75TH ANNIVERSARY IN 2020

Nigeria 2020 | FINANCE | VIP INTERVIEW

TBY talks to Ademola Adebise, MD of ALAT (Wema Bank), on the institution's core strengths, technology adoption, and tariffs on transfers and the cost of doing business.

Upon its 75th anniversary in 2020, what are Wema Bank's core strengths which have led the firm to its success in the market today?

Our core strategy has been agility. We are constantly evolving to meet the changing business and economic landscape. This has allowed us to remain resilient and relevant even during extremely bearish phases of our market. It is agility that led us to switch to a regional banking model when it suited the business. This relieved us of some operating pressures and allowed the bank to stabilize. The same spirit of agility led one of the oldest banks in the country to emerge as leader in the digital space with the creation of ALAT, the first of its kind in the industry. We are constantly reviewing and refining our business and operating models to ensure that we are properly positioned to take advantage of the opportunities in our rapidly changing industry.

What market opportunities drew ALAT into existence, and what strategies were implemented to set the product in motion?

The growth opportunities in the Nigerian market at the time were clearly in the retail segment with increasing saturation in the corporate and commercial segments making them a red ocean. Retail is also a segment that is best served digitally to reduce costs and align with shifting consumer behavior driven by the mobile revolution evidenced by increasing device and data penetration and digital disruption. Our demography is also largely youthful and as our engagements at the time revealed, were not interested in the traditional financial services model that was built around the bank branch. It was clear to us that to deliver an experience that was a radical departure from what obtained in the market, we had to leverage a different structure from our traditional bank. So we created a separate, stand-alone digital bank, with its own operating model – different people, processes and (to a large extent) technology. This allowed for the kind of focus, speed and agility required to birth ALAT.

How does ALAT leverage the country's fintech industry further?

Following the success of ALAT, the bank took a decision to embed innovation in its DNA to guarantee a sustainable pipeline of innovation. We also witnessed the rising influx of FinTechs and other Technology Startups across other sectors of the economy and the disruptive value they were adding. So, the bank set up an internal innovation team, and one of their primary objectives was to establish business and technical relationships with FinTechs and other Technology Startups. This led to Hackaholics, our first ever hackathon event that saw hundreds of these FinTechs sign up to partner with the bank to co-create the next wave of innovative ideas. We eventually shortlisted to about 20 teams and after intense engagements a winner was selected. After Hackaholics, some of the most promising ideas were selected to participate in a bootcamp to further incubate/accelerate those ideas. We're about to hit the market with a few exciting ones. Watch this space. We're also advocates of the API economy. It is no longer feasible to expect to create all your technology capabilities internally, so we're taking the open, collaborative approach. Through partnerships, we are mutually extending capacity to offer services through open APIs.

What strategies are you undertaking to maintain your original clientele while attracting a younger customer base?

Quite the contrary, we do not view this as a challenge, but instead as an opportunity. All technology will go through different phases and will follow the normal distribution of the adoption curve. The youth population happen to be the enthusiasts and early adopters, while the older ones are usually late adopters or laggards. This is to be expected. The engagement framework for each sub-segment of the adoption model is where the hard work lies. Enthusiasts and early adopters will be drawn by the technology for the sake of it. To attract and retain them, all you need is novelty and innovation. The late adopters, however, will be attracted and retained by utility and quality of experience. You need to engage them, educate them, making abundantly clear what your value proposition is and how it impacts their lives. Laggards will only follow, after your innovation has become mainstream and they are constrained by available options in the market. We realize that our customer base is split along all these lines and we are not using a one-size-fits all approach for engagement. From product design, to marketing communications, to support, we ensure that we have a very clear view of the customer we're solving for. And as time progresses, we will see a gradual shift of customers across all the various buckets.

How does the surge of mobile transfers improve financial inclusion, and allow products and services to be more accessible and affordable to all individuals and businesses?

The numbers clearly show that more and more people are adopting mobile transfers. It also stands to reason that more financially excluded people will have access. This will be driven by a number of factors. At the lower end of the market, in addition to the agent-led distribution model, the primary driver will be USD-based transactions that will allow customers with low/no data or feature phones to transact seamlessly. Today, a number of banks allow a customer to open a low tier account/wallet, fund and transact, all on USD. This significantly lowers the barrier to entry for the financially excluded. At the other end, falling prices of smart devices and data subscriptions will also enable more and more people even at the mid-lower mass market to perform transactions on their mobile phones. With this increase in accessibility, we will witness the continued growth in the volume and value of mobile transfers across the country.

Will the proliferation of mobile transfers contribute to a reduction of bank charges for electronic transfers? In what other way can this increase be leveraged?

Beyond even this observed trend, the Central Bank also released revised tariffs that materially impacted bank charges on transfers. Also, across the industry, we are now witnessing some banks using low/no charge transactions as a value proposition. Ultimately, this will help further drive adoption, particularly at the lower end of the market. It also means that older transaction artefacts such as cheques are on the way out and will be completely phased out in the next few years. This also puts the onus on banks to ensure stability and reliability of their platforms in order to provide customers a delightful experience, and maximize revenue growth.

What is your outlook for the year ahead?

Globally, the continued pace of protectionism will dampen overall trade as major trade blocs increasingly impose tariffs on one another. The ongoing U.S.-China trade war while pulling back from the brink recently by stopping short of imposing the 3rd round of sanctions is still affecting global trade. For the local economy, the outlook is slightly worse than at the start of the year. Though most analysts had predicted a slow growth environment, this has now been further exacerbated by the public health issues in China with the Coronavirus epidemic. As one of our primary trade partners, the expected slow down in trade volumes will have considerable effect on the economy. Specifically, for the banking industry, we expect to see revenue pressure with the income lines shrinking as a result of the new tariff regime. However, one area of opportunity is in the consumer loans space. Although this is already proving to be a red ocean with nearly all the banks looking to play in this space, and an onslaught of competition from the FinTechs focused on this area. We also see the continued rise of the cost of compliance as we try to navigate a complex business and regulatory landscape. In addition to reduced tariffs, the industry in line with the Loan-to-Deposit (LDR) policy will be looking to grow their loans aggressively. All these in addition to the various ratios and reserves that we pay attention to. We will continue on our digital journey keeping an eye on how this translates to cost efficiency and ultimately our bottom line. It is also clear that business model innovation is now imperative. New ways of creating value and unlocking revenue generation potentials have become critical to the continued growth of our business.