30 — Vanguard, MONDAY, APRIL 9, 2018 FINANCIAL VANGUARD No govt will submit its legal tender to cryptocurrencies —Shonubi, NIBSS CEO In a bid to enhance development of financial technologies that will facilitate payment and also increase financial inclusion, the Nigeria Interbank Settlement System and the Central Bank of Nigeria recently collaborated with fintech entrepreneurs to inaugurate the Association of Financial Services Innovators (FSI). The group among other things will, over time, manage the regulatory sandbox developed and introduced by CBN and NIBSS to facilitate testing and deployment of financial techonolgies. In this interview, Managing Director/Chief Executive Officer of NIBSS, Mr. Ade Shonubi, explains the purpose of FSI and operations of the regulatory sandbox. He also speaks on topical issues such as crytocurrencies and slow growth rate of electronic transactions last year. Excerpts: By Babajide Komolafe WHAT is the rationale be hind NIBSS’s support for Financial Services Innovators’ Association that is being launched today? What used to happen before was that few companies, usually the larger ones, used to come to NIBSS and say we have an idea, it involves payment, and how do we connect to the payment system? The Central Bank has regulation as to who can come into the payment system. The question is do you get into the payment system first before you then come up with ideas that can acquire payment or is there any way if I have an idea I can test it and then go to the CBN and say licence me so that I can be part of the payment system. That was the challenge. One or two of them were complaining about that ‘when we go to the bigger companies, they actually take our ideas, they don’t recognize it, they convert it to their own and they use.’ That got us thinking. Coincidentally at the same time, CBN had as one of its objectives to drive financial inclusion and use technology companies, Fintechs. So the two of us came together to talk about how to encourage these people to have their own association. We don’t want to create an association for them because it must be self sustaining and they must believe in it. If they don’t believe in it, if they are not the ones driving after a while it would just die and become a pressure group. That is what led to it. To show our commitment to them, we offered to support the association for the first one year and in addition create what is now being called the sandbox where anybody who is in Nigeria. We are also conscious of the fact that if we do not manage the people who go there, we may find people in Ukraine, Russia taking our knowledge, building solutions and then com- ing to sell it to us. We wanted to limit it to any Nigerian. The only way we could do that was BVN. So if you go to their website anybody can download the documentation as to how to build the application but you cannot test it if you are not a Nigerian. So you need to put your BVN. Why we ask of BVN is so that one or two people don’t manipulate or take it over and they are the only one using it to run like 20 different tests and the limited resources can then not go round. Our hope is that all these small guys can test and they can either go to CBN and say I know I have a solution. I can now afford to be licensed or when they are going to the big companies, it is not ‘I need you’, it is, ‘I have something that I can say can work and if you don’t like it I can go to anybody else, I can plug it into the payment system and it will work. So that is what the main drivers are. Anytime we meet even if you go online, you check the NIBSS website, BVN is only 33 million. I say it every time, it does not make sense, even if our population is 180 million, it doesn’t matter, 33 million is too small. It is people like them (fintechs) that would be able to create a small application. It can only work for ten thousand people because their own cost is not high. It is not like the big companies. They are close to the people of the associations and the cooperatives. So they are more likely to make it work and bring these people in, so it is going to be harder for the big companies. We don’t want a repeat of when we adopted GSM and there were only international companies. Remove the dust now, other CEO,NIBSS, Adebisi Shonubi than Glo what is left? Meanwhile, it is Nigerians and a lot of money that have been paid is going out. Almost all of the applications, we are using, the new ideas, are copied from abroad. I don’t mind, but if we are the ones copying and we are not paying licensing fees to them outside I won’t mind as much but we are paying. So let’s grow our guys. Tonnes of them don’t have any Will the banks be threatened by the Fintechs? Yes, I think there is even other business that is easier for the Fintechs to get involved in jobs. That is another problem we have, that we are turning out graduates but we are not giving them employment or employment opportunities nor are we making them employable. Many of them go and take all these courses. Now is the chance for some of them to grow with it. But the primary thing is you must take ownership. We support but you must take ownership. You must run it yourself and everybody must have a common voice. So that is what we saw. In the nearest future you should know, with sandbox and this platform we should be expecting an outburst of financial technological innovation that can help financial inclusion. Yes if they get it right, I expect. Our own role is to provide them that support. The CBN doesn’t want to say but they have been very active in listening and promoting many of the ideas they have even the unlicensed ones, and I know for a fact that they are looking at it internally. They are not a pressure group, they are not going out to say. ‘Oh this is what we should be doing’. They are only suggesting that look this is what we are seeing as users, please consider it. So that is on that side On being able to innovate, the sandbox will give everybody a chance to do that. I am very hopeful that we will now see a lot of people converting ideas into good products or quickly killing bad ideas. Once the ideas donot work, you just move on, don’t spend time and efforts, limited resources, trying to take it forward when it doesn’t work. For fintech start ups that want to join the platform, what do they need to do? It is individuals, the people that join. Just go online and register. That is it So it is not for corporate organizations? If you are a corporate, you need to sign up with them as a partner and why we wanted that is that, we want to make it easy for people to join but we also want the association to sustain it. So rather than charging membership from individuals some of whom may be students why don’t you have a corporate who realizes that an opportunity is created for them to meet a pool of talents. Whether it is talents you can hire or talents that have ideas you can work with. So pay something to keep the association going and then you can become a partner. This sandbox who will be managing it, CBN or NIBSS? For now we put everything in place. The server is NIBSS, applications is NIBSS. APIs is NIB- SS. Everything in it so far is us (NIBSS). But we hope that we can encourage other companies that have platforms to also put their APIs on. But it has to start from somewhere. We told them that we will hand it over to them. We will continue to run it. Pay for the infrastructure. But it is through their own website that you access it so that others can whether it is international, Visa or Mastercards putting on their APIs, whether it is local, Interswitch or whatever putting on their APIs and it is not only NIBSS, anybody can go in there and try anything. There are lots of people out there who do don’t know about this initiative yest. Some of them are still in the universities. So how will you drive awareness? You know me I am an old man. So all these social media things I don’t understand. Once they have sorted it out, if they have a plan to go to the social media, whatsapp or Facebook, and the young men in Flutterwaves, they are one of the biggest payments companies that people don’t know. We have Querush there, Mush. We have Obadare, all of them are successful in their own right. And that is why I was happy that, it wasn’t us anymore, my company. But it now we. What can we do? In some ways they are protecting their own future as well because they will not always ever have the best of ideas but if they associate with this people they will learn. They are already involve in social media and we are hoping they will use it to thrive some of the awareness as well. Who monitors what goes on in the sandbox? What we have is, on the sandbox when you sign in, for a limited period of time you can test. After that time we will delete you. But you can try anything. Whether it works or it fails it doesn’t matter. It is a practice area. You can do rubbish we don’t mind. Even if you bring the whole system down, we will re-format; put it up because it is a text environment. So it won’t matter so much. We will be monitoring the people that are on. That is what we would be trying to do. Do you see the FinTechs taking over the business of the banks? I don’t see the Fintechs taking over the business of the banks. What I see is a collaboration whereby the customer get the best based on what the banks can provide efficiently and what the Fintechs can provide efficiently. The Fintechs are not good at managing liquidity and money and getting the best value out of money but they are able to automate processes and to bring in whether it is artificial intelligence or logic to a system. I don’t see them replacing banks. I don’t. I see them encouraging banks to up their games. In those days, banks use to hire consultants like Author Anderson to review their processes and then find somebody to build the reviewed process. What we are finding with fintechs is that, outside they have built the improved pro- Continues on page 32
FINANCIAL VANGUARD When will the age of aviation begin in Nigeria? Vanguard, MONDAY, APRIL 9, 2018 — 31 Against stupidity, the gods themselves struggle in vain —Fredrick Von Schiller, 1759-1805. German philosopher. THE Dark Ages ended in Europe over three hundred years ago. Nigerian Historians of the future might eventually come to regard our era as a continuation of the Dark Age in the, well, Dark continent. Professor Wole Soyinka declared our generation as the Lost Generation. He would have to find another word from his Thesaurus to describe the generations coming after. People become repetitive in old age and I will soon turn 74. But, nothing summarises the decline of everything in Nigeria, including Senior Advocate/Professors peddling rumours, instead of stating facts better than what Horace, 65-8 BC, observed over two thousand years ago. “What does corrupting time not diminish? Our grandparents brought forth feebler heirs [meaning our parents], we are further degenerate, and soon will beget progeny [our kids] more wicked.” Look around you today. In schools, primary and secondary where the most dangerous weapon you could find in 1960 was a pen knife, you now must have guns and cutlasses to survive. Yet, despite the pervasive FINANCIAL VANGUARD Technology would eradicate categorisation of MfBS — Hackman MfB By Providence Emmanuel decline noticeable in virtually everything, we occasionally bestir ourselves and make attempts to join a world which is rapidly leaving us behind in our self-induced darkness. From time to time, governments and our parasitic private sector pretend to want to join the global race for economic advantage and dominance. But as James Macpherson, 1736-1796, grandfather of a former Governor General of Nigeria, Sir John Macpherson, once said of his lazy countrymen, “They came forth to war, but they always fell.” Our tycoons always bite the dust. There has never been a great business tycoon in Nigeria whose business empire lasted more than a few years after his death. There are no Fords, Mercedes Benzes, no Toyota, no Phillips, no Nestles or Guinness. It is likely that all of our current champions (no names please) are building their business empires like children constructing sand castles on the sea shore – waiting to be wiped away in record time. The only other business sectors which had witnessed more casualties in this respect than aviation are private banking and the print media. Since private IT Executive, Hackman Microfinance Bank Limited, Mr. Emeka Victor, in this interview said that technology would further enhance the activities of Microfinance Banks, MfBs, and eliminate categorisation in the sub sector. Excerpt: WHY are Unit MfBs facing more challenges than State and National MFBs? There are limitations to Unit MfBs, regulatory wise there are limitations. The latest is the new capital structure. With this, I see a lot of Unit MfBs folding up but to save face and remain in business, we would be seeing about two or three of them trying to merge. That would also have its own limitations, because they have to agree on a particular location, each MfB has its different setting. There are some MfBs that are strictly for women owned businesses. The vision of such MfBs cannot tally with others who deal with high networth individuals. The cost of technology is still very high. If you have a proper banking solution, you would be paying the chunk of the current capital on credible banking system, you would have been coughing up to N10 or N15 million for the credible service provider. The limitations are so much and in all that, if there is a way we can leverage on a very good technology which the Central Bank of Nigeria, CBN, is currently trying to provide right now, we can leverage on good technology and support, not really in terms of financial support or bailout from CBN but adequate support would aid business models and it would be good for the sub sector. Would you say that MfB subsector would lose people's confidence due to some of these challenges, especially, recapitalisation? We would lose out but it would build a future for the sub sector, especially the Unit MfBs, which I think that the airlines emerged in the early days of the Structural Adjustment Programme, SAP, during Babangida’s regime, one would need a computer to count the number of private airlines that have come and gone – some so fast the uniforms issued to their staff – from air hostesses to ground crew - are still sparkling when they go belly up. Nigeria’s aviation sector is so weak and vulnerable, more so than those of many African countries, never mind European or Asian – that it was inevitable The first entrants were people with a lot of money or clout with banks that they were the first sector to urge Buhari not to sign the African Continental Free Trade Area accord. This is a comical case of the giant running from battle against midgets. But, nobody can blame them exclusively for their collective cowardice. In no business sector does Nigeria enjoy any demonstrable competitive advantage – not in education, CBN should look at. There are places where you see the Unit MfBs, especially in the rural areas you don’t see a commercial bank in those areas. The banks are not ready to commit staff in places like that especially outside Lagos. Even There are some MfBs who play on the same field with the commercial banks because they are doing agency banking and doing some sort of partnerships in the states capital there are no much commercial banks, you would see MfBs and what we call community banks in the technology, power generation, infrastructure, ease of doing business, government economic policies, preferred investment destination and transparency. Aviation sector merely mirrors the rot in other sectors which need government’s protection (import prohibition, subsidized production, duty waivers etc) in order to survive. Two factors make the aviation sector more vulnerable than others – attitude (including poor business models) and wrong players. Let us start with the players. Almost right from the start of private airlines, the Nigerian aviation sector can be described as one in which most of the owners are “money-missroad” individuals. The first entrants were people with a lot of money or clout with banks. They saw a virgin territory into which they could step as pioneers. Some of them even took advantage of the incentives offered under the Pioneer Status Schemes offered by the Federal Government designed to encourage Nigerians to participate fully in the sector. While their contributions are appreciated, there was no real commitment; no passion for flying in a civilized world. An example will illustrate that statement. I was once on a flight from Lagos to Maiduguri with the intention to continue to Yola by road and return with the same airline from Yola. The outbound flight was flawless, as far as Nigerian operations go. It was on the return journey that the proprietor of the airline demonstrated all the faults that later turned the dream to a nightmare for him, for staff, for passengers and for bankers. After several announcements of delay for “one hour” and “regrets for any inconvenience to passengers”, the reason for the delay soon became clear. The owner of the airline and his wives were traveling to Lagos on short notice and he would not travel with his wives and passengers in the same plane. Over two hundred checked in passengers were asked to come and collect refunds and find their way. It was the second and last flight from Yola that day. I had an appointment in Lagos next day. I gathered three men and together drove all afternoon and all night to Lagos. That might be extreme, but, elements of his behaviour was common then. Customer satisfaction counted for nothing. Five months after, the airline was grounded. MICRO-FINANCE past, which are now the Unit MfBs. However, there is a good ground for partnership. Even between Unit MfBs, there are some MfBs who play on the same field with the commercial banks because they are doing agency banking and doing some sort of partnerships. Partnerships can occur irrespective of merger, though there would be due diligence and undergoing regulatory procedures with the CBN and other bodies but the partnerships can really work out. An instance is that, if you may have a very viable Unit MfB who have a service and may want to reach out to a particular community, instead of going to set up an agent, I could find a neighbouring offer in that area with other institution it could be a finance house or a microfinance bank that I can render my services to. We can increase our reach, technology is meant to help the system, with technology there shouldn’t be a difference between a Unit, State or National MfB. What are the solutions you suggest? We can leverage on partnerships. There is really a good ground and opportunity in some communities and localities which may be good for businesses to thrive. I may want to disburse loan and expand my horizon. For instance, we are based in Lagos, we may want to expand to Jigawa State, I could partner with a Unit MfB over there after I have done due diligence to ensure that they are credible, on services I offer which they do not and use their staff to get the knowledge of the area. It would be on agreement but it goes beyond competition in the Unit MfB but building a good synergy. So I would be riding on the good will of that Unit MfB and they would be relying on my own services to bring something on board. The interesting thing now is that there are a lot of products that so many service providers have, but they need to run it through a financial institution, FI to gain ground. That is an area MfBs can plug in. Some guys can come and say I want to give micro loans to students based on traffic on their phones. But they cannot thrive without running it through a FI to cover them. There are lots of opportunities and partnerships are key.