Tosin Eniolorunda, CEO of TeamApt, shares his views on the relationship that should exist between the banks and fintech firms, how TeamApt fits into the mix, among other issues. Excertps.
Some people are of the views that the best direction for Fintech might be to collaborate instead of competing, as new consumer-facing financial applications can be built on top of old banking infrastructure. How should Fintech relate with banks?
The truth is banks and Fintechs are mutually dependent on each other in the financial industry. It doesn’t matter how great your technology processes are, if there is no demand, then it’s almost useless. On one hand, banks have the large customer base, credibility, trust, experience on financial regulations and the right audience to sell these services or products to. On the other hand, Fintechs bring innovation, faster processes which can cut down operation costs, increase revenue for these banks and increase their customer base and turn these customers into advocates for the banks. Bringing these qualities to the table, the relationship between Fintechs and banks should be forged into a partnership programme. This would ensure that in the end, everyone wins, the banks, Fintechs and the customers who are now better served as a result of this collaboration. The only objective is for the customer to win. Banks need to foster Fintech collaboration by opening up APIs and by funding startups through accelerator programmes. The Africa Fintech Foundry from Access Bank is a good example. Fintechs also need to collaborate with banks by making their arguably superior products available to the banks through white-labelling or source code licensing arrangements.
Fintech innovation requires a particular skill set but the skill gap in the Fintech industry is quite alarming. Getting good programmers is a huge challenge. What do you think could be done to address this?
This is a real challenge. Good programmers are few and there is a competition for them in and outside the country. The country’s brain drain is alarming as many experienced developers can get jobs outside the country. They can get jobs in Dubai, Ireland, and Estonia with far greater compensation compared to what they would get in the country. To foster innovation and develop the country, a lot of engineers will always be needed and I think it’s high time the industry and the nation banded together to solve this epidemic. I think the challenge can be resolved fundamentally in two ways. The first is to increase the supply of good quality software engineers and to make the industry more lucrative for them. Supply of good programmers can be improved through internship programmes for secondary and university students to catch and mentor them while they are young. The second solution is slightly harder as it is tied to the macroeconomic performance of the nation. The recent naira devaluation, for instance, has led to increased emigration of experienced software engineers. The industry can however try and raise rates for the engineers.
The desire of most startups is to woo potential investors. Why has your organization taken a different approach to grow your business, particularly at this early stage?
We are fundamentalists at TeamApt. The purpose of a business is to create wealth. Wealth is profit. Sometimes startups hype promises of profit making to investors in order to receive higher valuations. Hype is not value. Profit is value. Profit with hype is, however, greater value. In the B2B industry that we play, customers are expected to pay for value. We figured if we recycle their payments and do this quickly, we could reach the scale quickly without external funding. This is what we believed will help us build the muscle we require for a sustainable growth. The second reason is that it takes time and effort to raise significant institutional capital. We did not have that time. We would rather spend that time with our customers and understand their needs deeply. Our clients have rewarded us with millions of dollars of revenue in 26 months without raising a dime from investors.
Leaving a seemingly promising career at a firm like to chart an entrepreneurial course may be an impossible mission for many. What motivated you and your partners to start TeamApt?
Entrepreneurs are usually restless people. They are not usually after money but they thirst greatly on making an impact. They know the money will follow. I needed to make an impact in my life and it was becoming harder to do so with my employer so I left. I figured that the worst that would happen will be that I would fail, and I could always get another job even with the startup on my resume. I, however, knew I was not going to fail. I had planned to do this all my life and I knew it was time. I was 29 years old then. While in school, I had acquired entrepreneurial experience while studying Mechanical Engineering at Obafemi Awolowo University. I had a consultancy business for students, while helping them with various hardware and software projects. I was single and I knew it would only get harder if I didn’t do it then. It was then or never. So I had to leave Interswitch in just under three years after. I could not have made a better decision.
Regardless of how it unveils, a revolution in finances has already started and regulations are the biggest obstacles that Fintech innovators face today. What is your assessment of the current regulatory environment and your suggestions for improvement?
The banking and finance industry is the backbone of the nation’s commerce and regulation is very important. Regulation should foster growth and control malpractices that will hinder the growth of the industry. One of the ways regulation does this is by licensing players activities. The Apex bank is doing a good work in protecting the industry and ensuring that only serious players with value to offer are allowed in the industry. The methodology today is cash deposit for the period while the license is being granted. This often filters a lot of unserious players but it unfortunately also precludes otherwise nascent companies who do not have the financial muscle. I believe the position of protecting the industry should not be compromised however other ways to encourage serious players without the financial muscle can be encouraged.
Startups can, for example, make a case for an exception if they satisfy these conditions: a year old company and employs more than five Nigerians in the period of 12 months, that can demonstrate that industry players (e.g banks) are using their solution in a different capacity other than one that requires licensing and can get the bank to attest to this fact, that can show evidence of tax payment and revenues in books, a fidelity guarantee and professional indemnity from a reputable insurance firm to guarantee against losses dues to fraud and errors. If an intention of licensing regulation is to ensure only serious players are licensed, these steps can achieve the same objective without the financial hurdle.
Would you say Lagos can become No 1 Africa’s hub for Fintech? What are the infrastructure and policies the industry stakeholders, regulators and government need to put in place for Lagos to attain this status?
With all the right conditions in place, I believe, Lagos would not only be Africa’s No 1 Fintech hub but would be at par with other Fintech hubs around the world. Currently, the Fintech space is developing with a huge focus on Lagos and asides key factors such as talent, capital and consumer demands which are essential for the growth of any Fintech hub in the world, government policies can either stunt or accelerate the growth of a Fintech hub in Nigeria. If the government steps in and creates policies and procedures that protect and encourage Fintechs in Nigeria, there would be better promotion of innovation and foster healthier competition. Just like London and Singapore, which are two leading Fintech hubs in the world, their regulatory bodies Financial Conduct Authority, and the Monetary Authority of Singapore, have established certain initiatives to strengthen collaboration between Fintech hubs. Initiatives, such as accelerator programmes, Fintech offices, international agreements, and sandbox environments, where both Fintech companies and other financial institutions can test their innovations without incurring heavy regulations, have accelerated the growth of Fintech in those countries. Asides these regulations, the government can also establish policy programmes that would support the development of Fintechs and other financial related startups in Nigeria. For example, StartUp India was established by the Indian government to provide mentorship opportunities, funding, simpler regulatory processes and many more benefits for startups in Indian. It wouldn’t be a bad idea if the Nigerian government take learning from these countries and establish similar initiatives in Nigeria to accelerate the growth of Fintechs and place Lagos on the map of Fintech hubs globally.
Europe and North America have embraced Open Banking system for different reasons and adopting different model. What is your view on Open Banking and how should Nigerian banking industry approach the phenomenon?
Open Banking is a welcome innovation in the global financial industry and there is going to be a noticeable shift of power from financial institutions especially banks to consumers. It has started already just as you mentioned in the UK and North America. The Australian government has started putting in place policies known as the consumer data rights which will give customers access to their banking data. I believe it wouldn’t take long before the Nigerian banking industry join the global community of Open Banking. We already have organisations in Nigeria such as Open Banking Nigeria that is developing free API Standards that would give customers the power to access and share data with the third parties. Already, mobile banking in Nigeria is the rave. Imagine doing so much more than just fund transfers, bill payments and top-ups as a result of Open Banking?
The importance of removing obstacles in Fintech innovation cannot be overemphasized. How can the Fintech industry convince government to make space for innovative technological products in the financial market?
I think some of the government’s policies have been great. The cashless policy is a good initiative that reduces the cost of cash handling while increasing its traceability. The financial inclusion drive is also another good initiative to further boost the economy and allow the bottom of the pyramid to participate in institutional finance, have access to credit and therefore increase their economic potentials. Last year’s inclusion of software companies in the pioneer status list is another example of a laudable initiative. The government can however still do more to allow Fintechs to thrive and improve the country further. The democratization of access to social data like identity is a major example. Opening up the Bank Verification Number [BVN] and National Identity Number [NIN] databases for programmatic access and modification, for example, will create a new slew of products that will further improve access to credit and include the bottom of the pyramid faster.
What should the market from TeamApt in the next five years?
Our mission is to facilitate financial happiness for banks, people and businesses. We believe happiness is the goal in life and money helps people to be happy. Banks are at the centre of money in the world and this is why we set out with serving banks. We help banks to deploy web and mobile banking applications for their customers so that the customers can find it easier to pay, collect, manage or grow their money. In the next few months, we will be serving businesses and we will allow them to do same. In the next five years, we would have connected all the banks, businesses and people in a symbiotic and frictionless ecosystem. Our vision is to see that the friction of people dealing with money is gone completely, the bottom of the pyramids are financially included and people are generally happier by using our systems and infrastructure to deal with their finances.