Yele Okeremi, MD/CEO, Precise Financial Systems (PFS), the software firm behind the revolutionary cheque truncation system, in this interview spoke about myriads of issues pertaining to fintech. He declared that same day cheque clearance technology is available in Nigeria. Excerpts:
As a major indigenous player in the fintech segment of the country’s financial services sector, could you assess the fintech market?
The industry is evolving. It is a dynamic industry. If you talk a look at it over the past, one year people have taken opportunities especially in the payment systems. So, we have witnessed the advent of many operators springing up. Fintech is just a technology company offering financial services.
Most of the fintech companies that we see today in Nigeria are running in the payment space and the reason is that our payment system in Nigeria has become reasonably sophisticated. People are seeing opportunities in that area either to become aggregator or to use some form of gateway that is available technologically to allow money to move from one point to another. There is a lot of activities happening in that space.
How well are the banks and fintech players collaborating?
Sometimes ago, a company hosted a programme with the theme “Fintech versus Banks: Friends or Foes”. However, the truth of the matter is that, if you rally unpack the gamut very well, you would have seen that what we call banking operation emanates because of the incapability of technology to do certain things. That is why we have people in operations departments in the banks.
If technology can do everything end-to-end, you would not see technology department. You will just see technology departments. So, what has happened is that as technology is becoming more sophisticated, the banks are trying to upscale their own technological infrastructure. They are trying to use technology to their advantages as well.
But the interesting thing about technology is that technology is open to all. So, you now see smart programmers as well using technology and trying to see whether they can find some ways of encroaching into the banking space. One of the things I have said is that finally, people do not really need banks. What people want are banking services.
That is the reason why people go the banks and now that same service is available to you without having to go to the banks. For example, there are many people I know in Nigeria today that have not visited the banking hall in over two years. They are doing banking services using the internet and telephone etc.
You can see that though the banks offer such services but the fintech firms are also identifying some loopholes and gaps, as such; they are trying to get into that space. I hope that if the banks would wake up very early enough and the banks might be able to really get what they need through the fintech firms. The banks are not technology companies. Therefore, the best thing they can do is to look at what some fintechs are doing and partner with such fintechs.
Security of some fintech solutions and platforms are concerns to industry stakeholders. What is your opinion on this?
Well, if you look at security of electronic payment platforms through policy, for instance, what policies do is to stipulate minimum standards. But the issues are when you have continuous improvements and innovations. There will always be gaps. People will always identity those gaps to the extent that they will try to develop based on cutting-edge technologies. They will always be gaps and vulnerabilities that people can tap into. But that really should not scare us from adopting e-channels for financial transaction.
My suggestion is that, and this is not the gospel, for many banks that are established, they don’t need to go to the cutting-edge of technologies. Rather these banks should strive to the proven-end of technologies because the cutting-edge of technologies can give you quantum benefits but can also expose you to certain risks.
If you want stability, stay with proven technology. But if you want to encroach with cutting-edge of technologies, then, your risks appetite is likely going to be higher and then you go for the higher-end technologies. When you go for these higher-end technologies, I am not saying it won’t happen but there are chances that it may happen.
BVN is one of the industry-wide initiatives designed by the CBN to address issue of security in the financial services. Has it brought any revolution?
I won’t say the Bank Verification Number has brought a revolution. But I would say it is long awaited and it is necessary. I would say this for the record about BVN. It is a very great idea but I think it came out of frustration of the banking industry.
It came when the banking industry could not get the leadership they expected from the national level because ordinarily, if you have an effective national identification system, as it is the case in some countries, BVN would not be required. But apparently, the industry has waited for a while to get effective national ID system from the government but they didn’t get it and they were suffering and people were criminalizing and scandalizing the system.
If you identify yourself as one person and you commit a crime. If you run to another place and that you are somebody else, no one will argue with you. There is no system to dispute that. So, the industry has been able to lock down every individual to an identity and you could see that this has also happened in immigrations and travels. That is why the banks have decided to have one unified identification for everybody who requires banking services so that they can know you.
Therefore, it won’t matter where you go. You are known in the system. No matter which bank you visit, you can be identified. I think the success of BVN has reduced some rogue transactions and rogues generally in the banking system. It is a very highly commendable project. But I think it can be frustrating when you didn’t see what you are looking for. To me, today, BVN is still one of the most reliable identification database that we have in Nigeria.
Can you disclose the volume of transactions carried out on your cheque truncation platform in the last one year or monthly?
Only the Nigerian Inter-Bank Settlement System (NIBSS) can give you information on the volume of transactions. But I know that the volume is huge because what we do is to automate the cheques and the automated clearing house system. What happens is that the technology called cheque truncation is not germane to the Nigerian technology. It is a concept. This means that you are de-materializing the paper. So why it uses to take a very long time for paper cheque to clear, we automated the processes involved.