The most successful or impactful financial technology product, in Nigeria, after Diamond Bank industry-shaping DIBS (Diamond Integrated Banking System), is Remita, an integrated electronic payments and collections platform developed by SystemSpecs, a local ICT powerhouse. While DIBS pioneered a new way of banking, making banking exciting, Remita is redesigning the core architecture of government in Nigeria. Before DIBS, intercity merchants moved cash in bags, exposing themselves to armed robbers, because bank accounts could only be operated in the specific branches they were opened. But when DIBS came, the era of open in any branch, enjoy banking in all branches, of the same bank, was invented. Nigerian banking has never been the same.
Remita is doing likewise, but unlike helping the citizens and businesses access their money irrespective of local domicile, Remita is making government to operate with memory. In the past, government with positive account balance could be taking overdraft in another account, in the same bank, despite having enough positive balance in the other account. Through the Treasury Single Account (TSA), anchored on Remita, government now operates, with clearer visibility. For Remita, it is a moment, unprecedented in the local financial technology space.
Remita is an e-Payments and e-Collections solution on a single multi-bank platform. Today, Remita is in use by many individuals, public and private sector organisations that process over 500 Billion Naira worth of transactions on a monthly basis. Adopted by the Central Bank of Nigeria for the payment and collections of funds on behalf of the Federal Government of Nigeria and used by all 22 commercial banks and over 400 micro finance banks, Remita has significantly assisted to revolutionize the e-payment industry in Nigeria.
Remita also comes with an optional Payroll and HR solution for full integrated processing. Remita, developed by SystemSpecs, and voted many times as Nigeria’s Software of the Year, is indeed a success story and a pride to Africa.
A key component of the Remita N500 billion monthly transaction volume is the TSA, a financial policy introduced by the federal government of Nigeria, to consolidate all inflows from all MDAs (ministries, departments and agencies) into a single account at the Central Bank of Nigeria. Through Remita, the TSA initiative enabled Nigerian government to take full control of its cash assets.
The Remita Moments
In a letter reportedly written to President Muhammadu Buhari by John Obaro, Founder and Managing Director of SystemSpecs, developers of the Remita application, the allegation that SystemSpecs pocketed 25 billion Naira was refuted. Obaro explained that the one per cent commission was negotiated prior to the signing of the contract; and the one per cent commission was shared by SystemSpecs, participating commercial banks and the Central Bank of Nigeria in the ratio of 50:40:10 respectively. According to findings by PremiumTimes,’Remita’ is not “an agency” but an application/software for executing payment instructions and collection of government revenue
If you do the maths, it does imply that Remita generates more than N2.5 billion monthly for SystemSpecs (500 billion monthly transaction, mainly through government with commission of 1% and receiving 50% of that 1%). So, the annual revenue from Remita comes down to N30 billion. It is very safe to assume that Remita commands more than 90% in profit since banks do the jobs; all it does is to provide the code. Using that, Remita could be generating N27 billion of profit yearly. (Note: the N500 billion was in 2016. I do expect this volume to have increased as more entities are moved into Remita by the government.)
That is why Remita is the most successful product, in profitability, in the Nigerian financial sector, ever. There is no record of any technology that has generated that level of margin and volume mix within years of launch in the history of Nigeria. Remita is having its moments; the glory is on SystemSpecs.
The impact is huge and let me explain, comparing with the total market valuation of some banks in Nigeria, using Bloomberg Markets which captures the data daily. As of today, here is the state of selected banks.
- Wema Bank Plc: N20.4 billion
- Unity Bank Plc: N7.13 billion
- Fidelity Bank Plc: N32 billion
- FCMB: N25 billion
- Skye Bank: N9.4 billion
- Sterling Bank: 29.4 billion
Now, you can see who is really doing banking and making money. Oh yes, banking is necessary, but banks are not really that important, if you want to join the club. Remita can buy most Nigerian banks with its annual profit. This is what the fintech (financial technology) entrepreneurs see and the reason the sector is heating up with many players. The value creation does not belong to the people on suits, exclusively.
Beyond Government: Journey to Africa
Remita has since moved beyond serving government. It is aggressively working to win startups, SMEs and companies of any size. It understands that government partnership will not be enough, because what is outside is certainly substantial. The Management of this product believes the product is on a mission: build a pan-African brand that commands presence in key markets in the continent. They are marketing, promoting and pursuing new market segments for a product that is largely bigger than the owner. Remita is SystemSpecs and, I predict, it will not be long for SystemSpecs to be renamed Remita.
But there are others with ambitions. This business is not just Remita. Interswitch, Paystack, Fluuerwave and other payment companies are aggressively competing. I do think that the winner will be anchored on technology and service. Remita is far ahead. Paystack crossed N1 billion worth of monthly transaction last month, Remita processed more than N500 billion worth,monthly, last year.
The competition will be intense and many fintech companies will have to consolidate in the next five years. According to Disrupt Africa, Africa has more than 300 fintech entities. That is more than needed. I expect Remita to be one of the winners. It begins with a huge advantage: free cash from its federal government of Nigeria contract. That provides it capital to fund expansion. Moving into small African countries will be very catalytic for it now fintech is still at infancy in Africa. It cannot afford to make the mistake of Interswitch which wasted time before it began to execute its African strategy.
The Remita Limit
While Remita sounds very exciting, the core of its opportunity is the contract it has with the Nigerian government. It can be switched off if a new government seeks new terms or decides to work with another partner. This is the Remita risk. It has to think beyond what it does today, to build a solution that will unite Africa, and offer something none has been able to do in Africa.
In this videocast, I discuss the need to build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. None of the products we have today meets that standard. Largely, I envisage a situation where all you need to buy and sell across Africa is one bank account in just one African Union country. With that, you do not have to even think about the specific currency of that account as technology will seamlessly make it possible to access other African markets for payments, transfer, etc. The banks or fintech companies must still comply with all regulations related to inter-national transfers, forex ,etc. The only difference is that customers will not see them as they will be hidden with technology.
Rounding Up / Remita Bank
As I conclude this piece, I hear Remita bank: an internet-only banking institution that will have zero branch network. This bank will deliver service and help pioneer digital lending, and other digital banking services in Nigeria, at cost model that will beat traditional banks. SystemSpecs has the money to get a license, because it has to diversify from its one-contract product, even as it seeks for alpha from other areas. It’s Remita – remitting value.