Banking is gradually moving away from the banking halls, with banks and customers doing everything to ensure that face-to-face transactions are reduced to the barest minimum to cut cost and ensure efficiency. That explains the huge investment most banks are making in the digital banking space and technology. Wema Bank’s Deputy Managing Director Ademola Adebise says the bank is playing big in the digital space because it realizes that it’s where the future of banking lies. He speaks with on the Alat, a fully digital platform and how it is promoting financial inclusion, especially among the youth.
Digital banking is becoming more attractive to banks and their customers. It is catching the attention of everyone thinking of speed, efficiency and cost saving in banking. At Wema Bank, the launch of Alat, the first fully-digital bank in the country, where account opening, card issuance, documentation, and transactions take place without any physical contact between the customer and the bank, was a turning point in its digital banking journey.
The Mr. Adebise explained during an interview in Lagos that Alat is defining the pace in digital banking with over 100,000 customers and over N1.1 billion in deposits in just the first six months since its launch in May 2017. He said the lender early in 2016 reviewed its marketing strategy to grow its market share and reduce cost of deposit, adding that after the exercise, it was what it needed to appeal to the youth, young professionals, and the Small and Medium Enterprises (SMEs).
“Based on the focused sessions that we had, there is this group of people that do not want to visit the bank’s branches. They want to be reached through digital platforms. And in Nigeria, over 100 million people have mobile phones. We thought it was very important for us to carry out that number of research. Of course, we came up with the Alat platform, developed here in Nigeria by Nigerians.The whole idea of Alat is to have end-to-end transactions without visiting a bank’s branch,” he said.
Continuing, he said:“Today, we have over 100,000 customers on Alat. One beauty of it is that it relies on having a Bank Verification Number (BVN). These 100,000 accounts we are talking about our unique customers. So, basically, we are making a lot of progress. We just launched the Version 2, which is an improvement on the first version. It tries to appeal to the lifestyles of customers.
“Someone wakes up in the morning, goes to the office, and then to the canteen, and to the supermarket to buy provisions. We have developed the Alat to be part of people’s lifestyles. It comes on the improvement on the goals. A lot of people want to save but lack the commitment to save their money. The Alat helps you to save your money. The version 2 gives you a lot of flexibility on the savings that you are making.”
According to Adebise, the banking platform also helps the customer to easily know what he or she is spending on feeding, tuition and allows the customer to create a dollar virtual account needed to make purchases on e-commerce sites abroad.
“Basically, Alat is changing the banking landscape. It is the first fully digital bank. Digital, in the sense that, you are not touching any form of paper. You are not filling any form to open an account. All you just need to do is to get onto your phone with basic information like your phone number, BVN, and other information. You have to download your utility bill, download your photograph, and your means of identity and send it to the bank. The bank has an operations unit at its back-office, where they do the necessary Know-Your-Customer that needs to be done,” he disclosed.
He continued:“You can also request a card, the first one on Alat is free. A number of them, you do not need to go to the branch to activate your branch even as your card will be delivered to your residence or place of work.”
Explaining further, he said a customer downloads the app through the Apple store or Google play store. “Once you download, you initiate account creation. It will ask for your BVN, phone number used in registering the BVN. Then it will immediately confirm you and creates an account for you. The account allows you to do a minimum amount of transaction and makes you step up to a higher transaction volume when you complete your Know-Your-Customer (KYC) form. It goes to the first KYC tier, which allows you to do about N20,000 a day. And if you want to do more than that, it requests you to download your means of ID, or photograph. Once you download that, the bank will initiate a KYC and a KYC agent will go and confirm the address of the customer,” he said.
Funding the Alat Account
Adebise said the opened account can be funded through another bank or even from abroad. “However, we understand that whether we like it or not, we are still largely a cash environment. You can still walk into our branches to pay if you have to. From the Alat account, you can then carry out the transactions seamlessly,” he said.
Continuing, he said the bank is investing heavily in technology. “The whole objective for investing in all these platforms is to create convenience for our customers and reduce the cost of service to them.You can imagine the cost of setting up a new branch, cost of employing staff and putting everything together. It is quite expensive. But on the mobile platforms, your initial investment may be high, but over time, your cost to serve a customer will drop,” he said.
He added:“You can imagine if I have a million customer on Alat. You know that as I increase the number of customers, the cost to serve the customers goes down. The same cost I will use to serve one million people is what I will use to serve 100,000 people. So, really, that is the beauty of it. Initially, there will be some cost we are going to incur, but over time, it will begin to make a lot of sense. The major thing is that if you do not make that initial investment, where will you be? You will be out of the market because your competitors are also spending as much on technology. For us, it is spending wisely to ensure that we are able to reap the benefits in the future.”
Staying ahead of competition
Adebise said: “To stay at the leading edge of technology, for us, is to take a deliberate strategy. Alat is a journey. It is not the end of the story. We released version 2, which is an improvement on version 1. Version 2 largely deals with lifestyles, convenience, improving on what competition is doing. We are moving from acquisition to intention strategy in which case, yes, I have a customer on my platform, how do I continue to keep such customer so that he does not drift into a competition?”
The Wema Bank DMD said the bank is taking security very seriously. “The BVN project has been largely successful. It means that for you to properly serve your customer, you also need to identify the customer.The BVN has a lot of opportunities. It allows you in your lending process to ensure that you are lending to the right person. It allows you to know that you are dealing with the right person and to keep track of those trying to defraud the banks. If you remember, there was no database for credit bureaux previously. But today, we have credit bureaux. If I lend money to a customer, the first thing is that the customer approaches me I will find out if he has a loan in any other banks. If you try to create another BVN, the system will deny the request because it is biometric,” he said.
Competition with FinTech
The DMD also said the bank is collaborating not competing with Financial Technology (FinTech) firms. “I think we should see it as how do we build an eco-system. Yes, I have my customers. The FinTech has their products. They will need to access my customers and we need to collaborate. It is not an issue of whether they are taking over or not. And mind you, the business of banking is regulated.The Central Bank of Nigeria (CBN) is charged with the responsibility of regulation. But we cannot rule out the threat presented by FinTech and any forward-thinking organization or bank must identify the areas of collaboration to build the ecosystem. You cannot be competent on everything.”
Return on investment
He said banks are in business to create shareholders’ value. “Intermediation is basically the business of banking,” he said, adding: “What that means is that you are taking from the area of surplus and giving it to the area of deficit. And in the process of doing that, you have to be able to ensure that you cover your cost. If I have collected funds from ‘Mr A’ and given it to ‘Mr B’ I cannot give it to ‘Mr B’ lower than what ‘Mr A’ collected. So, I think you should look at it from a holistic view. We look at banks as being responsible for the high cost of funds, but it is an interplay of so many factors, that you need to put at play. If the interest rate is low, of course, lending will also be relatively low. But if the interest rate is very high, definitely, lending will also be very high.”
Lending to Alat customers
The bank chief said the bank will soon begin loan extension to Alat customers. “Today, we do only deposits. That is why I said Alat is a journey. There are many things in the pipeline. Very soon, we will go into lending. Imagine lending to you without you having to come into the banking hall? That is what is going to happen in a couple of months,” he said.
“One key aspect of achieving that is being able to support SMEs. And SMEs must also be able to access loans at a very reasonable rate. If at this point in time, the government is borrowing from the system, that means that the private sector has been crowded out. Imagine if you want to invest in Treasury Bills at 16 to 17, 18 percent, how do you expect to borrow from a bank at the same rate? And given that banks are not paying Treasury Bills rates as interest on deposits, you may pull out your funds from the banks and invest in Treasury Bills.
“So, I think the government is doing quite a lot to bring down the interest rate, at the same time there is also the aspect that has to do with managing exchange rate. Yes, the interest rate must come down, but we are beginning to see that forex stability in the system, we can see lower interest rate.”
Wema Bank, which now operates a national banking license, according to Adebise, is planning to make new expansions in different regions of the country. “We were a national bank, we moved on to be a regional bank because we did not have the capital base. But immediately we recapitalized, we had two schemes of capital raising, which made us return as a national bank. We got our national banking license in 2015. Between 2015 and now, we have been rolling out in other areas.
“With regional banking, you can only operate at two geopolitical locations, we operated in the southwest and south-south, and Abuja. But immediately we got the national banking license, we are planning to open Aba and Bauchi branches. Kano is also opening in November,” he said.
The bank’s inroad into digital banking, he said, will help it to reach customers in areas not yet covered with physical branches. “What we decided is that we need to be in some locations, but we will not be bullish in rolling out physical branches. And we just decided that to do just a few branches. We have identified Aba, Onitsha, and Enugu. Bauchi, Kano, Lokoja, Niger, and Kogi for the north. And we will continue to drive our operations through digital platforms. Physical presence is important, but relatively today, it is not as important as the digital space,” he stated.