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 MR AGBAJE IS THE CEO OF GT BANK PLC
Digital Banking Holds The Key To Financial Inclusion In
Nigeria —-Segun Agbaje
Nigeria’s
economy may be in a difficult period, but with digitalisation at the core of
the national banking strategy, financial inclusion has been given room to
grow.
“There
are so many people in Africa that are outside the banking system”, said Segun
Agbaje, Managing Director and CEO of Guaranty
Trust Bank (GTBank), one of the continent’s leading financial
institutions. “For you to be part of organised society, financial inclusion
is a must.”
Slowly
but surely, financial inclusion in Africa is improving. In fact, the Central
Bank of Nigeria predicts that, by 2020, the number of adult Nigerians with
access to payment services will increase to around 70 percent (see Fig 1). “It’s not as superfast as we would like it to be, but
there are marked improvements, and this is steadily increasing”, said Agbaje,
speaking to World
Finance. “Just 10 years ago, data on
financial inclusion was hard to come by. Now we know just how much better we
must do in order to expand access to financial services.”
Access
to savings, credit, insurance and pensions is also growing rapidly.
“Encouraging
as these projections are, we know that there’s a lot more to be done. This is
why, at GTBank, we are keen to leverage digital technology to expand the
reach of our products and services. Mobile has become very, very big and we
have begun to see people doing a lot using their mobile phones.”
Agbaje
points to the example of Kenya’s M-Pesa, a mobile-based money transfer and
finance platform that is now used by more than two thirds of the country’s
adult population. The mobile app serves as a channel for approximately 25
percent of Kenya’s GNP. “When I look at our mobile technology compared to a
lot of developed economies, I think we’re a lot further ahead. You know, I
actually think that the African banking sector is very much ahead in terms of
mobile banking. And I think African banks are probably embracing disruptive
technologies a lot quicker, because we don’t have as many legacies.”
Making banking more mobile
This readiness to embrace new technologies has helped a large proportion of
the African population skip whole stages of traditional digital development
altogether. Indeed, for many, a smartphone is their first computer. Agbaje
said: “From experience, we know that the major reasons for financial
exclusion include the lack of physical access to financial institutions,
inadequate understanding of financial institutions and their products,
general distrust in the system, and the affordability of products as a result
of minimum opening balance requirements.”
Despite
these hurdles, technology is helping forward-thinking institutions tackle
such challenges head on, pro
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mpting financial inclusion to leap forward on the African continent.
Agbaje explained:
“The world is
changing around us and the future of banking is digital. To protect our
traditional business and maintain our social relevance, we are incorporating
another model, which involves mobile phones, use of data, partnerships and
collaborations. Simply put, we are creating a platform to support our
traditional business model by leveraging digital solutions.”
GTBank’s Bank 737
provides banking services to millions of Nigerian mobile phone owners, and does
not require internet access to perform basic banking services. Anyone with a
phone registered in Nigeria can open an account, transfer money, buy airtime or
check their balance by dialling *737#. The convenience of Bank 737 lies in the
fact that all of its services can be accessed through a customer’s mobile
phone, at the dial of *737#. And because stable internet access is still not
ubiquitous in Africa, Bank 737, being USSD-powered, side steps the need for an
internet connection.
“Through this
service, which makes banking simpler, cheaper and faster, we continue to pull
into the banking stream many of those who have long been excluded from the
country’s financial framework”, said Agbaje. “Since its introduction, we have
recorded an uptake of over three million customers and over NGN 1trn [$3.1bn]
in transactions via the platform.
The reception of
Bank 737 has been phenomenal, with it gaining recognition as Product of the
Year in Africa from The Asian Banker and Best Digital Bank in Africa from
Euromoney. The bank was also the recipient of six awards at the 2017 Electronic
Payment Incentive Scheme Awards, which was organised by the Central Bank of
Nigeria in conjunction with the Nigeria Interbank Settlement System to
recognise financial institutions, merchants and other stakeholders at the
forefront of driving electronic payments in Nigeria.”
Digitally
minded
“Core to our digital strategy is both our understanding that the future of
banking is digital, and our determination to lead that future”, Agbaje said.
“We know, because digital technologies have dissolved the boundaries between
industry sectors, that our competition is no longer just banks. It now includes
fintechs, telcos and tech companies that can provide speed and flexibility to
customers as we can. This creates tough challenges for the banking sector, but
it also creates ample opportunities to extend our footprint.”
A readiness
to embrace new technologies has helped large portions of the African population
skip whole stages of traditional digital development altogether
For example, the
bank’s SME MarketHub is an e-commerce platform that allows business owners to
create online stores. Agbaje told World Finance: “Our strategy is to
take advantage of the new opportunities born from the digital revolution by
moving beyond our traditional role as enablers of financial transactions and
providers of financial products, to playing a deeper role in the digital and
commercial lives of our customers. In pursuit of this strategy we have created
our own in-house fintech division, while also actively seeking partnerships and
collaborations with other fintechs.
“Our immediate
focus is three-pronged; to digitalise our key processes, build a robust
data-gathering infrastructure, and create a well designed, segmented and
integrated customer experience, rather than a one-size-fits-all distribution.
In the long run, our goal is to build a digital bank that consistently delivers
faster, cheaper and better solutions for the constantly evolving needs of our
customers.”
The lack of
digital and electrical infrastructure, as well as lower levels of wealth than
those found in more developed markets, means that there are some barriers to
the full adoption of digital banking that are particular to Africa. “Another
obvious challenge is the little focus given to innovation in the banking
industry.
African banks,
like most banks across the world, tend to innovate in bite sizes, and generally
around products, rather than service delivery. It was almost as though banks
believed that ownership of the customer was their right, as long as they had
the branch network to support customer footfall. Now, facing the real threat of
losing relevance, banks are waking up to this need to innovate – not just out
of dire necessity, but as a strategic objective.”
Agbaje also
pointed out that, while GTBank has made significant gains in getting customers
to accept digital banking as a viable alternative to traditional forms, there
is still more to be done. That said, he is hopeful that the Central Bank of
Nigeria’s ‘Cash-less Nigeria’ policy, which discourages the use of cash, will
drive greater migration to e-banking platforms.
“We are also
tackling the innovation challenge. We now operate an open innovation policy,
through which we invest significantly in building our in-house digital
capabilities. At the same time, we are seeking effective partnerships and
alliances to drive operational efficiency and boost our competitive advantage.
“We want to become
a fully digital bank that offers everyday banking services outside of
traditional bank walls, but more than that, we want to create digital touch
points that ensure we are constantly interacting and playing a deep role in the
lives our customers. This of course requires a sustained commitment, and we
have repositioned our business structures in such a way that makes us very
confident in our continued leadership of Africa’s digital frontier.”
Gaining
interest
Despite the difficult business environment in 2016, GTBank enjoyed “a fairly
decent year”, according to Agbaje. The bank overcame these challenges by
growing its retail business and leveraging technology to deliver superior
payment solutions to make banking simpler, faster and better. Gross earnings
for the period grew by 37 percent to NGN 414.62bn ($1.3bn), from NGN 301.85bn
($959m) in December 2015 (see Fig 2).
This was driven
primarily by growth in interest income, as well as foreign exchange income.
Profit before tax stood at NGN 165.14bn ($524.7m), representing a growth of 37
percent since December 2015. The bank’s loan book also grew 16 percent, from
the NGN 1.37trn ($4.4bn) recorded in December 2015 to NGN 1.59trn ($5.1bn) in
December 2016, with corresponding growth in total deposits increasing 29
percent, to NGN 2.11trn ($6.7bn).
Likewise, the
bank’s balance sheet remained strong with a 19.7 percent growth in total assets
and contingents, reaching NGN 3.70trn ($11.8bn) at the end of December 2016,
while shareholders’ funds reached NGN 504.9bn ($1.6bn). The bank’s
non-performing loans remained low at 3.29 percent – below the regulatory
threshold of 3.66 percent, with adequate coverage of 131.79
percent. Against the backdrop of this result, return on equity (ROE) and
return on assets closed at 35.96 percent and 5.85 percent respectively.
According to
Agbaje: “The vision of the bank is to build an oasis in a country that was not
necessarily known for doing things properly, so we focused on ethics and
integrity. And once you build anything on that type of foundation – because
even though things change, values never change – and bring in very young people
who imbibe this culture along with a healthy attitude towards work, you have a
workforce that’s very young and dynamic, possessing all the right values to
enable you to build a successful organisation.”
Pan-African
GTBank is building on its successes both at home and abroad through its ‘Pan-African’
growth strategy. Apart from its home market in Nigeria, the bank enjoys a
presence in three countries in east Africa (Kenya, Rwanda and Uganda), five in
the west (Ivory Coast, Gambia, Ghana, Liberia and Sierra Leone) and has plans
to have another in Tanzania by the end of the year.“Our strategy has always
been to go into a country and take the high end of the middle market, and then
as we grow, enter into the corporate markets.
“We are building a
high-end type retail business because the middle class is emerging in most
countries in Africa, and where you have an emerging middle class, you have a
lot of banking opportunities. So far, we have been fairly successful,
delivering an ROE after tax of over 25 percent.”
The bank’s
expansion strategy has enjoyed remarkable success, with businesses outside
Nigeria now accounting for 15 percent of total deposits, 11 percent of its
loans and around 8.2 percent of its profit. Over the next three years, Agbaje
expects subsidiary contribution to grow further, to approximately 20 percent.
He told World
Finance: “I’m pretty excited about the fact that the profit of the bank
has grown by over 300 percent in the last five years. Our customer base has
grown from around two million to over 10 million, and we have built a very
strong e-business as well.
“We are driven by
a vision to create a great African institution; an institution that can compete
anywhere in the world in terms of good corporate governance culture and
performance. We are driven by the desire to be, in terms of best practices, as
good as any institution in the world. As a bank, we always want to do better
than 25 percent ROE, and if we have the corporate governance that you’d find
anywhere else in the world, then we’ll always be an attractive destination for
discerning international investors.”
