Using cardless technology to reach remote communities in Nigeria should be a key priority for Nigeria’s banks owing to the vast business opportunities in the country, the Chief Executive Officer, Diamond Bank Plc, Uzoma Dozie, says in this interview.
In 2017, banking services were hugely disrupted by technology. What is Diamond Bank’s story in this respect?
Our bank made giant strides in this respect, and the results today are very glaring. Thanks to changing lifestyles and the ubiquity of mobile phones, the number of people across Nigeria using mobile banking is rising exponentially. This is creating the opportunity to turn my vision of a cardless Nigeria into a reality.
Technology will, no doubt, continue to grow, and banking services are expected to follow suit. By 2020 there will be 200 million smartphone connections in Africa. In Nigeria, there are more mobile phone lines than adults, 16 smartphones are sold every minute and 24 per cent of people already have access to mobile broadband.
Mobile technology, mobile payments, and therefore cardless payments are already becoming a way of life for millions of people. Digital banking technology is moving beyond payments, as it is now possible to open a bank account, create savings plans and conduct other transactions using a mobile device.
The bank’s performance last year was very impressive, especially its nine-month results, where profit grew by 71 per cent. How instrumental was technology to realising this feat?
The year was really good for the bank given the prevailing macro-economic situation in the country. Gross income increased although operating expense increased as well and this is understandable from the standpoint of currency of our major investments in technology.
For one, we have been able to earn more fees based on subscription to our mobile banking platforms and the transactions that go on in that community of merchants and customers. This, of course, has moderated what would have been otherwise a massive drop in commission and fees for the bank. Beyond fees, we have reduced staffing costs because most transactions are now done online and as such we have less needs to have people in our existing branches while the rate of opening new ones has dropped steeply.
Through innovation, we have also have a customer acquisition strategy that has seen our number of customers grow to over 15 million which is more than double what it was three years ago. We are currently running a pilot on how to appraise and grant loans to customers who may never really need to walk into a physical Diamond Bank branch and the scalability of this is something we are very excited about in Diamond Bank.
What has been the experience of the bank technology-wise?
Traditionally, the progression is as follows: cash-using customers become cashless as they switch to using cards, and then become cardless as they switch to using their mobile for all financial transactions. However, technological developments – in particular the growing use of mobile – have presented Nigeria with a unique opportunity to leapfrog straight from cash to cardless.
There are however great challenges to overcome. In Nigeria, 80 per cent of payments are still made in cash. Diamond Bank is at the forefront of modernising payments with 89 per cent of our transactions now cashless – up from 67 per cent in July 2016. Steps are being taken in the right direction, and technological innovation can really propel this transformation forward.
Going cardless is well suited to the realities of Nigeria’s economy and geography, with over 50 per cent of the population living in rural communities, according to the World Bank, where infrastructure is often minimal. Customers are more likely to have access to a mobile phone than proximity to a physical branch, meaning electronic payments are better suited to the population.
The jump to a cardless society will have life-changing ramifications for rural Nigerians. For example, in Diamond Bank’s partnership with MTN, over nine million customers have opened a bank account on their mobile phone simply by dialling a shortcode. Opening an account no longer requires a branch – it only needs a phone signal, which covers 99 per cent of Nigeria.
Cardless banking will also enable these communities to become more economically active. With access to finance at their fingertips, mobile banking will allow individuals and the SMEs to unlock their full financial potential. It will promote financial inclusion of a population that is typically under-banked or completely unbanked. It will also act as a springboard for them undertaking further financial transactions, boosting financial literacy.
In the last quarter of 2017, Diamond Bank announced the sale of its West African banking operations to focus on Nigeria. Going forward, what would this mean to the bank?
We want to focus on Nigeria’s significant retail banking opportunity. So, we agreed to sell our operations in Benin, Togo, Cote d’Ivoire and Senegal to Manzi Finances S.A., a Cote d’Ivoire-based financial services holding company.
We want to capitalise on the positive macro fundamentals inherent in the Nigerian market. These include Africa’s largest economy and evolving socio-economic trends driven by changing lifestyle preferences in favour of mobile-delivered services, and a culture of innovation and entrepreneurship.
This is coming after 18 years of building the Diamond Bank franchise in other markets in West Africa. This is the time to fully apply our resources to Nigeria. We are prioritising the Nigerian market because of its vast potential. A large segment of the population is underbanked or unbanked and the use of technology and mobile banking is rising exponentially. This provides Diamond Bank // the opportunity to reach millions of people, and facilitate financial inclusion on an exceptional scale.
Don’t forget that we have a strong foundation for growth in Nigeria with over 15 million customers. We also have a framework in Nigeria that will allow us to scale rapidly, efficiently and cost effectively.
Retail is the future for Nigeria and we are allocating our resources to that. Prior to now, as a Nigerian bank but operating in West Africa, the idea was to follow our customers wherever they were and provide services to them beyond what corresponding banks were doing. In the case of West Africa, our licence allows us to operate in different countries and so we saw that the sub-region as one country because it is about 49 million people. We were also investing in the sub-region with the hoping that with the West African Monetary Union being in operation, we have to take advantage of it.
But that has not come through and Nigeria is still under-banked; about 60 million people are not banked in Nigeria. So this 60 million are more than the whole region in which we were operating. We were deploying capital in those areas and the returns were not as much as those we got from Nigeria. Currently, owing to capital constraint, we have decided on where we intend to get the greatest value and certainly, that is Nigeria. It has to be Nigeria. Nigeria is a place where we have largest cities in Africa with the largest population.
This will help us to focus. This means we have more resources for doing businesses here, and our best hands in these markets would be brought to Nigeria to add value to our operations and drive our retail strategy in Nigeria.
What is the way to go in 2018 for Nigerian banks?
Using cardlesss technology to reach remote communities should be a key priority for Nigeria’s banks. Doing so is a win-win situation; not only does it ensure more people are banked, it ensures more people are part of the formal economy. This will create jobs and revenue – necessary for the development of healthcare, education and some other key national infrastructure.
Going cardless will also give people access to financial products on-the-go. This improves the customer experience, as in a cardless economy people can make a range of payments anywhere and on a 24/7 basis, spending less time at ATMs and branches and more time generating commerce or with families.
We see the future of financial services as increasingly digitalised. Touch fingerprint recognition, as used on the Diamond Mobile app, and developments with retina technology have the potential to make banking easier for customers. Fraud could even be pre-empted, as the technology and service becomes more personalised to the individual or business. We are even exploring the potential role of virtual reality in our branches.
Nigeria is becoming more mobile and digital. It is now up to the financial services sector to respond to this technological revolution and challenge the norms to make way for a truly cardless future. Banks, supported by the Fintech industry, have the capacity to drive this enormous change. – Punch/The Citizen
– Jan. 2, 2018 @ 11:30 GMT /