Dr Segun Aina, former President, Chartered Institute of Bankers of Nigeria (CIBN), currently serves as President, FinTech NGR, and Chairman, FinTech Associates Ltd. In this interview by TOLA ADENUBI, he speaks about the evolution of financial technology in Nigeria as well as its capacity to revolutionise the nation’s economy. Excerpts.
THE Fintech Association of Nigeria was the answer to the collaboration call at the 1st edition of the Conference. How has FinTEch NGR thrived since inception about a year ago?
We had the first FinTech conference in April 2017, and one of the fallouts of that conference is the need to put together Nigerian FinTech Technology Ecosystem, which does not only include startups, but also involves users of such services like the banks, insurance companies and many others. So we then kept it upon ourselves to create the FinTech Association of Nigeria which today has over 60 corporate members spread across several sectors. We have University of Ibadan, University of Nigeria, Nsukka and many others as members. We also have 14 banks as members; include First Bank, Access Bank, Ecobank, Stanbic IBTC and a whole lot of them. We also have big law firms, about eight of them as members. We have technology players and investors in our rank. We even have the media as members. We also partner consulting firms like PriceWaterhouseCoopers (PWC), Deloitte and many others. So through this membership, we have access to resources that have allowed us to see how we can improve the system. Our three cardinal points are; Connect, Advocate and Accelerate. Connect means bringing people together. By this, we are always holding events where we discuss various issues, and hear from each other. Our second cardinal principle which is Advocate is one area we have done very well since inception. In terms of advocacy, we have interfaced with a lot of government agencies and associations like the Central Bank of Nigeria (CBN), National Insurance Commission (NAICOM), Security and Exchange Commission (SEC), Nigerian Communication Commission (NCC) and all of these agencies of government are very happy that we are having our next conference this month. They all believe it’s a conference that will help the system. We have also related with the National Assembly, the Senate President, Senate Committees, House of Reps Committees, and they are all very eager to work with us to push the frontiers of knowledge and advance the cause of innovation in this country.
So, by and large, the FinTech Association of Nigeria in the 18 months of its existence has done very well, and we want to do better, that is why two weeks ago, we had our strategy session which was aimed at designing a roadmap for the next three years. That session was facilitated by PriceWaterhouseCooper (PWC), one of the leading consulting firms in the world, and we hope that in the next few days, we will start to work on that roadmap and see how we hope to achieve all our set out goals.
This very conference is tagged Africa FinTech Festival. Why the shift from the conventional National FinTech Conference series?
When we had the first conference, one of the outcomes was the need to bring together FinTech leaders and players to form FinTech Association of Nigeria. Again, one of the things we set out to do is to look at how we can loop African FinTech leaders together, because we discovered that a lot of our FinTech start-ups of different companies are now trying to move into other African countries. A lot of banks are doing that, moving into other African countries. We therefore saw the need to have an African FinTech Network where we will all be working together, exchanging ideas. Africa has a lot of common issues, challenges and opportunities, so instead of us working separately, we thought of how we can work together to harness those resources and strength. How can a company based in Nigeria work out initiatives that will solve issues not just in Nigeria, but on the African continent? We now thought that there must be an annual gathering that will bring all of us together, that is what led to the African FinTech Festival. This does not stop us from having our National FinTech Festival. The first African FinTech Festival is holding in Nigeria, where we will be launching the African FinTech Network which will be a network of African countries. Subsequently, African FinTech Festival will be taken from one country to another country on the African continent. This is so because we just don’t want to be promoting businesses among ourselves but we want to be supporting initiatives of organizations like the African Union (AU) and its agenda 2063.
FinTech startups are now redefining retail banking. How are the initiatives that you are championing affecting this; and what is the next big thing for FinTechs in Nigeria?
Nigeria is a large country with a huge population, but about 40 percent of that population does not have access to basic financial services. Most of the rural areas do not have bank branches, and those that have maybe have closed them down. Some of them have micro finance banks, but such banks are too small to serve the financial needs of these rural areas. You don’t expect commercial banks to be in every nook and cranny of the country due to the huge cost involved in setting up branches everywhere. That is where the opportunity lies for start-ups and small FinTech companies to come up with solutions that are digital in order to reach many people. Today, with the advent of the mobile phones and the internet, digitalization has become easy for many people. For instance, there are now digital lenders who have been lending money to hundreds of people without seeing them face-to-face. The digital lenders have details of the people they are lending money, but they mostly don’t have face-to-face contact. That is the power of technology, helping to deliver services to a larger number of people which would not have been possible physically. Technology shortens such environment. However, what we have always been advocating is that deposit money banks, that is the conventional banks, should not see these small companies as competitors but as collaborators. They need to collaborate together. These small companies have the idea, they are digitally savvy, but don’t have the financial scale that conventional banks enjoy. Banks have the capital, they have the resources and the customers, so when there is partnership, it becomes a win-win situation. So a lot of banks are now looking at partnering start-ups, partnering with FinTech. Many banks are now involved in incubating ideas from these start-ups. When everybody has access to financial services in the country, it improves the economic standing of the country
FinTechs are bringing innovation in the micro loans space. How much of this is the technology? And how much is doing the hard work, knowing your customers, knocking on doors like?
Well, with digital micro-lending, you don’t need to knock on anybody’s door physically. Your marketing is done digitally via social media. The good thing about digital lending, which used to be a challenge is that, with Bank Verification Number (BVN) and National Identity Number, you are able to have the standard and basic data that you need to know about your customers, like the age, who your customer is, where your customer lives etc. So, when you want to open an account, you don’t need to visit a bank to do that. You can open an account on your phone by putting in all your documents like your passports, Drivers License etc. All the bank needs to do is to verify through the Central Data Collection Agency’s because there is an understanding already. This has helped very well for digital lending and we hope that it will also help to accelerate the pace of financial inclusion
The Financial Conduct Authority (FCA) UK, Monetary Authority of Singapore (MAS) and others recently created Global Financial Innovation Network, a global sandbox for regulation. How are the Nigerian regulators playing in this global innovation move?
The regulators are now very conscious of the need to see themselves as partners to the operators and start-ups who are very disruptive. In the early days of the upsurge in these disruptive activities, regulators were not keen to hear of such activities, but nowadays, regulators, including Nigeria, have now seen the need to promote innovations because they know it will help in promoting the system. That is why today, anytime these products are launched, the focus is on how they won’t cause problem for the community that the regulators should be protecting. To avoid this kind of problems, that is why ‘Regulatory Soundboxes’ was created. Regulatory sound boxes is a term used to define a test environment. That is if somebody says he has a product, they will tell him that before a license is given to such product, come and demonstrate for us. Once such product is tested, it is then allowed to be used by the general public. This has helped a lot in smoothening things. It is also now being done at the global level. This year, about 12 regulators all over the world led by the Financial Conduct Authority (FCA) started the Global Financial Innovation Network. In technology, you can sit down here and make transactions that will have impact all over the world. So because technology has no boundary, there is need for collaboration among regulators.
Where is financing for FinTechs growth largely coming from today? Funding for FinTech start-ups in Nigeria are few and far between unlike their peers in Asia, Europe and U.S.A. What is responsible for this? How can Nigerian FinTech start-ups attract big-ticket funding?
Well, I will not want to agree with you that funding has been scarce for FinTech start-ups based on my advantaged position. I am aware of a lot of investors who have the funding but are looking for what to invest in. What is in short supply is good idea that will be commercially successful. The funds are there, however, the sad thing is that most of the funds are coming from outside Nigeria, which are foreign investors. The reason why funding is coming from outside Nigeria is basically because investing in start-ups is risky in this part of the world. Traditionally, most start-ups fail. Again, it takes a long time for returns on investment to start coming in for start-ups. So, we believe that as times goes on, we will see a lot of rich Nigerians devote funds for FinTech start-ups
FinTech regulation in Nigeria is probably at its infancy but some players in this space are of the view that the sector is being over regulated already with the Central Bank of Nigeria’s N5billion capitalisation requirement for FinTech companies, which are often start-ups. What is your view on this?
World over, it is always very difficult for regulators to catch up with innovation. When new idea comes up, the regulator, in the quest to understand the idea and ensure it meets standards, slow down the innovation. To some people, regulators slow down the pace of innovation in some sectors like banking, medicine etc due to the need to protect stakeholders in such sectors. For the financial sector, it is not true that FinTech start-ups are being over regulated by the CBN to the tune of N5bn. The truth is that CBN can come up with a regulation to license what we call ‘Payment System Banks’. Payment System Banks are banks that can be promoted by FinTech start-ups, by supermarket chains, by subsidiaries of telecommunication companies or any group. The idea is to offer more financial services to people in the rural area in order to ensure more financial inclusion. The capital for such licenses is graduated. The highest level of licensing is N5bn. There are other lower levels of licensing. There has been a lot of complaint concerning the capitalization policy of the CBN concerning FinTech start-ups, but the CBN is willing to look into such complaints because it is interested in the development of the sector in order to make more people have access to financial inclusion.
The UK/DFID wants to form a group with the Africa FinTech Investment Group. What are the aims and objectives of this?
The UK Prime Minister, Theresa May, was in Africa about two or three months ago. She visited South Africa, Kenya and Nigeria. She initiated a move to set up a UK-Africa Fin-tech Investment Group. The group is to coordinate UK investment into African FinTechs. I am honored to be a member of that UK-Africa investment group. When we informed the UK/DFID that we are organizing the African FinTech Festival, they saw the need to hold the inaugural meeting of the UK-Africa FinTech Investment Group on the 3rd of December during our African FinTech Festival. We hope to set the ball rolling on how the UK can be more supportive of the African FinTech initiatives. Apart from the relationship that the African FinTech Network is building with the UK, we also have collaboration with other continental groups and regional groups. We have a partnership with the Asia FinTech Network. We also have a partnership with the Middle East North Africa (MENA) FinTech Association. The partnership with leading FinTech networks positions us to bring their experience to bear on the African FinTech Network. By doing this, we are developing set skills so that Africa can develop technology that can be exported to the world.
How would the Festival consolidate the gains of FinTech growth in Nigeria and what’s your projection for FinTechs in Nigeria/Africa?
FinTechs in Nigeria and Africa generally have consistently been growing. FinTechs have been contributing to the GDP of their various countries in Africa. My view is that in 10 years’ time, FinTechs contribution to the GDP via technology would have grown significantly to a level that will also benefit the economy. If you look at the successes that we have had concerning some FinTech start-ups that started from nothing about three years ago and have grown significantly over the years into multi-billion Naira worth companies, not only in Nigeria but in other parts of the world, it is very much encouraging for young minds to come up and delve into the world of financial technology. So the future is very bright, and that is why we want to ensure that we are part of that future and help young minds to grow that future.
Is FinTech looking at integrating the unlettered populace in Nigeria, and to some extent on the African continent?
In technology, anything is possible. FinTech thrives on the ability to look at and address the need of the people. Illiterate people use phones, you begin to ask yourself, how are they using the phone? Obviously, something must have been done to make the illiterate people use the phones. I don’t know how the solution will be, but somebody will definitely come up with a solution because need drives innovation in technology. In the nearest future, if somebody comes up with a solution that solves that need, there will be investors who will pay for it. The challenge here is language, and in FinTech, no challenge is insurmountable. Definitely, the need to integrate the unlettered populace will bring out creativity and innovations in the nearest future. Obviously, internet won’t stop at the way it is. More and more innovations will come up that will address the challenge of illiteracy.