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Facebook Enters Nigerian Banking Sector

By
Ndubuisi Ekekwe
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1

What is the largest market in Nigeria right now? Perhaps Lagos you may note. That is wrong – the largest market in Nigeria right now is Facebook Corp.  Facebook Corp hosts excess of 30 million Nigerians users, far more than the population of Lagos State.

Within five years, most of the users would use messaging for commerce. Facebook Messenger would anchor those within Facebook while WhatsApp would drive the business outside of Facebook. When you add Instagram, you would agree that Facebook Corp is the largest market for any Nigerian consumer business.

Ecobank and Zenith Bank want to launch Facebook Messenger banking with MasterCard.  That is a good move. As Konga learnt, its main competitor was not really Jumia but Facebook which took many of its marketplace customers.  These banks want to reach out to the small businesses where they are, and most are within Facebook Corp.

“Brands and developers around the world are turning to messaging to connect with the 1.3 billion people who use Messenger each month,” said Kahina Van Dyke, Director of Payments and Financial Services Partnerships at Facebook. “We are pleased that MasterCard is developing a service on the Messenger Platform to help small merchants use messaging to manage their business and connect with their customers.”

The Opportunity

According to research done by The Fletcher School and Mastercard Center for Inclusive Growth, of the $301 billion of funds flow from consumers to businesses in Nigeria, 98 percent is still based on cash.

That is the opportunity, and there are rooms to grow digitally and electronically. Some banks are plotting strategically, going ahead to take advantages where these customers are located:

“In line with our goal to serve 100 million Africans by the end of 2020, Ecobank is delighted to collaborate with Facebook and MasterCard to enable underserved and unbanked micro-merchants with the opportunity to open an Ecobank account almost immediately and begin to receive instant payments using Ecobank Masterpass QR on the Facebook Messenger platform…,” said Patrick Akinwuntan, Group Executive, Consumer Bank, Ecobank Group.

 

“Our Bank is partnering with Facebook and Mastercard to introduce Masterpass QR as a means of driving financial inclusion and creating a new payment ecosystem for MSMEs and consumers,” said Mr. Peter Amangbo, MD/CEO of Zenith Bank Plc. “This initiative will help us encourage financial inclusion within the country in line with the strategic thrust of the Central Bank of Nigeria (CBN). Buyers and sellers now meet and conclude transactions in-store, online and on social media, so we are ensuring payments can also be made on these platforms via QR codes, without having to log onto other solutions or even take a break from what you are doing on Facebook.”

Note how these banks mentioned Facebook – yes, they are actually working directly with Facebook in these products. This goes beyond MasterCard as they would not have mentioned Facebook if there was no direct coordination with Facebook. And Facebook would not be involved if there is nothing there for it. No matter how you see it, Facebook is finding ways into Nigerian banking.

All Together

This is the expected natural trajectory as the ICT utilities take over the lands. Once Facebook perfects the integration with MasterCard on Messenger, it would do same on Instagram and WhatsApp. Then, it would be opened to any financial institution that wants. MasterCard is a natural payment aggregator, agnostic of banking institutions. Facebook would be the platform while MasterCard would act as the “interface institution”[payment processing] and banks the hosts [the accounts]. The implication is that over time few would bother to notice the hosts, focusing more on the platforms [once you have set up an account and put your bank details, there is no need to even remember the bank again as the transactions would happen on Facebook while MasterCard handles the underneath processing with the banks].

The banks are doing what they have to do: with Facebook Corp, there is no other alternative – you either fall in line or you go extinct. This is going to be the future of banking in Nigeria. No one goes to a bank in China; most go to WeChat to do banking. Facebook has a plan for that in Nigeria. The plan is now under execution.

This is March – Build Excellence in Your Business

By
Ndubuisi Ekekwe
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0

Entrepreneurs,

As you begin the month of March, I want to challenge all of you. You may be small but note that there is glory if you demonstrate excellence in what you do. People are watching and any step you take is what they would use to judge you for engagements. There is no small or big job – every job is a job. You must put the best efforts to help your clients. It is always a great privilege that someone has hired you to offer services to his or her firm. It could be product supply, engineering design or even consulting services. Do not take it for granted: there is nothing you know many others do not have.

When I started my practice [the Advisory Services], I used to beg for speaking opportunities. I would even offer to cover my logistics.  I needed platforms to reach out to people that would pay for my services. Those days, it was not straightforward. Then, the moments came: invitations to speak now come largely weekly. Instead of speaking for free, it is flipped that someone has to pay good money for my time [I give many free speeches in Africa but I charge fees in Europe and U.S.].

The message today is this: the best time to audition for opportunity is when there is no apparent opportunity before you. People are watching. And once those opportunities emerge, they know who to call. The best validation I ever got was when a potential client asked me to come over to discuss a project. At the end, I told him if we would need to send a proposal. He said “No, your prior works are enough proposals. I read what you wrote on this topic. Nothing needs to be added”. Just like that, we signed a contract and began the work. Of course, I am very happy that my client remains a fan.

Tenacity, focus and excellence will always win. And note that every job is a job – there is no small or big one. You must commit to absolute quality. Invest time to let people know what you do. That is the only way they would pay attention when the moments arrive.

Have a great profitable March.

Nd

Open Innovation Event

By
Ndubuisi Ekekwe
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0

In our Advisory Services, we offer four services. One is called the Open Innovation Event. Others are Discovery Innovation Presentation, Discovery Innovation Workshop, and Advisory Services.

Open Innovation Event: In this engagement, we would run a mini-pitch competition within your firm as part of a process to mine ideas from your team. We understand that some of your staff members have great ideas. We would work with you to get them to share them. We will handle all aspects of the process – structuring the survey, analyzing the data, coordinating with representatives and deciding on the finalists. In a recent client engagement, 45 staff members of the client (out of 420 that submitted ideas) pitched ideas to judges (from IT, Strategy and Executive Management office). At the end, 5 of those ideas became products.

Contact: tekedia@fasmicro.com

The Most Important Gene in Great Digital Startups

By
Ndubuisi Ekekwe
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0

Between building for platforms and not just products is also making things for users and not just buyers. Great digital companies turn customers into fans: they design and create products for users and not just buyers. Making things for buyers is an industrial age business model – they buy and they are gone. Today, products must have full-cycle value where the users are engaged at both pre- and post-purchases. Indeed, you are selling living experiences and not just things. Yes, you want the products to be part of the lifestyles of the users for you to have success. WeChat is a good example: it is both a platform and a full-cycle product with users who depend on it to run their lives.

Any digital product that does not have the duality element will struggle especially in consumer market: you need the product and the platform as one to make progress these days. You need to build platforms because they have the elasticity to evolve with your business logic. Products are static and fade quickly as markets change. Platforms can grow without bounds, anchoring new opportunities on top. The business logic of integration, process and decision making are best handled on platforms over products in the internet space. With platforms, you have CUSTOMERS; products deliver consumers.

Largely, the shift to platform-full-cycle product is anchored on network effect – the positive continuum which is based on the construct that the more users you have in an ecosystem, the better is the value to everyone.  Digital companies like Facebook begin without thinking of sales. They simply focus on delivering the best possible experiences to customers. The goal is to help to reduce the frictions in the lives of customers. They spend money for years, earning no revenue, as they work hard to ensure users like and use their products.

You can associate the funding mechanism from venture capitalists as part of the catalyst for this.  Non-digital firms typically begin lives looking for how to immediately get users to buy and spend money. The reason is that they have no platform to nurture. So, the only thing they gain is the sale that happens. The experience is immaterial: it is buy that drives the strategy.

As you build your business, hiring marketing, advertising and all the elements required to run firms, you must architect a roadmap on how that product must be structured for users and not buyers.

Four Themes for Digital-First Retail Banking in Africa

By
Ndubuisi Ekekwe
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0

McKinsey identifies four themes for digital-first retail banking in Africa. They are:

  • End-to-end digital transformations (e.g. Equity Bank);
  • Partnering with telco companies (e.g. CBA in Kenya or Diamond Bank in Nigeria);
  • Building a digital bank (e.g. ALAT in Nigeria); 
  • Building an ecosystem (e.g. Alipay in China).

Notice that no African bank has a banking digital ecosystem. Alipay remains a great benchmark globally. Read the press release below.

The McKinsey Global Banking practice has published a new report on African Retail Banking – Roaring to life: Growth and innovation in African retail banking (https://goo.gl/grn5ju).

The report finds that Africa’s banking markets are among the most exciting in the world. The continent’s overall banking market is the second-fastest-growing and second most profitable of any global region, and a hotbed of innovation. Nearly 300 million Africans are banked today, a number that could rise to 450 million in 5 years. The report illustrates four segments of African markets – from the advanced markets like South Africa and Egypt, to fast-growing transition markets such as Kenya, Ghana and Cote D’Ivoire, to sleeping giants like Algeria, Nigeria and Angola, to nascent banking markets like DRC and Ethiopia.

The report finds that Africa’s top quintile banks – the so-called “winners” – are simultaneously 4 times more profitable and over 2 times faster growing than bottom quintile banks. The report’s key findings are that these “winners” are defined by employing one or more of five winning practices:

  • Draw the right map. In Africa, geography matters. About 65 percent of African banks’ profitability (measured by RoE) and 94 percent of their revenue growth are attributable to their geographic footprint. Importantly, the report highlights a shift in exchange-rate adjusted revenue pools North Africa, East Africa and West Africa, and away from South Africa.
  • Right segments, compelling offers. We find that 70 percent of revenue pool growth will occur in the middle segments, defined as earning between US$ 6,000 and US$ 36,000 in annual income. The mass market – individuals earning less than US$6,000 per annum – accounts for 13 percent of the growth, but is the fastest growing segment. Whichever segment banks choose, having the right proposition is key. Our survey of 2,500 banking customers in 6 African countries finds that 25 percent of customers choose price as the most important factors in choosing banks. Equally important is convenience, also cited by 25 percent of customers. Service is the third most important factor, selected by 12 percent of customers. We also find huge cross-sell opportunities – while 95% of Africans have transaction products, fewer than 20 percent have lending, insurance, investment or deposit products.
  • Leaner, simpler banking. While African banks’ cost: income has been falling, we find that this is due to rising margins for banks, and their cost-to-assets ratio has actually been worsening. At 3.6 percent, Africa has the 2nd highest cost-to-assets ratio in the world. However, rapid efficiency gains are possible, and we spotlight eight African banks that have made strides in efficiency in the last five years, through a combination of three levers – end-to-end digitisation; sales productivity improvements fuelled by advanced analytics; back- and middle-office optimisation.
  • Digital first. 40% of Africans prefer to use digital channels for transactions. In four major African countries – South Africa, Nigeria, Kenya, Angola – a higher proportion of Africans prefer the digital channel for transactions to the branch channel. Given low branch density in Africa, banks need to employ a digital first approach. The report hones in on four themes of innovation emerging in Africa on digital – end-to-end digital transformations (e.g. Equity Bank); partnering with telco companies (e.g. CBA in Kenya or Diamond Bank in Nigeria); building a digital bank (e.g. ALAT in Nigeria); and building an ecosystem (e.g. Alipay in China).
  • Innovate on risk. African banking still has the second highest cost of risk in the world. Poor data availability is part of the problem: 11 percent of Africans are on credit bureaus, compared to in excess of 90 percent in advanced markets. However, we are seeing innovations such as banks partnering with data and analytics fintechs like Jumo to improve credit underwriting; banks partnering with telcos to leverage telco data to issue small-ticket loans on mobile; and players employing payroll lending across countries.

This new report draws on the experience of McKinsey’s partners and colleagues serving banks across Africa; McKinsey’s Global Banking Pools research; a proprietary database of the financial performance of 35 of Africa’s leading banks; a survey of executives from 20 banks and financial institutions across Africa; and a broad-based survey of 2,500 banking customers from 6 African countries – South Africa, Egypt, Nigeria, Morocco, Angola and Kenya.

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