What if Financial Inclusion is a myth that we have created in our jaded view of what we feel is good for the world’s poor but, does not address their needs or that they do not even need? What if the real problem is that the worlds poor don’t trust these help and they see it as a means of control by the government who want information about everyone for taxation and further subjugation?
Financial Inclusion used to be a hot buzz word, and even years after, it’s still hot enough to warm a pot of coffee. Unfortunately, I haven’t been able to understand it from a viable business model.
Nevertheless, from an altruistic angle, it makes sense to me. It is not out of place for the haves to pay for the transactions of the have-nots so they could bring them to modern living. The World Bank says “Financial Inclusion is a key enabler to reducing poverty and boosting prosperity.”
CGAP believes that Financial Inclusion is about migrating the 2 Billion working-age adults that don’t have accounts with licensed financial institutions to the formal economy where, regardless of income levels, they can have access to savings accounts, insurance, and other financial services needed to transform their lives.
But recently even that understanding of mine has been shaken so profoundly I’m asking myself if Financial Inclusion isn’t a scam.
Before you lob a hand grenade at me, hear me out.
I recently had a conversation that underscored this new position of the possibility that Financial Inclusion could be a scam. Someone asked a poignant question in a group chat – do the financially excluded really want to be financially included? If yes, do they want to be financially included in the form that is being shoved down their throats? That question has been nagging me ever since. I took the liberty to ask a few “financially excluded” people around me and their responses were shocking. They didn’t care for digital payments, wallets, bank, Bitcoin, etc. All they want is real hard cash which they can spend and treasure.
Beyond receiving money from the cities, many of their friends in the villages don’t care about money transfers and other fancy digital thingamajigs.
It is possible I’m totally wrong in all these. It is also possible that this could be a beautiful scam that sounds pretty good to our helpful alter egos.
Financial Inclusion has many challenges – education, infrastructure, cost of transactions, KYC. But something that struck me is that when the need hits the sweet spot, some of these things do catch on. For example, despite some bit of literacy requirement, elitism and cost associated with mobile phones, the usage caught on to almost everyone that only those in the deepest rock caves in Nigeria don’t have them. The numbers on NCC website speak for themselves.
As much as the internet is a luxury in Nigeria, almost everyone is on Whatsapp (it cost money to have data), and there are more Facebook active monthly users than active monthly bank accounts.
Do you think Financial Inclusion is a scam?
Category: Payments
Adedeji Olowe’s take about everything payments. You could read about technologies, business models, direct debit, transfers, virtual accounts and other industry stakeholders for payments.
Where are these 37 Million Ghostpreneurs in Nigeria?
The ongoing revolution in payments, automated credits, and self-service onboarding that have fueled massive growth in digital banking over the last 3 years seems to have largely overlooked the Nigerian Micro, Small and Medium Enterprises (MSME) sector. Forget whatever anyone says, the small business owners have been left behind. Who did they offend?
At a recent event, I touted the numbers from SMEDAN that Nigeria had, as of 2013, 37,067,416 MSMEs, someone almost stoned me with her stiletto (with wicked looking pointies that could be deemed a weapon of personal destruction) because the numbers just didn’t look real.
Or are they Ghostpreneurs?
The numbers didn’t add up for me as well. Where are these companies or micro-enterprises? Finding them is hard. I mean, every bank will tell you that 7% or less of its accounts belong to non-individuals. When you look at NIBSS June 2017 figures, corporate accounts are just 6.5M out of the 98M accounts strewn across 20+ Nigerian banks. And the 98M accounts belong to about 26.5M accounts which average about 3+ accounts per individual. And by the way, over 98% of account holders have accounts with more than one bank.
Something doesn’t add up.
Of course, it was easy to see. Many of the MSMEs run their businesses with their personal accounts, so they are probably not Ghostpreneurs. So Sisi Clara Cake and Thingz, Baba Bisi Furniture Works probably run off their personal accounts with Bank A and B. Would you have thought they love it that way? Maybe not.
Until recently, opening a personal account in Nigeria was one of those rites of passage where you must pull a tooth with rusty pliers, by yourself and without anesthetics. Calling it painful and sadistic would be an exercise in understatement. The good thing is that over the last 2 years, the self-service revolution has extended from digital services to account opening.
At first, banks streamlined their account opening packages, so you won’t have to write GMAT essays just to open your Savings Account and then naturally progressed to opening accounts online. Now, practically all forward-looking banks allow you to open accounts online or via USSD. Unfortunately, what you get is a basic Tier 1 account and to upgrade to a proper account you can live with, a trip to the bank branch is still required. Alat by Wema has done a good job though – you get to open a proper account 100% online, and even your debit card is ferried to your shanty free of charge. I hope others see the light!
However, opening a business account is still an exercise in morbid self-flagellation; no bank seems to get it right. They ask you for all types of documentation, like what tribal mark your dead great grandmother had (you never met her!). They require random documents from fledgling entrepreneurs, who can barely put together their business plans. Many of these documents require pilgrimages to dens of government agencies. Ultimately, unless that account is critical, most entrepreneurs use their personal accounts to run their side gigs.
Think about it, have you ever paid your friend that does small chops as side hustle via her company account?
The lack of ease to open a business account has been a lose-lose-lose for every single stakeholder.
Not having a business account, in the company name, means a small business will never be able to scale. I mean, do you think Shell or Mobil will give you a small supply contract with a personal account? Absolutely not. Furthermore, by the time the small business eke out some semblance of progress and a business account is opened, the company is locked out of valuable business loans because the new account would not have the financial history that has been lost to the founder’s account.
The efforts of different banks, especially Diamond and Fidelity Banks (Disclosure: I worked at Fidelity Bank), would continue to be hampered if the ease of business account opening is not addressed.
The government also loses because taxes are lost when revenues for companies are sunk into individual accounts. The government is also not able to have data to track the performance of MSME initiatives, and they are not able to drive grants to sectors in dire need of one (I dey try myself, I know!)
What the MSMEs need today is a bank, beyond the rhetoric and adverts, which can automate the account opening processes. If an individual does not need to worship at a bank branch to open accounts same should also be extended to MSMEs. A startup should be able to start the process, upload all documentation and have an account opened within minutes or hours at most. There are APIs, tools and other offline services available banks to authenticate almost all documentation required for business account opening. Each director or signatory in the account would also be part of the process and can be validated as well.
I honestly believe this would happen as soon as the market for individual digital payments reaches maturity. However, between now and then, the first banks to streamline this process may have a lockdown on MSME business accounts.
Dropbox banking: The backbone for Fintechs and a probable model for banking in the future
The argument about if Fintechs and Banks are frenemies would never end. And it’s justifiably so.
Retail banks have a model of providing checking, savings, investment account services. Of course, they layer that with credit cards, personal loans, mortgages, etc. Fintech showing up on the scene means one thing, banks would be losers. There isn’t any clearer way to say it.
Think about it this way, banks earn money from these services and would want to continue that way. Fintechs showing they could do it better means they also want to gain something as well. So, any of these could happen: banks would lose, and Fintechs could gain; Fintechs and banks would gain from increased service cost and customers would pay more; Fintechs would lose, and banks would be cool.
There is also the friction that comes with who owns the customer experience. Most banks loathe to see new players sandwich between them and the customers and would prefer to control every single data point. On the flip side, when customers start to use apps for Personal Financial Management and their bank accounts, they start seeing the banks as a repository of their funds or provider of loans.
Retail banks don’t even trust Fintechs as their services tend to aggregate and disintermediate. None of the banks want to be a bucket for storage.
But wait, why not?
The traditional model makes losers out of the retail banks for Fintechs to win, maybe the only way would be to have a new type of bank, modeled from grounds up to take away the arguments of retail banks.
So imagine a bank, fully licensed but whose interaction is via APIs that Fintech and others can use to connect to it. Fintechs are the actual customers because the banks help them to hold their customers’ funds and loans in compliance with the regulation.
Dropbox was happy to become the programmatic storage for many apps, and that cemented its position in the world of cloud storage. Of course, Google Drive, Box, Microsoft OneDrive, etc. support the same approach but nothing represents personal commodity storage more than Dropbox.
A bank, fashioned after Dropbox, could have the same model and would face no pressure to compete with Fintechs but be the backbone for them. Such a bank, with no direct customer interface, would be barebones to run with the most minimal of operational overhead.
Could this be a viable model?
If this model works, then it’s possible that the future of banking will be the gradual transformation to the utility company providing services to the Fintechs who will own the customers. Nevertheless, there may not be a total elimination of the traditional model though, or one where all banks become a full-scale utility.
The harsh reality for Fintechs is that banks still own the customers’ trust for now and that counts for a lot.
Being a utility player offers no room for differentiation, and it simply becomes a case of the best bank offering ease and variety of API integration (across the various requirements of the Fintechs – Risk and Regulatory Compliance – i.e. KYC, AML, security of deposits, etc.).
What is likely to happen is more of a gradual acceptance of the Fintechs services as options for customers in areas where the banks may not have the capabilities. For example, Santander is selling SME lending via Kabbage or providing Personal Financial Management via Meniga, the ultimate Fintech bank that will provide an integrated suite of all the customers’ required financial services may just not be on the horizon yet.
But it will be interesting to see how this pans out for the future of banking.
#Note
Contributions from Ladi Asuni
Online Banking without Offline Annoyance
The drumbeat for payments and all things digital has been beating loud and long (and annoying, almost like a banshee!). At face value, this seems to be one thing customers and banks can agree about.
Banks don’t want customers in the branches anymore (because it cost more to serve them in-branch) and customers don’t even want to go to the branches to do transactions. It cost more to get there; the tellers aren’t as pretty as before; you could spend the last years of your life stuck in traffic and lastly; woe betide you if your favorite branch got robbed, a junior thief could use your pot belly for target practice.
Unfortunately, while it seems there is an agreement, almost every bank seems to struggle with getting customers online.
Many issues are to blame.
The processes are designed by sadists who don’t understand what customers want or able to even let the customers know what needs to be done online.
Even when the processes can be decrypted by the CIA and NSA, it mostly involves a trip to the banking hall.
But then, good news is, sadists are getting a change of heart and banks are seeing the light. Hallelujah.
Curiosity killed the cat
In the age where Zenith, Wema, etc. let you open an account with your USSD code, I was wondering if these banks won’t let me have internet banking without seeing their shops. So huddling with a friend, we trolled banks to find out the current processes of getting customers to register for Internet banking (hey, we didn’t touch mobile, don’t beef!) and whoa, we have an intriguing result.
Summary
Out of the 21 banks surveyed, 57% or 12 of them allow you to start and end your registration for online banking. However, most would want you to view just your balances. You must still ferry your backside to a branch to get token.
Of the lot that really understand the perspective of the customer, 50% of them allow you to complete the end-to-end enrollment and start doing transactions without any branch visit. Kudos to their product management team – you guys have balls!
Full Data
| Bank | End-to-end self-enrollment? | Self-enrollment allows transactions? | Authentication method |
| Access Bank | Yes | No | Valid account number to register; an activation code is sent to registered email and mobile number via SMS |
| Diamond Bank | No | Not applicable | Download and fill form and submit at branch |
| Ecobank | Yes | Yes | Valid account number to get OTP via SMS |
| FCMB | Yes | Yes | Use valid account number, use Debit card information to validate |
| Fidelity Bank | Yes | Yes | Use account number to get OTP, fill online form, use debit card information to validate, download a token app and start doing transactions. |
| First Bank | No | Not applicable | Call FirstContact to begin registration or visit a branch |
| Guaranty Trust Bank | No | Not applicable | Download and fill form and then submit at branch for activation |
| Heritage Bank | No | Not applicable | Register online, print and take to branch for activation |
| Jaiz Islamic Bank | No | Not applicable | Download and fill form and then submit at branch for activation |
| Keystone Bank | No | Not applicable | Download and fill form and then submit at branch for activation |
| Providus Bank | Yes | Use valid customer ID, OTP sent via SMS | |
| Skye Bank | No | Not applicable | Register online, print and take to branch for activation |
| Stanbic IBTC | Yes | Yes | Use valid account number and phone number; set up secret questions, OTP is sent via SMS |
| Standard Chartered | Yes | Yes | Use Standard Chartered ATM, Debit or Credit card information to validate to get OTP sent via SMS, alternatively get Temporary ID (Received via Email) Temporary Password (Received by SMS) |
| Sterling Bank | Yes | No | User valid account number and Phone number |
| SunTrust Bank | Yes | User customer number, identification number, e.g., Passport or National ID card, date of birth and branch name | |
| Union Bank | Yes | No | Use valid account number to get OTP via SMS |
| United Bank for Africa | Yes | Yes | Use Valid account number, use Debit card information to validate, use OTP to consummate instant transactions |
| Unity Bank | No | Not applicable | Download and fill form and submit at branch |
| Wema Bank | Yes | No | Use valid account number |
| Zenith Bank | No | Not applicable | Download, complete, and submit request form at any branch or via email |
TGIF but one last thing
I know the stories won’t hit the headlines but banks still get shafted, once in a while, by fraud. However, I’m very sure that the ease of onboarding, the rapidly ramping revenue from transactions and even the demand for modern banking would force everyone to be at parity within the next 2 years. Mark my word, time would come when the last bank to get onboard self-enrollment would be beaten up by the horde of irate customers.
Getting them high: Challenges of onboarding customers to digital services
Digital services, which include cards, online banking, mobile apps for finances, USSD for transferring money you don’t have, etc., are essential services. In fact, financial inclusion has been elevated to the level of fundamental human rights. However, unlike things we derive joy from using – Whatsapp, Tinder, Facebook, to mention a few, digital services are like toothpaste; nobody gets too emotional about them – you just want them to be affordable, available, easy to use and then get them out of the way before you lose your mind. That is if you have a mind to start with.
Challenges facing purveyors
But then, the horror eating at digital bankers, the unloved purveyors of FinTech (Ok, I want to stop using this buzzword, it’s no longer cool) products and other financial thingamajigs, is the low onboarding or usage rate despite a captive market. When I say captive market, I’m talking about banks with large customer bases but whose customers just don’t sign up for electronic services. You would think customers love going to those crowded and nightmarish banking halls. Hell, freaking no! They continue to complain about having to visit branches to get things done. To make matters worse, even the tellers in the branches aren’t smiling or friendly, so what’s the point?
What customers want
I know quite a bit about what customers want with digital services because I’m one of them. As crazy as it sounds, I’m a customer, so I’m speaking for the hordes of ill-served and hapless customers.
The average user isn’t a techie, but yet products and services are designed such that you need to be a professor to figure things out. How to get the products is never clear; the screen flow is more complicated than flying a space shuttle, and the error messages leave you scratching your head. I can imagine how hard that is going to be for bald customers. For example, the password instructions about using special characters, upper, middle and lower cases, etc. can drive even the most patient Moses impersonator to tears. Why can’t I choose a password I’m more comfortable with? After all, if I use a complicated password and my money gets stolen, the bank still won’t be doing a refund.
By the way, using passwords such as Password123, for example, is like painting a big fat red ‘X’ on your back and then taking an evening stroll through a war zone.
Customers want convenience so asking me to visit a branch to request internet and mobile access is just, pardon my language, insane. Until someone explains why Facebook and Whatsapp never set up offices to sign up users, but my bank has to force me to endure the unfriendly Customer Service Officer, I won’t ever understand this. The pseudo-professionals talk of security and risk management, I only see mental laziness. While the risks have not disappeared, banks have launched USSD services, virtually all via self-enrollment, and the world is yet to end. Why the same approach can’t be used for all other electronic services baffles me.
My accounts have simple ten digit numbers, but the various digital banking services require different profiles and credentials. The multiple systems don’t talk to each other or even know my preferences. Does it make sense to have a different username and password for the internet and mobile services? Why can’t I manage my cards within these applications?
And the most annoying thing ever? – Even after I have taken Keke Marwa to visit the branch, endured the overzealous security guard, prayed through 10 chapters of Psalms that the branch doesn’t get hit by robbers on the day I visit, complete a form that stretches over a thousand pages, made to fill all my information over and over again, sign in 10 different places and then, oh, the customer service officer says “you have to come back to get your token as we have to make a request to head office.” Darn it!
Why digital initiatives and products have failed
Of course, customers aren’t idiots, so they rebelled against the products, come to the branches to cause trouble and continue to add to the blood pressure of digital bankers when they have to explain their weak numbers at monthly performance meetings.
My opinions on why things failed are few:
It starts from the top. Senior management and executives don’t understand the retail customers. In their rarefied offices, they practically get everything done for them. If you don’t walk in your customers’ shoes, you can’t get things done for them. In fact, let’s take a bet; if you work in a bank and 50% of your senior management use digital products regularly, I’ll give up my salary for next month.
Many products are developed by techies, who obviously have orgasms making complex products than serving dumb customers like me. The world has moved beyond digital products being hobbyist items; experts in customer experience and human computer interaction need to work on the flows and processes that are simple and a joy to use. Banks and FinTech (oops, I used the word again!) have to start doing product management and not product delivery.
Risk management is essential but isn’t everything. Every business has an element of risk; if you don’t want to get bruised, don’t play games. Many of the processes and product requirements are designed by sadists who think risk avoidance is the same as risk management. Not to be hard on them, if you have ever seen a massive fraud once in your career, you could be worse than them. Trust me, EFCC cells don’t have air conditioners.
Data practice is poor, and customer information is scattered everywhere in database silos. The silo data means the customer’s phone number on the card management system is different from the one on that of internet banking; the address filed on the mobile app request form was never updated into the core banking application; the madness goes on and on.
Making life easy for everyone
It’s not all doom and gloom. The strides made by some banks, especially those leading the USSD trail (GTBank, Fidelity, Access, Zenith, etc.) have shown that when the right mindset is applied, magic can happen. The simple workflow and self-service options for USSD banking have been so successful that it has led to over 200% growth for interbank transactions in 2016 alone.
Banks should develop integrated products or make efforts to integrate what they already have. Let the ATM know that I have the mobile app; let the mobile app be able to change my card PIN (yes!), set limits and allow me to make requests from my phone.
Processes that involve branch visits should be streamlined; Forms should be designed by humans (not sadists) and for humans; requirements should be clear and reasonable. For instance, setting up a company online banking profile, with various mandate instructions remotely, will always be difficult but not impossible. At least, that process shouldn’t be an attempt at mental genocide.
Banks should clean up their data and also implement a single-source of truth. It’s never going to be done in a flash, but the process can start now.
FinTech and banks should understand what risk management is. Instead of making things too loose (FinTech) or too hard (Banks), elements of quantitative and qualitative risk assessments should be applied, and banks should learn to set a portion of income aside for fraud and loss compensations.
Things can change
The frenetic pace of changes over the last few years is an indication of things to come. I honestly believe that many of the issues outlined above can be resolved. After all, we didn’t get here in one weekend. Additionally, the regulatory demands of Cashless would drive the banks, financial service providers and the average Nigerian towards more robust digital services.