactions. For instance, if you want to request for a debit or credit card (people call it Automated Teller Machine card), you still have to go to the bank. However, when we talk about a digital bank, it is practically 100 per cent digital. From the point at which you get in touch with the customer to the point at which they initiate or start banking transactions, it is all done online and they don’t need to walk into any physical structure. With digital banking product like Alat, once you download, you can open a savings account and start banking on the go in the comfort of your home, office, or anywhere.
A digital bank can do everything you need to do in a banking hall so you don’t ever need to go in there again. From opening a savings account to a current account to lending and others, these are the benefits of a digital bank. Everything is automated on a digital bank. You can request for an Automated Teller Machine card right from the digital banking app and it will be delivered to your office or home. Customers are being empowered and have full control of their accounts. Your bank ceases to be the four walls of a bricks and mortar structure and it now becomes your smartphone, tablet or laptop. Your bank is with you all the time. Also, mobile banking app is for customers who already have accounts with banks while digital banking app can be used by anyone, including those who don’t have accounts with the bank.
Could digital banking operate independently of the traditional banking system?
Yes, you would not need to walk into the bank again with digital banking.
In this age of cyber hacking whereby a fraudster could hack into the system of a bank and cart away with customers’ funds, do you think Nigerians would embrace digital banking fully?
Yes, as time goes on, people would finally embrace digital banking, especially products from reputable institutions. Remember also that we are being regulated by the Central Bank of Nigeria and we have approval to do whatever we are doing. All the funds that users are going to deposit via the digital banking platform will be insured by the Nigeria Deposit Insurance Corporation. Technically too, when we were developing the platform, we engaged trusted third parties who carried out all sorts of security test running into a dozen. All these tests were carried out on our digital banking app and those third parties gave us a clean bill of health before we launched the app to the whole world. They tried several mechanisms of hacking into the app, painted all scenarios on how a fraudster might want to hack into the system and they said it was a trusted and secure platform. Remember, it’s a bank and so customers must be very assured that their money is safe.
The CBN’s cashless policy has still not been fully implemented. Could digital banking be successful without the effective implementation of the policy?
The cashless policy started in phases and the first phase was carried out in six states in the country. The next phase was the one the apex bank wanted to carry out a few weeks back, but they had to put a hold on it in consideration of some external factors, but nonetheless, this initiative will still happen, it’s just a function of time. Cashless is the way to go. So yes, digital banking will succeed with the current implementation of the cashless policy.
There are still millions of Nigerians who aren’t using smartphones in the country. How does a digital banking platform like yours plan to reach those people, talking about financial inclusion?
In the country, there are arguably 170 million people; and across all the four major telcos, we have over 70 million subscribers. That is a huge number. Let’s even say 40 or 50 per cent of 70 million mobile phone users are using smartphones, it is still a good number compared to the number of traditional bank customers in the country. We have 23 banks and collectively, they don’t have up to 40 million customers. So, the number of mobile phones in circulation is much more than the number of bank customers. The onus is on us as financial solution providers to find simple, smart and convenient ways of bringing in everyone into the financial sector. That’s the whole concept of financial inclusion. We are encouraging those that are not already in the structured financial environment to come on board and feel confident and safe to put their money in the financial sector and this will add to the growth of the economy.
A disruption like this is bound to have initial challenges. So what challenges are you facing right now with a digital bank?
The challenges we are facing right now were anticipated and we considered them very well before we developed our digital banking platform. The first challenge is electricity supply. Power must be available 24/7 because a digital bank must run 24 hours. This office, for instance, runs for 24 hours, unlike traditional banks. People are always in the office; we run shifts. Customers have to be attended to anytime of the day. The Informational Technology departments of most regular banks close by 7.30pm or 8.30 pm. But in digital banks, it is not so. You have to be on 24 hours a day, seven days a week and 365 days a year. Due to this, power is a serious issue. The second challenge is the security of the digital banking platform, which we took seriously while developing this platform and which we still do.
Since a digital bank could run independent of the traditional banking system, any fintech company could as well develop it. Are you afraid this might happen someday?
In fact, there are already a whole lot of offerings in the industry, but when we talk about reliability, it’s what every customer wants. Any fintech could fold up someday, but having a digital banking app that is connected to one of the biggest banks in the country would make people to be assured of trust and safety of their funds.
A report by the Wall Street Journal in 2015 stated that about 7 in 10 Americans had not been to the bank in over a year because of a disruption like this. That means in the future, we would see lots of banking halls being shut down…
It’s happening already in Nigeria and this is because the cost of keeping and running bank branches is so huge. Many people are already transacting on their mobile phones, so they don’t go to the bank often. With digital banking, they would never need to go to the bank again, so banking halls would definitely close. For instance, in just few weeks of launching Alat, we already have over 12,000 sign-ups. Before you know it, hundreds and millions of people would sign up and take note that all of them would be served from one single office, not many offices. A traditional bank branch could only serve a few hundred people who are around its location. So there is limitation by space unlike the digital bank, which is boundless, paperless and limitless.
So what advice would you give to banking employees who might lose their jobs in the nearest future due to this disruption?
Actually, automation would not make people lose their jobs as long as they are equipping themselves with new technological skills. Technology is an enhancer or enabler; it is not really a destroyer of jobs. What you’ve been doing for five hours, you can now do it within 30 minutes due to technology. So for banking employees, they will be redeployed to do other things where their skills are required, not necessarily that they would be laid off.
How can digital banking drive entrepreneurship among Nigerians, particularly the growth of the Small and Medium-scale Enterprises?
A digital bank will reduce expenses incurred by the SMEs, it will also help them to save time. When you no longer need to visit a bank but conduct all transactions via a mobile device, it will save you stress and time. Apart from banking transactions, an entrepreneur can also order for products and services on their mobile device. It’s exciting, it’s fun.
What trends do you see in the digital banking industry in five years’ time?
The adoption rate will increase. Right now, it is novel, but I bet you, before the end of this year, you would see other banks and fintech companies churning out their digital banking products. Just like the Wall Street Journal report you quoted, Nigerians are going to get to that level whereby they would never need to go to a banking hall again. Few years ago, nobody would have imagined that today, you could go online and order for food and it would be delivered to you; that you could hire a cab today without going down the road; that you could get your university degree without going to the four walls of the university; that you could play music on your phone without buying a big home theatre; and that you could take lovely photographs on your mobile phone without requiring the services of a professional. A whole lot of things are being digitised and you can expect much more of these innovations and ideas in the nearest future.
What opportunities are here for indigenous software developers?
Partnership is the way, collaboration is the key. For example, our digital banking app was built by Nigerians from the scratch to the finishing stage. We didn’t buy the app from the shelf, no foreigner was involved in the development of the app. So there are definitely opportunities for local developers.
You said Alat is the first digital banking product in Africa. What made you to be so sure that something like this has not been existing in countries like South Africa and Kenya?
We started this project two years ago and we travelled round all the locations you mentioned. A platform like this does not exist currently. Let me shock you — in Nigeria today, when you transfer funds from your phone to another person using another bank, it takes just a minute or so for the beneficiary to get the payment. In South Africa, it takes three working days. It’s not that we were told; we visited the country and had interviews with operators. It has never happened before in Africa that you can open a bank account remotely, fund it and start transacting.