World Bank Statistics show that 95 million unbanked individuals in Sub-Saharan Africa receive cash payments for agricultural product sales [1]. The fintech revolution is poised to change the way individuals access and use financial services. While traditional commercial banks have been more concerned with conventional ways of banking, a new crop of Fintechpreneurs are revolutionizing the integrated financial services space. One of such Fintechpreneurs is the MD of Advansio Interactive, Olufisayo Oludare, whose drive to make a difference in financial inclusion in Africa and passion for the continent is palpable.
During our dialogue, Olufisayo explained how Advansio’s tech solutions for account opening, agent-based deposits, cash withdrawals, fund transfers, bills payment and more are tailored for Africa. Olufisayo was part of the Central Bank of Nigeria’s (CBN) committee in November 2021 on Open Banking. His company has developed software technologies such as ‘Covr Branchless’ which currently powers some commercial bank's agency/branchless banking operations in Nigeria. Covr branchless won the Startup Istanbul competition in 2017 where 100 ventures from 65 countries contested [2]. We discuss challenges hindering the disruptive potential of fintech in Africa and how Advansio has been navigating these. Olufisayo believes that lowering the cost of fintech through the increased use of API technology may be the silver bullet to financial inclusion in Africa.
When did Advansio Interactive start? and why?
Advansio started in 2017 to make a difference in financial inclusion in Africa. After people open bank accounts, it's important to develop applications that support access to financial services. If you get a farmer to open a bank account today and you don't give support to use the account, the account remains dormant.
The first step is financially including people and the next step is giving people access to financial services wherever they are. Financial services goes beyond deposits or withdrawals, paying of bills etc. People need loans to support their businesses. That's one way to support the economy. In the last five years our agency banking model has been a big success in Nigeria.
There are different financial transactions and payment types. Does your business only focus on business to customer payments?
Advansio runs a Business to Business to Customer (B to B to C) model. We provide businesses with the technology to service their customers. Agency banking is one way of doing this. Most people think fintech equals payments. But for Africa, it is beyond this. There are several payment companies, but where is the banking part of that? We often hear adverts of the easiest way to make payments, pay your bills etc. But there aren’t many on how to support your business, how to get a mortgage and access loans.
In Nigeria, some fintechs offer loans with 40% interest. I asked a client whom we built a credit platform for, why give loans with interest rates as high as 40%? He said business risk is high. Companies like this spend a lot to incorporate technology. To build a solid credit management system, companies on average would pay a minimum of $60,000 to start. This is a huge cost outlay and would lead such businesses to charge high interest rates to borrowers. Businesses, banks, finance companies know that borrowers may not pay back loans. Nigeria doesn't have enough digital information on borrowers. In some cases, less than 60% of information can be found online about a potential borrower and that's how a score is developed to give loans. These are some of the challenges currently faced in the industry.
On challenges in fintech, you mentioned that Nigeria does not have sufficient digital information on customers for credit checks. This may also be the case in other African countries. Do you believe that regardless of the technology or credit platform you build, the underlying problem of no database, no information, would affect the expansion of fintech services. Is there something the government can do?
Advansio is not leaving this to the government, we're doing it ourselves. I have been in the agency banking space for many years. People who go to traditional banks or who have mobile banks, think differently from agency banking customers. I understand both. You and I may find convenience opening a bank app for transactions. But there are people who would not do transactions this way. In Nigeria, I feel the government has tried with the Bank Verification Number (BVN) roll out and of course they can do more.
My company is approaching the information challenge by using information gathered from agency banking networks and from normal banking networks. We combine digital footprints with business habits, where a borrower works etc. If a loan is to be issued to a borrower in Idumota market, there are different ways to approach this. With agency banking, you can have a partnership with cooperatives in the market, who know members; when members breathe in and when they breathe out, so you're guaranteed loan recovery. The market cooperative guys act as agents and get a commission for loan recovery. I've done this before in different local markets. That's the agency network way. Relying on credit scores in this part of the world, would mean no loans get repaid.
Agency network approach to financial inclusion is a viable alternative to traditional banking methods. It provides a safe way to offer loan services to majority who are excluded based on credit scores.
Why is fintech beneficial to Nigerians?
Nigerians face high banking charges and transaction costs. In remote areas, queues with one person in front doing ‘cash outs’ are popular. This person has a POS machine and is charging 200 to 500 naira per transaction, despite CBN guidelines prohibiting charging more than 100 naira for certain transactions. People in remote areas have limited options because going to town in search of the nearest ATM machine, in addition to transport costs, would cost up to 1000 naira. Usually, withdrawals from an actual ATM shouldn't cost more than 20 naira. The high costs of accessing these services for those living in remote areas makes cash outs popular.
Kuda bank is an example of a digital banking model for Nigeria to reduce banking charges [3]. Kuda Bank has only one physical building in Nigeria, with over a million customers. They don't charge for transfers and this is where big Nigerian banks make money. Kuda bank is lowering its cost and doesn't have branches like traditional commercial banks. You download their banking app and start banking. Debit cards are delivered to the customer's house address. Life is good. You don't need to go to a physical branch and no unnecessary charges are deducted. Besides, the debit card is free. Other commercial banks in Nigeria charge 1000 - 1500 naira for a debit card. So, if digital banks like Kuda become commonplace, they can kill commercial banks.
What policies are you aware of to facilitate fintech and what is the policy environment like in Nigeria?
I was part of the CBN committee on open banking in November 2021 in the customer service subcommittee. The idea is that Nigeria wants to adopt open banking where people would be connected via APIs. I may want to give a loan and with just the potential borrower’s BVN number, I have access to information on that individual such as their bank statement for the last six months. This information makes it easier to create a credit score.
The CBN also launched the Global Standing Instructions, not yet open to fintechs, but open to commercial banks in Nigeria. What it means is that if you get a loan from a bank, and it’s due, the bank can recover the loan from other banks where you also have funds.
For example, requesting someone's BVN in Nigeria from banks is difficult due to high fraud perpetration in the country. But there can be a process to certify a few fintech’s to have access to BVNs, instead of all together stopping the innovativeness of fintech. We used to have access to BVN through payment gateways like Paystack [4], but the government blocked everyone. If you’re not a bank, no access to BVN. This happened early 2021 about the same time crypto sales within Nigeria was banned.
So one way your company is making a mark in the fintech space is…?
While most fintech companies build standalone applications, Advansio is building integrated technology to reduce the cost of banking and financial services. We do not see ourselves as competitors, we see ourselves as collaborators with the aim of providing Africans access to good financial services.
Advansio is powering SANEF (Shared Agency Network Expansion Facility) interoperable platform [5]. SANEF was created to monitor agency banking operations in Nigeria. We built the SANEF Interoperable platform in such a way that hundreds of thousands of agents can pick up the app via APIs and open bank accounts with any of the banks in Nigeria. What Advansio did was integrate that platform to as many banks that were ready to integrate (18 of them). And then we have super agents licensed by CBN to carry out agency banking services. These super agents have agents under them who can connect to the platform and can open a bank account for anyone. That’s the first step. In the future, they will offer more services on behalf of banks to customers wherever they are.
Do you think increased access to mobile phones facilitates access to financial services?
If you look at the data on mobile phone accessibility in Nigeria, it’s really, really good. And for most people, their mobile phone is an identity. It's basically some people's life. Why can't that be true for business to financial service, offering financial services wherever you are to other people?
Asides Nigeria, are you looking to expand to other African countries?
Asides Nigeria, we are currently operational in Ghana in partnership with another company, sort of a merger. It's called Oakwood Advansio. Operations have started since January 2022. We are looking to expand to South Africa and Kenya soon.
References
https://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows
https://disrupt-africa.com/2017/10/31/nigerian-fintech-company-wins-startup-istanbul-demo-day/
https://www.kuda.com/
https://paystack.com/
https://sanefng.com/
Author's bio
Oluwatobi Ogundele's economics experience and interests have been in the areas of competition law and policy, health and migration. She has masters degrees in Economics and in International Public Policy with specialization in International Economic Relations and Global Governance.
Guest: MD of Advansio Interactive
Olufisayo Oludare is a serial entrepreneur whose passion for financial inclusion can be perceived a mile away. He is a graduate of Computer Science from Covenant University, a Java Developer and a web app designer for businesses. In the early years of his career, he founded over three different companies. He built his career in financial solutions, focusing on agency/ microfinance banking portfolio.
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