In this interview, our Head of IT, Adewale Saka speaks about the impact of technology in the Nigerian banking industry and how we have leveraged on technology to improve our offerings. Adewale Saka speaks about the launch of ALAT, Nigeria's first fully digital bank in May. He believes banks in Nigeria will soon adopt the use of blockchain technology and artifical intelligence.
How has technology changed the face of banking in Nigeria?
Technology has changed the face of banking forever in Nigeria and across the globe. Gone are those days when banking in Nigeria was confined to physical locations, specific time of the day and accessible/understandable to the upper, educated class of the society. Products and services available were primarily taking deposits and making loans and these were delivered via the branch and calling the officer, which was based on face-to-face contact with customers.
Technology has not only redefined and simplified banking, it has also brought banking to the doorsteps of almost every household in Nigeria and beyond. Opening and operating accounts can now be done without visiting a bank or physically interacting with human beings and from the comfort of your office, bedroom or even while in transit! Technology has practically revolutionized banking and every individual now has the capacity to have their banks with them everywhere and in their pockets. Banks are now empowered to reach customers and potential customers even in areas where they do not have physical presence.
The ease of creating banking products and services as well as making them available to customers is quite amazing and this is made possible through technology. Bank customers now have access to almost all banking services 24/7 including access to cash at odd hours through the ATMs, airtime recharge, bills payments, funds transfer, service subscriptions, online and offline shopping, lifestyle management and a host of others. Banks in Nigeria have leveraged technology to reposition banking in the minds of their customers.
All these have been achieved through technology-powered delivery channels such as mobile banking apps, online banking platforms, robust payment and collection platforms, etc.
In my own view, most banks have become technology service providers.
Do you think banks have effectively harnessed technology to improve services in Nigeria?
There is no doubt in my mind that banks have effectively harnessed technology to improve banking services even though there is still room for improvement. Everything in banking today is powered by technology to the extent that when there is a technology failure in any bank, it can cripple the entire operations of such bank with attendant financial losses and negative brand perception.
Banks in Nigeria have over the last few years embarked on automation of backend processes to drive efficiency, improve productivity, innovate effortlessly and optimize risks. Banks have also developed and deployed innovative products and services for customer acquisition, risk management, transaction processing and ultimately improve bottom-line. Cash-lite policy of the Central Bank of Nigeria (CBN) has been hinged on technology and so also is the Bank Verification Number (BVN) project.
Unlike before, customers can get instant value for both intra-bank and inter-bank transfers without having to fill forms, join a long queue or visit a bank branch. Customers are now able to have value on cheques deposited in their accounts within 24 hours and in some cases, customers do not need to visit a branch to present their cheques for clearing, since all banks started participating in the automated clearing house using Cheque Truncation Systems.
Significant successes have also been recorded around taking banking to the unbanked through the use of technology in driving Agency Banking processes. More and more in-branch banking services are getting digitized and made available to customers across multiple alternative channels to make customers less dependent on bank workers but rather serve themselves.
These have been achieved through effective use of technology in banking.
Improvement is still required around data analytics for determining specific needs of customers and various segments of the markets to develop products and services to meet those needs. Another area requiring more attention is eliminating the need for customers to come to the bank at all. Wema Bank is leading the rest of the industry in this area through the creation of our Digital Bank, ALAT. This is the next level of effective use of technology in Banking.
Analysts say although technology has many advantages, it has also affected the banking industry in many negative ways. What can you say about this?
Technology has undoubtedly brought positive transformation to the Nigerian banking industry but surely it hasn’t been without a couple of challenges. In the days of pure traditional manual or semi-manual banking, operational downtime was minimal and most times limited to the specific business unit or branch while a downtime on a centralized Core Banking Application or infrastructure can bring the entire operations of a bank to a halt.
Banking industry has been experiencing new types of risks associated with the use of technology for banking services. These risks could be due to human error, systems failure, fraud and cybercrimes. Banks in Nigeria have lost a lot of money to various fraudulent practices perpetrated through electronic channels. Fraud attempts, successful frauds, hacks and scams have steadily increased as banking takes center-stage in the digital world.
Count and volume of computer-related frauds has been on the upward trend. This has not only created image issues for banks and the industry, but has also impacted the bottom-line of impacted banks.
Banks are now made to invest massively in technology infrastructure, implement & maintain technology standards and frameworks (e.g. PCIDSS, ISO27001, ISO 20000, COBIT, TOGAF, etc.) and compliance generally. Cost of maintaining and sustaining most of these standards and frameworks have become a burden to many banks.
How much of a bank’s technology infrastructure should be built and run in-house, considering security concerns that come with outsourcing?
Honestly speaking, I do not share a view that outsourcing or cloud computing or sharing a public infrastructure is less secured than on-premise deployment of infrastructure. All that is required for organisations is to go through a stringent process in selecting a cloud service provider and ensure a water-tight agreement is put in place to protect their businesses. The type of service to be hosted on a public cloud should be determined by the Cloud strategy of various institutions and all conditions required to effectively protect information asset on-premise should be considered when outsourcing or migrating to the cloud.
The benefits of outsourcing or cloud service are so enormous that a forward-looking organization cannot ignore. Organisation should rather look for mitigants for the risks that are associated with the cloud rather than avoiding the cloud. Some of the benefits of cloud computing includes; Agility, Cost efficiency, Scalability, etc. In summary, it offers responsiveness, effectiveness and efficiency in the delivery of IT services.
In summary, except for data, infrastructure or solutions that have been mandatorily confined to Bank’s datacenters by way of regulation or government policies, every service or infrastructure can be outsourced or run from a public cloud. This will improve uptime and reduce cost significantly. It helps in managing cash flow by converting CAPEX to OPEX for organisations.
What big leaps has technology enabled Wema Bank to take?
It’s no more news, Wema is the bank to beat when it comes innovation using technology. As it stands today, Wema has made a bold statement with ALAT being the first TRULY Digital Bank in the country. What is also unique about this is the fact that our Digital Bank and all other digital channels provided for customers’ comfort are fully owned by Wema (developed, maintained, supported and owned end-to-end by Wema).
Our WemaMobile platform can be switched to SMS banking if you run out of data right from within the app. This is an amazing experience that is unique to Wema. Card Control integration to all our service points (ALAT, USSD Banking, WemaMobile, WemaOnline, etc) and giving customers of the bank absolute control over when, where and how their debit and credit cards are used without recourse to the bank is the first of its kind in the Nigerian Banking industry. We have also consistently provided a very stable and reliable banking services through our digital channels.
These have not only started changing customers and non-customers’ perception of the bank, they have also increased number of customers and volume of transactions across all our channels.
We have witnessed all kinds of technological disruption in the banking industry; what more can we expect?
There is no end to innovation and with the dynamic nature of technological advancement, it is certain that we have not seen the end of disruption in the banking industry. Certainly, all banks will gravitate towards digital and compete with technological innovations.
We are going to see more of partnerships between banks and FinTechs in the coming years. With technology, there is limitless opportunities for disruption provided the market is matured and ready for such disruptions.
Do you think blockchain technology has a future in banking in Nigeria?
My response is in the affirmative because the Nigerian Banking industry is transforming rapidly with the use of technology to meet ever-dynamic and sophisticated customers’ needs.
Since Blockchain provides opportunity for exchange of values across the internet without any intermediary, it thus present banks and other organisations with a cost-efficient and highly secured alternative platform for consummating financial transactions or sharing information.
I am sure every organization or market will like to benefit from such value to reduce their cost of providing services through highly secured platforms like the Blockchain. It is just a matter of time, stakeholders including the regulators will key into it and possibly regulate its use for the benefit of the industry.
What about Artificial Intelligence (AI)?
AI has to do with developing systems that learn, adapt and respond autonomously rather than simply execute predefined instructions. AI will be the battleground for technology vendors in 2018 and indeed over the next few years.
For every organization in the banking industry, it has become increasingly important to keep up with competition, and increase their share of the market by being innovative.
In no distant future, the Nigerian banking industry will begin to deeply harness AI to enhance their data analytics capabilities to support their decision-making process. With the right AI and Big Data, banks are poised to provide systems that will engage customers and recommend appropriate product/services or investment opportunities based on customer’s historical data. Other areas where this can be of relevance to the industry include visual perception, speech recognition and language translation.
AI will also be applicable to banking in the areas of Fraud Detection, Trading, Chat robots and Anti-Money Laundering (AML) Pattern Detection.
In a nutshell, the Nigerian banking industry is very responsive to technological advancement and AI is surely one of the next to be leveraged for competitive advantage.
With the rate at which technology is permeating our lives, where do you see banking in the next five years?
Technology is a great enabler, making banking more accessible and reducing costs for consumers. I don’t think bank branches are going away because people still need human contact.
However, it is expected that banks will shift competition to the digital space and de-emphasize competing based on number or size of branches. Rate of branch expansion will go down paving way for channels and digital penetration. A lot more of digitally-powered unmanned service centers where customers can drive in and perform banking services (including seeking financial advises or solutions) on a self-service basis will take center-stage. This has started already but it’s going to continue and increase in the coming years.
More and more banking processes will get digitized and a lot more services currently handled within banking halls or head offices of banks will become available via digital platforms.
Banks like ours (Wema) has invested in the bank of the future, ALAT and I believe that banks that fail to invest and take advantage of new technologies to reengineer their products and services may be losing customers to the better-quality or lower-cost products of smarter ones.