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‘How digitalisation is changing banking’

‘How digitalisation is changing banking’

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Banking has become a one- stop shop, providing services for the growing needs of its customers. In this interview with TOBA AGBOOLA and AKINOLA AJIBADE , Wema Bank Managing Director Mr. Ademola Adebise speaks on how the bank’s innovativeness is transforming the sector.

Why did Wema change from being  a regional to a national bank?

The change in the strategies  and the focus  of the bank did not just happen. It was a product of  extensive research  and search for competitive edge in the industry. This  informed the decision of the management of the bank to put in place a turnaround mechanism in 2009.

2009 was when the new management came on board, and basically what we did then was to put a turnaround plan in place. Part of the turnaround plan was actually to scale down to become a regional bank, fix the bank, then get enough capital, and  come back to become a national bank. And that was what we did. In 2013, we scaled out to become a regional bank, and by 2015 we were back as a national bank.

All the basic plans that you need to have a robust bank; things around technology, fixing the people and things to make our processing contemporary are the things that we put in place. And we then focused on our real segment, which is the Small Medium Enterprises (SMEs). That is what we’ve done. And of course, we also try to run a very structured, very robust public governance to ensure that the issues of the past do not recur.

We are one of the tier two banks. And to compete in the market, we decided to embark on the digital journey. And to achieve that we set up a digital bank, and that is what culminated in the launch of Alat, which is Africa’s first fully digital bank, and that is where we are today. We are going to improve our KPIs and financial by leveraging on innovation using technology as backbone. We believe that we are quite ahead.

Today, people see us as a digital bank from the outside, and we also want to be a digital bank on the inside. We have been able to digitise a lot of our internal processes. We believe that it will reduce the cost of serving our customers. That will ultimately lead to creation of values for our shareholders. That is basically the story of Wema bank.

What informed the digital revolution  in your bank?

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 Wema Bank is making in the digital banking space and technology. Wema bank is playing big in the digital space because there is the realisation that it is where the future of banking lies.

Alat, which was launched last year, is a fully digital platform, and it is promoting financial inclusion, especially among the youths.

Does that imply that digital banking is where the future of banking lies?

Of course, it is. Digital banking is becoming more attractive to banks and their customers. It is catching the attention of everyone that is thinking of speed, efficiency and cost saving in banking.

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 has remained a turning point in its digital banking journey.

How did you arrive at the choice of  Alat innovation as a digital platform for growing your bank?

In 2016, we reviewed our bank’s marketing strategy to grow its market share and reduce cost of deposit. After the exercise, we found out through strategic thinking and brainstorming that Alat was needed to appeal to the youth, young professionals, and the SMEs.

Based on the focused sessions that we had, there was 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. I must also add that the whole idea of Alat is to have end-to-end transactions without visiting a bank’s branch.

What is the response to the platform like?

Saying that Alat is defining the pace in digital banking cannot be an overstatement. For instance, in just the first six months of its launch in May 2017, over 100,000 customers and over N1.1billion in deposits were recorded. With what we have learned over the years, we decided to position ALAT as the bank of the future not only in Nigeria, but in Africa at large. After going live, we received tremendous support and response from the market and had roughly 15,000 users on our platform as of June. The volume of deposits was also impressive, at over N150 million. By October, the customer base had grown to over 130, 000 and deposit volumes to more than N850 million. ALAT offers customers the convenience they have been seeking. It simplifies all their transactions and ultimately gives them a greater ability to do their banking transactions without visiting a physical branch. A typical retail bank has branches in almost every strategic location where they can easily reach out to customers. This is great, and almost all of them want to make their branches accessible for customers. We, however, have a slightly different view. As great and conducive as these branches are, young professionals and entrepreneurs do not enjoy going to branches. We allow them to do their banking transactions from their homes or offices. Excitingly, there are over 80 million Nigerian subscribers combined across the four major telecommunication platforms in the industry.

What is the Unique Selling Point (USP) that differentiates Alat?

One of its USPs, as they are not one, is that it relies on having a Bank Verification Number (BVN). While using the Version 2 of Alat, which is an improvement on the first version, it clearly explains that there are a lot of USPs that are inherent in the digital platform as it tries to appeal to the lifestyles of customers.

For instance, 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 two gives you a lot of flexibility on the savings that you are making.

How can the account be funded?

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.

What is the objective behind the bank’s heavy investment 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.

You can imagine if I have a million customers 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.

With your bank completely technology-driven, can you say thta is an edge?

It has no doubt made us stay ahead of competition, but 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.

The Nigerian  Stock Exchange (NSE) has just acknowledged the improved performance of Wema Bank; can you give us an insight into the performance?

Yes, you are right. The bank recorded an improved performance where it posted 72 per cent profit growth in the third quarter of the ongoing year, 2018.

We posted a 70 per cent growth in profit before tax (PBT), from N1.80b in Q3 2017 to N3.07b in Q3 2018. Profit after tax (PAT) rose by 72.55 per cent to N2.64b in Q3 2018 from N1.53b in Q3 2017.

Gross earnings grew by 7.96 per cent from N45.38b in Q3 2017 to N48.99b as at the third quarter of 2018. The performance was supported by increased contribution from non-interest income, which rose by 24.85 per cent from N8.09b in Q3 2017 to N10.10b, as at Q3 2018. Net loans increased by 13.44 per cent from N215.8b (2017FY) to N244.8b (Q3 2018).

Again, deposit volume increased by 42.36 per cent to N362.3b (FY 2017 N254.5 per cent billion). This is driven by the continued brand acceptance and customer acquisition initiatives involving branch network expansion and service improvements across our digital platforms (ALAT, $945). We also recorded significant growth in agency banking partnerships, with the number of agents increasing by 27 per cent to 1076 agents as at Q3 2018 across all the 36 states of the country.

We are witnessing this impressive result because the bank is being governed to focus on the retail market segment, which as I earlier explained, is driven by digital technology. We are determined to double all indices by leveraging on digital innovation while we look further to deepening our partnerships in the commercial end of the market. As you are aware, partnerships are keys to the success of our franchise and we have created structures that will help deepen our market share.

As part of the efforts to ensure that Wema bank positions itself for continued growth, the Series II Bond Issuance Programme of N208b was opened on September 28, 2018; can you tell us how successful it was?

Without speaking much on this, the bond issuance, which is a seven-year bond 2018-2025, was a huge success.

Being a national bank, what are the efforts being made to ensure that Wema Bank’s presence is felt in every part of the country?

In our bid to build a robust retail bank, we have taken Wema Bank, over the past few years, to virtually all parts of the country by increasing its presence in the North and Eastern regions of the country, and we are aggressively growing our agent banking business to reach the financially excluded and branch-starved communities. As you are aware, new branches were recently opened in Sangotedo in Lagos, Jebba in Kwara, Aba in Abia; and Ilupeju also in Lagos State.

What is your strategy to increase Wema Bank’s customer base and revenue from N54 billion?

We defined our business clearly before embarking on the journey to ALAT. We have certain loyal customers who are in the older generation, because of the age of the bank. Therefore, we needed to reach out to younger customers who should be able to build and grow with the bank and change the perception that Wema is only for older people. We will be vibrant in our outlook and approach. We also want to disrupt what seems to be the status quo in doing banking transactions. That is the force driving our work. It is a deliberate decision to do retail and do it more effectively. We are now leveraging on technology and reaching out to customers. We want to meet them at the point we can easily catch up with them and provide offerings that will get them excited to use the bank.

What is your  view on the threat digital banks pose to traditional banking?

They do not pose a threat, but will merely change how banking will be done. Banking will always be necessary; banks, however, will not. The largest industry in the word is the payments industry. This cuts across everything we do, as well as every lifestyle and type of commercialisation. Payments and banking are one and the same. Therefore, the digitalisation of banking will not pose a threat. It will, however, complement the industry. Today, people can do their grocery shopping online; why not do the same for banking? If the educational system, music, and public transportation can be disrupted by technology, why not banking? Technology makes everything a level playing field. It disrupts almost every business, including banking. It is not a function of “if,” but “when.” That time is now, and we are leading a path in the industry. We are disrupting the way banking used to be done as the first fully, end-to-end, digital bank.

What is the experience of Wema Bank in being a Foreign Exchange Primary Dealer (FXPD)?

As an FXDP, we are a dealer to others who are not. We have the direct interface with the central bank. The CBN is still the major supplier of foreign exchange into the system. It is just like clearing. There are only four banks doing clearing system in this country today, but a lot of customers don’t know. When you go to your bank and drop your cheque, that bank is not the one going to the clearing house to  clear the instrument.  We have four banks representing the rest of us who go to the clearing house to clear. So, what we are saying is that we don’t need as many as 22 banks all coming together to the clearing house to do clearing. So if you look at it, it is an average of five banks per clearing house. By limiting the number, it brings a whole lot of efficiency into the system. I think what the FXPD has done is to say rather than having everybody doing it, let’s have some primary dealers who would take the funds from the central bank, which is the biggest supplier of foreign exchange to the market today and other people can go to those banks. It is an open platform and we all bid on the FMDQ platform. So, whether you are a primary dealer or you are a secondary dealer, honestly I really don’t mean anything, as long as everybody has access to foreign exchange. So, it has been a pleasant experience and we are happy that we are able to be a primary dealer and also selling to others who are not. What does it do? It puts lots more responsibility on you and it is also a training ground for our dealers. We have one of the best dealing rooms in this country in terms of equipment, lay out, and our dealers are well equipped to do the business. So, we are up to the task and I think we have delivered to the best of our ability to the industry as a primary dealer.

What are the other packages you have for your staff?

Basically, that is a normal talk in any organisation, but what we are saying is that we want to be more performance driven. We are going to review our appraisals step-by-step basically to ensure that everybody is working very hard, and there is no way anybody can be caged in the system, and when any staff is due for promotion, he or she will get promoted, basically once the target is met by the staff. A number of things will begin to happen.

When I assumed office few months ago, we had meetings with staff across regions in the form of town hall meetings and discussed all issues at stake. Those issues that came up we’ve started addressing them. Some issues like allowances, incentives, leave days and all that for different cadres of staff.

One thing I believe is that we will do our best, and we would also expect a reciprocal performance from our staff. I think if we build a big bank, if will build a profitable bank, everybody will be happy for it. We will all enjoy the benefits.

It is like baking a big cake, and if you are agonising over a small cake, when shareholders have not been taken care of, you know what that means.

Everybody needs to be taken care of. One of the things we are doing is that if we hit our numbers for this year, by God’s grace, we should be able to go back to the board to say ‘let us have more to buy shares for the staff, and other incentives.’ We will begin to look around all that.

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