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The Voice for Banking and Finance in Africa
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December 2012 £3.99
The Role of CBS in Strengthening the Bank’s Market Position in Africa Entersekt: Africa’s Answer to Banking Security Issues
MTN Xaas: Microfinance Banking SaaS from CWG and MTN
Winning the Case for Core Banking Change
An interview with Entersekt’s CEO, Schalk Nolte, and founder Christiaan Brand
A look at the newest micro-finance banking software solution from MTN
Building a strong business case for core banking change
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FROM THE EDITOR
Welcome to Technology Banker - Informing, Influencing and Insipiring Business I can still clearly remember the first time I had to open a bank account. I needed to bring along with me some form of ID and my birth certificate. I had to go to the bank manager’s desk, fill out a lot of forms, and wait for an hour to get my passbook. When I needed to withdraw cash, I had to fill out a withdrawal form and drop it inside a withdrawal box with my passbook, and had to wait for ages to be called out. That time sounds positively ancient, but it was only 25 years ago.
Thanks to new technology, I now rarely visit my bank. In this month’s issue, we look at core banking solutions and how it changed the banking landscape, especially in Africa. We also have interviews with Entersekt, Africa’s very own IT security provider; Infosys, the CBS giant from India, and Chase Bank Kenya CEO, Raj Singh. I hope that you will find this issue informative and entertaining once more. To express your views, please e-mail me at hope.varnes@technologybanker.com Hope Varnes, Editor
CONTENTS Page 4 The role of CBS in strengthening the bank’s market position in Africa We look at how core banking solutions can empower banks Page 6 Product profile: Finacle: The Role It Plays in African Banking We catch up with Haragopal M, Global Head for Finacle, to ask him how Finacle help its customers in Africa
Page 16 Winning the Case for Core Banking Change We provide you some tips on how to build a strong business case for core banking change Page 18 New Product Release: MTN Xaas: Microfinance Banking SaaS from CWG and MTN
Page 8 Policy v Technology: How central banks’ policies affect banks’ use of new technology We look at how central banks’ decisions affect the banking industry
Page 20 Choosing CORE Banking Solution: All-inclusive vs. Boutique Approach A look at the newest micro-finance banking software solution from MTN
Page 12 Executive Interview Entersekt: Africa’s Answer to Banking Security Issues An interview with Entersekt’s CEO, Schalk Nolte, and founder Christiaan Brand
Page 23 View from the Top: Africa: From the Eyes of a Banker An interview with Raj Singh, CEO of Chase Bank Kenya
Page 25 Tech Page: Cloud Computing Simplified We try to clarify cloud computing and the ways to use it Page 27 Vendor’s Page: Nigeria’s Mobile Money Landscape and Challenges Ahead An interview with VTNEWORK’s CEO, Peter Ojo, to find out his views on Nigeria’s mobile money market Page 32 New Appointments Page 34 Events for Your Diary Events you should not miss this month Page 35 Vendors Directory A list of suppliers for your infrastructure and banking solution needs For Private Use Only
Publisher - Stefan Grossetti Stefan.grossetti@technologybanker.com
Sales & Marketing - Jenny Howard Jenny.howard@technologybanker.com
Editor - Hope Varnes Hope.varnes@technologybanker.com
Managing Editor - Remi Akinjomo Remi.akinjomo@technologybanker.com
Deputy Editor - John Bennett John.bennett@technologybanker.com
Design & Creative - Monika Derfinakova Monika.derfinakova@technologybanker.com
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FEATURE
The Role of CBS in Strengthening a Bank’s Market Position in Africa The development of Core Banking Solution is probably one of the greatest innovations in the history of banking and finance. It is up there with the invention of money By Hope Varnes and compliance much easier than before by automating the generation of accounting and management data for analysis.
The Role of CBS in Strengthening the banks market position
S
ince its inception, core banking solution has become an integral part of the banking system, especially in the service delivery, product development, and risk management and regulation compliance. The centralisation of data access and management that core banking solution offers has turned customer into customer of the bank rather than customer of the branch. This feature has revolutionised banking services, enabling customers to access their account anytime, anywhere, with low incidence of errors and high rates of accuracy. Gone are the days when customers had to travel a long way to their branch, complete a withdrawal form, drop it in a box and wait until their transaction is dealt with, and this could be hours if there are hundreds of customers waiting to be served. Without core banking solutions, ATM services and mobile money will not be possible. So far, core banking solution has delivered increased banks’ productivity and efficiency, reducing human error and providing standardised process. It has also improved the delivery of service by enabling banks to offer multicurrency transactions and 24 hours banking service, anytime, anywhere. Finally, it has made risk management
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With all the benefits, it offers, a good core banking solution can be a powerful tool that a bank can use to strengthen its position in the market. The current banking market is tough, and only the fittest will survive. For a bank to compete, it needs to be agile. It needs to be able to address the customers’ demands quickly and efficiently. With so much choice in the market, customers are spoilt, and their loyalty will only go as far as the quality of service that a bank will offer. After all, why stick with a provider that does not offer the range of product and quality of service that others provide?
Wielding the Power of Core Banking Solution The banking needs, of the African market, are hugely different from the needs of the developed world. It is, of course, common knowledge that Africa has a large unbanked population, but still consumes financial services. Additionally, most of the population in Africa has low disposable income. So, African customers require free or low cost financial services. There are also a huge number of Africans in diaspora, and family members working in big cities, who send money back to their families living in rural areas. They too have different needs. They need a quick, efficient and safe way to get the money to their families, preferably low cost. Taking these into account and the fact that customers’ demands change at lightning speed, banks have to be very agile indeed. The bank that can answer these needs and offer reliable up time service, and still maintain a healthy profit will have the biggest chance to capture the business of 134 Million financial consumers in Africa.
With 134 Million viable financial consumers, the prize is great, but the challenge is steep. And the bank that can correctly wield the power of core banking solution will end up the winner. So, how can core banking solution empower banks?
Providing Excellent Customer Service Like in many other countries, the African working and middle class are increasing in numbers. And their disposable income is higher than ten years ago. As a result, they have more money to spend, but they are time-poor and are also used to real-time transactions offered by the internet and mobile technology. Therefore, they are impatient. A bank that can provide them with a fast hassle free 24/7 banking service with nearly 100% uptime, in a continent unknown for its reliable connectivity, is without a doubt providing an excellent customer service. And this is not a pipe dream. A 100% up time may be impossible, but core banking solution with an excellent track record can help banks deliver quick and efficient banking services when and where the clients need them.
Targeted Sales and Marketing Most core banking solutions available in the market have the ability to analyse customer data. This feature will give the bank an idea of customers’ transaction pattern and will enable them to personalise their product offering and marketing campaign, making their products relevant and their campaigns, effective.
Reduced Cost of Bank Ownership Big banks normally run using a number of isolated, limited applications to process and manage their retail products and services products. According to Financial Insight, core banking amounts to approximately 12% of a bank’s IT cost, with 50% of that spent on maintaining legacy systems and keeping its network connected. CBS can reduce this cost.
David Arnott, CEO for Temenos, in a press statement issued after its core banking solution, TEMENOS T24, was
chosen by PT Bank Syariah Mandiri, Indonesia’s largest Islamic bank, claimed that by replacing legacy application and automating banking process with its core banking solution, T24, Temenos’ customers were able to reduce the total cost of their bank ownership and enables banks to become service-oriented, and as result strengthening their reputation of excellent customer service. Another core banking solution provider, FIS, claimed that its FISTM Profile Core Banking Solution has reduced their clients’ total cost of bank ownership by up to 60%.
Speed up time to the market ING Direct Australia is one financial institution that maximised core banking solution’s ability to speed up time to market.
ING Direct engaged with a number of vendors which collaborated to develop a core banking solution bespoke to the business The company had a large project backlog and could not cope with the bank’s demand for expansion. The company had an internal team of 18 testers and 49 developers, and they were regularly asked to test the impact of an idea in a complicated banking setting. But each test was taking up three months for 8 people to complete. Therefore, they needed a faster way to do the process to make the team more efficient and productive. According to Andrew Henderson, CIO, ING DIRECT Australia, their team is lean, efficient and very engaged, but their existing delivery method is significantly limiting the number of projects they can manage simultaneously. To solve its problem, ING Direct engaged with a number of vendors which collaborated to develop a core banking solution bespoke to the business.
‘Now we can provide a copy of the bank to anyone in the bank at any time - in 10 minutes Ben Issa, Head of IT Strategy, ING DIRECT Australia ‘
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INTERVIEW/PRODUCT PROFILE
Finacle: The Role It Plays in African Banking Finacle, is no doubt, a leading core banking solution. Mention Finacle to any experienced IT and Banking professionals, and you have to explain no more. Technology Banker catches up with Haragopal M, Global Head for Finacle, to ask him how it has helped its customers in Africa
With a growing population that demands access to financial services, regulators in Africa are waking up to the possibilities of technology driven banking automation. This is driving mandates across various countries in the continent requiring banks to adopt a robust, scalable CORE (Centralized, Online, Real-time, Electronic) Banking system to support their daily operations. The introduction of payment systems and the need to support intra-bank and inter-bank transfers has further amplified the need for banking technology.
We are confident that Finacle has a strong universal banking solution that delivers the best in class core banking technology improving operational efficiency and productivity by eliminating manual tasks which will in effect reduce process time and enhance customer service.
Banks in Africa are also finding out that a large section of the population is unbanked and resides in far flung areas. As per a 2011 report, out of a total African population of 1 billion, only 20% have bank accounts. This huge disparity in the reach of banking services has been offset by the penetration of mobile devices. Around 64% of the African population has access to a mobile device. Banks will increasingly look to mobile as a costefficient, ubiquitous channel to reach consumers and to deliver value added services. This brings into context the importance of mobile banking, digital commerce wallets, agency driven banking and financial inclusion technologies, which Finacle has pioneered over the years.
Additionally, African banks need technology to develop a 360 degree view of their customers to improve customer experience and understand their purchase habits. Finacle has a comprehensive surround solution suite that delivers intelligent analytics, CRM, social media and location based advisory capabilities that can help banks achieve all of the above.
Haragopal M, Global Head for Finacle you tell us how Finacle helps strengthen your Q Can banking clients’ position in the African market?
A
Finacle is traditionally associated with financial institutions as an innovation partner helping them drive outcomes that eventually improve efficiency, time to market and the reach of financial services. It is Infosys’ flagship banking solution. So far it has helped our clients by: • Improving top-line revenue through enhanced customer experience and quick launch of offerings • Delivering greater efficiencies to sustain profitability • Minimising risk of operations through agility and compliance
Africa is an exciting and challenging market for Infosys.
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banks in Africa have successfully used Q Which Finacle?
A
Africa was Finacle’s first overseas market outside of India. Having entered in 1998, we have been present in the continent for over a decade. 20% of Finacle’s global customer base is from Africa.
Our market footprint in the continent is diverse with small and large banks spread across Egypt, Kenya, Uganda, Nigeria, Ethiopia, Tanzania, South Africa, Mauritius, Zimbabwe and Namibia
Finacle Channel Solution Suite (Mobile, Online, Digital Commerce and Financial Inclusion), on the other hand, delivers improved reach of financial services through cost-efficient digital channels and agency banking, business growth through digital commerce (mobile and online payments), and person driven user experiences that help engage customers.
Other Finacle products are: • Surround solution suite, which delivers customer preference insights and real-time analytics on customer decisions driving top-line growth
A few snapshots of our African wins (some in progress, others live) in Africa include: • United Bank of Africa - a large bank with 21 branches in countries including Nigeria, the USA, United Kingdom and France, where we deployed core banking, internet banking and treasury solution to power its operations. It was one of our best implementations to-date that was completed in a record time and delivered scalability, agility and clear differentiation to the bank. • Standard Bank - one of the biggest banks in Africa, has implement Finacle to power their banking reach across Africa. Finacle Digital Commerce enables the bank to take onboard and manage agents, using mobile or internet channels. The agents, in turn, help the bank engage and service remote customers cost-effectively while delivering cash deposits/withdrawals and fulfilling service requests. The project is still in its deployment stages and is expected to be a first of its kind for a large bank in Africa.
• Compliance and Risk Mitigation, a globally compliant solution that helps banks balance regulatory and business growth requirements • Global delivery Excellence, the global delivery model we pioneered, and which has a rich legacy of successful deployments worldwide
One of the factors for Finacle’s success is our dedicated business development, engagement engineering and support teams on standby. Finacle has a dedicated team of over 1,000 people just dedicated to our African market, all with years of experience.
• Equity Bank Kenya - Infosys replaced the mainframe based, legacy system of the bank in 2005 followed by an upgrade to Finacle 10, a superior version with security enhancements. • Mauritius Post & Cooperative Bank - Employed our Retail Banking, Trade Finance and Loan Origination System • Bunna International Bank, Ethiopia - Core banking transformation and loan origination • Equatorial Trust Bank - Finacle replaced the bank’s legacy system with Finacle are the important features of Finacle product Q What range?
A
Finacle Universal Banking provides banks with the technology platform for core banking, mobile wallets and agency banking to improve the reach and inclusion of financial services. The solution has a flexible architecture, is future ready with built-in feature extensibility and has modular solution with pick and choose features, which control investment and Lower TCOs.
‘Africa was Finacle’s first overseas market outside of India. Having entered in 1998, we have been present in the continent for over a decade. 20% of Finacle’s global customer base is from Africa’
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FEATURE
Policy v Technology: How governments and central bank’s policies affect bank’s use of new technology by Grey Thomas
C
entral banks play a very critical role in the economy, but they have always worked behind the scenes. Although the public knew central banks exist, news about them were never consumed daily, unless by those in the financial sector. But that all changed in 2008. The financial crisis that started brewing in 2007 had blown up in everyone’s face on that fateful day, 14 September 2008, when Lehman Brothers received a call from its lawyer, informing them that the British regulator, backed by HM Treasury, would not allow Barclays Capital to rescue them without the backing of the American government. From that time, all hell broke loose, and central banks from various countries had been thrust into the spotlight. Many of them scrambled, to rescue failing banks, calm the market, keep the confidence up and diffuse the negative impact of the financial crisis in their economy. They had to use non-standard monetary policy measures to provide liquidity to banks that needed it quickly while reassessing risks that they previously overlooked, and putting tighter regulations in place. Whether it is true or not, many
8 | Technology Banker December 2012
Headline of the Lehman Brothers Collapse, 2008
Central Bank of Kenya believed that, that single decision made by the American Treasury, to let go of Lehman Brothers was an error of judgement that led to the global economic crisis that many countries are still struggling to overcome. Before the American government pulled the rug under Lehman’s Brothers, no one had believed that a financial institution that big could go belly up. It would not be surprising if businesses and investment boards across the world are devoting a significant amount of time deliberating and second-guessing the central banks’ next move, diverting their attention from monitoring vital trends, spotting opportunities and planning new products. The case of Lehman Brothers and the subsequent financial crisis highlighted the reality that decisions, taken by central banks, have a significant impact on the banking industry. Over the years, banking regulations, especially in the west, have become less confined and have changed from operational to market oriented. As a result, competition in the sector intensified, driving banks to be more innovative in their offerings. Since the onset of the financial crisis, central banks have tightened their regulations, and policies have become more complicated. And there is a high focus on risk mitigation. One of the major policies that emerged from the 2008-2009 financial crisis, is BASEL III, with the main focus on increasing banks’ capital ratio to make them more resilient. The effect was that, weaker banks had to restructure their business models or were completely weeded off the market. The new policy requires banks to improve their risk assessment methods and have better reporting. To keep up with new regulations, banks have turned to technology for support. And the Technology industry did not disappoint; new products and services were introduced in the market both bespoke and off the shelf.
SunGard launched its Risk & Performance Management solution, Ambit Liquidity Optimization. The solution suite includes Transfer Pricing, Liquidity Risk, Treasury Management, Cash and Liquidity Monitoring, and Operational Control. According to SunGard, its Ambit Liquidity Risk product features advance reporting, which allows the bank to weave contingency planning into stress scenarios, Stress Testing Scenarios, which simulates the influence of realistic stress scenarios on the balance sheet; and Cash Flow Simulation, which gives the banks an insight into the weaknesses of their funding source. Another core banking solution provider, Oracle, released its Oracle Financial Services Basel Regulatory Capital, which comes with preconfigured Pillar 3 reports and regulatory reporting of individual jurisdictions such as COREP in E.U, FFIEC 101 in U.S., IFSB for Islamic banks, all provided in the required formats. As with SunGard’s solution, Oracle’s Financial Services Basel Regulatory Capital also provide stress testing scenario. Additionally, it also offers exhaustive modelling framework, incorporating a complete set of statistical procedures such as linear regression, logistic regression, decision tree analysis, clustering techniques, time series analysis, and more. The solution supports various business models for the risk parameters e.g. probability of default (transition matrices, generalized linear, option pricing theoretic, structural model), loss given default (linear regression using beta transformation) etc. The users can develop models or host models calibrated externally. Moody’s Analytics, on the other hand, came up with Scenario Analyzer™ and RiskAuthority™. The integrated solutions provide clients with centralised data management and collect and consolidate all the information required for regulatory stress testing and calculating regulatory capital ratios. It has a built-in data quality checks to provide banks with up-to-date data before they carry out stress testing and capital calculation process. The Module uses templates to deliver correctly formatted reports, covering over 50 countries, enabling banks to deliver both group and solo reports to their regulators with ease. All products available in the market have strong credibility and promise a truck load of benefits, which means that banks don’t have any excuse not to meet the new regulatory policies.
‘Before the American government pulled the rug under Lehman’s Brothers, no one had believed that a financial institution that big could go belly up’
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NEWS
New Mandela Banknotes No. in Circulation New Mandela banknotes were released for circulation in South Africa on the 6th November 2012. The note presents an image of the first South African black President, now 94 years old, and still remains as a symbol of freedom, human rights and democracy. Mandela is popularly known as ‘Madiba’ in his clan. The new notes also feature South Africa’s ‘big five’ wild animals including the rhino, elephant, buffalo, lion and leopard. The new Mandela notes can now be used together with the old notes, which will be phased out in stages.
Security Breach Compromised Credit Card and Bank Details
Nedbank, gearing up for its Windows 8 banking app
Afrexim Bank Urges Banks to Take Advantage of Its Services
South African based merchant service provider, PayGate, confirmed that its security was breached in August. PayGate’s admission followed Payments Association of SA’s (PASA) disclosure on the 9th of November that a number of credit cards and banking details handled by an online processing company were compromised.
Nedbank launched its first banking app for BlackBerry, Android, and other devices earlier in August to its staffs then later on introduced to bank customers. The app has 6 core functions including, net worth calculation, budgeting, spend analysis, saving for a goal, alerts and calendar view. The app is available free to Nedbank, as well as nonNedbank, customers.
Afreximbank held a 2-day seminar on 5th November 2012, which was attended by 80 bankers and financial institution’s officers across 16 African countries in Cairo, Egypt. During the seminar, the African Export-Import Bank encouraged African banks to take advantage of the new opportunities it provides to strengthen their business relationships.
The company was delighted by the high uptake of the banking app, so it decided to launch for Windows 8 devices, as well. According to the Chief Executive Officer (CEO) of Nedbank, the banking app will soon be available to all devices running in Windows 8 platform. So far, Nedbank’s banking app is the only app in the country which has not experienced any phishing attacks since its launch.
According to the President of Afreximbank, the bank’s specialised training course in structured trade finance was designed to empower African banks to achieve the requirements of their customers as well as their partnering institutions. He added that the training would prepare bankers in dealing with risks in trade financing during change, especially in tough politico-economic situation.
PASA assured customers that it is taking strong measures to protect customers and PayGate is working closely with card association experts and banks, to ensure that all loopholes are closed. It also assured customers that they did not store any personal address and ID numbers, but it did store e-mail addresses. Approximately 100,000 bank customers had their bank account details exposed during the breach. Cardholders are urged to check their account transactions over the last weeks and report any dubious transactions.
Afreximbank’s annual seminar/ workshop offerings started in 1999 to aid in raising structured trade financing competence among African banks and other financial institutions.
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INTERVIEW
Africa’s Answer to Banking Security Issues Within 3 years of conceiving of their mobile authentication prototype, Entersekt has captured 70% of the South African authentication market. Technology Banker talks to the CEO Schalk Nolte and one of the founders Christiaan Brand, to find out more about their product and their views about mobile and internet security Conducted by Remi Akinjomo
Q Can you tell us a little about Entersekt? Nolte) We started out about 4 years ago, A (Schalk when Christiaan, together with the three other founding members, were completing their master’s degrees in engineering. It occurred to them that there might be a way of better securing online transactions and transactions from a mobile phone. So they started tinkering and came up with a prototype. One of the founders who worked on this model is my brother Dewald Nolte, which is how I became involved. At the time I was doing business consulting, and it was only natural to offer business advice right from day one.
Schalk Nolte, CEO
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About a year later, I thought: ‘This is a very good idea. Why don’t I seek funding and we can do this properly?’ The result was that towards the end of 2009 we opened offices in Technopark, Stellenbosch. And, in early 2010 we started building a prototype in earnest and appointing some additional staff members. Since then we have grown phenomenally, even with limited funding. We now employ more than 40 people, and we have opened a UK office as well as a presence in the USA with 2 very senior people. Towards the end of 2012, we will be formally opening a US office. It took us only 3 years to progress from initial concept and the building of prototypes to full speed operation and capturing 70% of the South African market. Normally IT start-ups take 3-4 years to develop their first prototype. We find this phenomenally exciting.
Technology has so many applications that our biggest challenge at the moment is keeping focused. We constantly keep thinking of new possibilities for our solutions. For us, banking security is the low hanging fruit, but there are opportunities around medical access in the US, secure communications between customers and enterprises, access to virtual private networks, and more.
Q How big is your market in Africa? Nolte) Actually, we already serve the A (Schalk global market by providing certificates to mobile phone users. Certificates are used to identify users themselves. This technology was available as far back as 2000. Initially, big certificate authorities (companies selling digital identities – or certificates) thought that every user would have their own personal certificate on their personal computer. This didn’t really pan out as a PC was simply not as “personal” as the mobile phone could be. We saw the gap for mobile devices, so we filled it. There are currently five billion mobile users in the world, and we want as many of these users as possible to have our certificates on their phones.
Ned Bank App Screenshot you tell us more about the mobile Q Can authentication solution? How does it work and how does it protect banking customers? Brand) In a nutshell, the mobile A (Christiaan authentication solution puts customers completely in charge when it comes to any electronic transaction. Whether you try to pay someone from your internet banking account online or whether you are physically paying at a retail store using your credit card, you want your transaction to be secure. With mobile authentication, any electronic transaction you do through any channel (online banking, credit card purchases) is sent to your mobile phone for confirmation.
In Africa, the mobile market is massive. In Nigeria alone, there are nearly a hundred million mobile users. Through various projects we hope to be able to deploy our security solution to each and every one of those mobile phone users that use a phone capable of running an application.
it appears that mobile technology is the PC for Q SoAfrican users then?
A
(Schalk Nolte) Yes, we see the growth of internet access being driven by mobile use. So if we can provide the security that ensures that customers can do on a phone the things they do on a PC, that is magic. If you look at Nedbank, they allow customers to do share trading as well as business banking through their mobile application. At Entersekt we provide the security to allow customers to safely do business banking, share trading and other sensitive transacting from their mobile phones. This makes the mobile phone a true business tool.
there any differences between protecting Q Are customers using internet banking and customers using mobile money? Brand) I think there is some level A (Christiaan of difference: We usually see phones used as a secondary authentication channel in the industry. This means that a transaction gets initiated on another device such as a laptop or point-of-sale, and then the phone is used to authenticate the transaction. For example, let’s say you do internet banking, or you do a transaction from your laptop
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for the SMS. Traditionally that is not possible. As far as we know, we are the only company in the world that provides two separate authentication channels from the same mobile device. You don’t have to carry around a token or a second device on which you actually receive the SMS message. And you can use your phone as a primary means of securely accessing your account for mobile money or mobile banking. South Africa do you have customers using Q Outside this technology? Nolte) At this stage, we are focusing on our A (Schalk home market, but we have signed a contract with banking groups that operate in other territories. We will soon be deploying in other markets internationally, the UK in particular. We are also progressing with international banks that are based in the UK as well as in continental Europe. Our immediate focus in the UK is to leverage off what we have already achieved with local clients who have strong connections in the UK. We are also looking to Australia. Entering the US market is another short term goal.
Christiaan Brand , one of the founders or a desktop or you stand in the queue or you draw money from an ATM, the laptop, desktop and ATM are your primary channels. Then you get an SMS on your phone telling you that you have done a transaction. If you are doing internet banking, you get an SMS on your phone with a One Time Password that you use to actually process your transaction - your phone is used as a secondary channel to support your transaction.
Our technology however allows consumers to use their phones as their first and as their secondary channels simultaneously to do a transaction. In doing this, they can almost be said to require two separate security communication channels from a single device: one for the mobile banking and one
14 | Technology Banker December 2012
We have recently taken on board a number of very experienced experts in the US that have become available through corporate activity. Based in the US, they have been in the technology banking industry for more than 20 years. We are very excited to have them on board. The opportunity is massive. The technology is selling itself , and we are very excited about these markets.
banks offering mobile money services use Q Should different security solutions from the one you use for Internet banking today? (Christiaan Brand) I think that is an interesting A question and my immediate answer would be no. Our approach is actually to consolidate all the different security solutions. There are really too many in the market already. If customers try to buy something at a point of sale, they use EMV chip and pin security. If they are buying online, they use different technologies. Our approach is to have one single way of securing all transactions. And we think our platform could be the single unified security platform for banks.
your opinion, what are the most common security Q Inproblems facing African banks today? Brand) We see a lot of traditional A (Christiaan phishing. There are banks that have actually disabled their internet banking because of phishing. The banks are looking to the mobile channel as a more cost effective alternative, but the security issue needs to be addressed. There are many security issues on mobile and actually on all other channels as well. Now Entersekt can make whichever channel you choose to access your finances, whether it is internet or mobile, 100% secure. The result is that the trust between the enterprise and the users is reestablished.
There is still one security risk that either goes undetected or is a fraud by-product that banks think they have solved. Banks have been telling users that they will never send emails because this is the mechanism used by fraudsters or phishers. The problem not addressed by the banks is that even a call from your bank is suspect. How will the user
know who is really behind the call? Identity theft is rife. Banks are therefore faced with the challenge of how to identify their customers at the endpoint of whichever channels or banking service they use to communicate with their customers. All of these issues Entersekt has addressed through the technology we deploy. in the browser, or man in the middle, is said to Q Man be the worst threat to financial services. Does your company provide any protection from this attack and what protection do you offer? Brand) Absolutely. ‘Man in the middle,’ A (Christiaan ‘man in the browser’ and ‘man in the mobile’ attacks lure customers into falsely logging on to the fraudster’s website. That is what all these fraudulent attacks are based on. Our technology protects against all these kind of attacks by relaying the transaction received by the bank, to the rightful customer’s mobile device so they have ultimate control over which instructions are processed by the bank.
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FEATURE
Winning the Case for Core Banking Change You know you can’t delay it anymore. You know that your bank’s core banking system needs changing. Not because there are more advanced solutions in the market, but because, if you don’t change it, your bank is at risk of spending more By Aisha Benson But changing your core banking system entails a significant cost. So how you do you convince the finance department to invest in the change, especially when it is trying to cut down on spending? Building a business case is one of the major hurdles that you have to jump over if you want to suggest spending. Without a strong business case, changing your core banking system will just remain a pipe dream.
Creating the groundwork for your business case
However, when it comes to significant investments such as changing your system, the focus should be on long term gains. Focusing on short-term plans is likely going to cost your organisation more, as you will be inclined to carry out quick fixes. Demonstrate the investment appeal. Be specific and detailed about costs and benefits, over a period of time. This is the only way that your audience can quantify the ‘value for money’ of the project.
Any spending in an organisation, big or small, needs to be aligned to the long term strategy of the business. The problem is that the operations department may have a different interpretation of the bank’s business strategy from the Finance department and IT department.
Be transparent. Nothing is infallible. So, consider all the risks you may encounter throughout the life of your project, and lay them all down. Hiding an important detail for fear that the project is declined is likely to create trouble in the future.
The first step in creating an unbeatable business case is to clarify each stakeholder’s idea of the company’s business strategy. Find the common denominator and build on it to define the specific requirements needed to support the company’s strategy. This process takes time, but it will make it easy for you to align your case to the stakeholders’ ideas.
Provide alternatives to your suggestions. By doing so, you are showing that you’ve considered all the options available, and will strengthen your case. It also maximises the chance for someone to recommend an improvement. Better to amend your proposal now than watch your project, fail halfway.
Never underestimate the power of communication, because it works.
Building the reasons for change Vendors may try to convince you that replacing your core banking system is not just about financial gains. But it is. Any business decision without any financial gains is foolish. Banks exist for profits. It is their responsibility to customers and employees to do so. Whether your reason is to make your bank run efficiently, or improve customer service, or increase staff efficiency, the end-result will always boil down to financial benefits.
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Finally, provide evaluation metrics to measure the progress and success of the process.
‘Building a business case is one of the major hurdles that you have to jump over if you want to suggest spending’
NEWS
Mobile Malware Targets Androids
DDoS Hits Two More U.S. Banks
Based from the latest study by Trend Micro, mobile malware attacks targeting smartphones have increased during the 3rd quarter, from 28,000 to 175,000, with Androids as primary target. According to Dr Markus Jakobsson, Mobile Security Expert and Chief Technology Officer at Fatskunk, traditional protection against threats no longer fit the intensity of modern malware attacks.
Online outages were experienced by Webster Bank and Zions Bancorp early in November. Outages were associated with distributed-denial-of-service attacks (DDoS), the most recent recorded attacks against banks in the U.S..
In October, the Federal Bureau of Investigation (FBI) issued an alert in its Internet Crime Complaint Centre about the new two Android Trojans: Loozfon, which steals phone numbers and contact details, and FinFisher, which enables hackers to control and monitor the device remotely.
Webster Banks website attack started on the 6th November at 4:30 pm and lasted until about 2:00 am, 7th November. The attack against Zions Bancorp, on the other hand, resulted to nearly 4 hours of intermittent outages on its online banking services the during the afternoon and the evening of 8th November. Experts are unsure whether the attacks are connected as there is no clear evidence that the Webster Bank and Zions Bancorp attacks were lunched by the same hacktivist group, Izz ad-Din as-Quassam Cyber Fighters.
Mobile Security Solutions for Businesses
Reduced Spam Levels Entails Great Danger
Corporates must ensure security with the use of mobile devices in work areas to eliminate risks. Webroot, an internet security provider in the US has introduced its SecureAnywhere Business Mobile Protection. It uses a single web-based admin interface to protect personal mobile devices and PCs used for business. This is structured for SMBs that requires quick and easy installation of mobile security solution to protect its business information.
Kaspersky Lab has been monitoring e-mail traffics and has recorded reduced spam visibility. The spam level decreased, by 2.8%, during the third quarter of 2012. The slowing trend of spam exchanges via email can be due to spams trending in different channels such as banner ads, social media sites, including contextual sites, and coupon services.
It offers a cloud-based security that is capable of supporting the newest mobile platforms such including iOS and Android phones. It also provides an advanced protection against malware, mobile theft as well as fraudulent apps.
The Q3 2012 report presents the cybercriminals’ modus operandi in sending spam messages. Cybercriminals have been sending spam messages through e-mails, however, they have now migrated to other channels to proliferate spams and malicious links to target users.
www.technologybanker.com | 17
PRODUCT REVIEW
MTN Xaas: Microfinance Banking SaaS from CWG and MTN By Anton Lapuz
Left to Right: Adedeji Adesemoye, CBN Representative; Austin Okere,Group CEO,Computer Warehouse Group; Babatunde Osho,Chief Enterprise Solutions Officer,MTN; Honourable Jethro Akun,National Chairman (NAMB); Valentine Whensu,Chairman (NAMB),Lagos State all at the launching of Microfinance Banking Software as a Service between the two organisations at the MTN head office in Lagos
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espite the debate over the benefits of Micro-finance, it has undoubtedly played a major role in helping the poor but entrepreneurial individuals in Africa, to start or expand the scale of their business. Of course, microfinance is not a magic bullet that can solve the poverty problem in Africa, or anywhere else in the world. However, for ambitious entrepreneurs willing to work hard but need money to bring their ideas to market, micro-finance institutions offer them a more reliable source of capital as an alternative to family and friends, to whom they can feel indebted and have to lend money in return, in times of emergency, which can then lead to starving the business for capital. Yet, despite the wide press coverage it receives, awareness of the availability of micro-finance in Africa is very low. According to a poll, conducted by Gallup World Poll, in Sub-Saharan Africa (SSA), the majority of entrepreneurs would ask family and friends for capital while 20%, despite not having the collateral or credit
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history, would approach commercial banks. Only 17% of respondent choose micro-finance. When asked further about their reasons, 16.2% revealed that they have not heard of any organisation offering micro-finance credit, and 46.2% said that such organisations do not exist in their community. This figures highlight the need for micro-finance to make their products accessible to the very people they want to help. When it comes to brand recognition, they have to compete with commercial banks. To be competitive, micro-finance institutions need to use advanced tools that will allow them to take their products to market without incurring excessive cost. For this need, micro-finance banking software solution could be the answer. One of the recent releases in the market is MTN Xaas. Technology Banker reviews MTN’s recent offering to find out how micro-financing can benefit from the new release.
Product Offerings MTN XaaS - Micro-Banking Software as a Service (SaaS) has the standard banking application features, optimised for additional security. Some of these features come as core modules and others as optional: Core Modules: • Customer Services: It automates the customer service provision process covering: Account Opening, offline statement rendition and customer enquiries • Credit Risk Management: Manages credit data for analysis, calculate current and potential risk exposures, manages the entire loan lifecycle • Deposit/Placement management: It automates the processing and management of taking deposits from customers and investing funds with other institutions • Cheque Book Management: Allows microfinance banks to manage different cheque books easily, from cheque request, MICR handling, and allocation to accounts and delivery to customers • Authorisation: Perform approvals at various authorisation levels. The authorisation module makes use of the inbuilt workflow system that direct authorisation request straight to the designated officer • Interests and Charges: Automates the processing of interests and charges on transactions, including handling of accruals • Parameter Setup and Security: System administrators can setup limits through this module and control the extent to which data can be captured and processed on the system. As part of the system’s security/control feature, the users can only see functions they are allocated in the system • Fixed Asset Depreciation: MFI can automate the monthly depreciation of their fixed assets until they have been fully paid • Reports: Management information system (MIS) reports can be generated based on business requirement. Microbanking SaaS comes with standard banking application reports which can be used as is, or modified to suit the MFI’s specific requirements. In addition, MTN XaaS has Digital Dash Board for top executives to monitor operational activities • Electronic Financial Analysis Surveillance System (EFASS): Web-enabled, analytical and validation tool that enables MFBs to comply with CBN report
rendition requirements. It is a Risk-Based Management Supervision Program that put emphasis on the risk and mitigation, collaborating directly with the CBN and other regulatory authorities According to Austin Okere, CWG Group Chief Executive officer, the partnership between CWG and MTN will enable so many people to have access to technology for competitive advantage. He further explained that CWG and MTN are commoditising the technology to make it affordable to Small and Medium-sized Enterprises (SMEs) to enable them to compete effectively. In his speech during the launch of MTN Xaas in Lagos, Okere said that they are giving SMEs, ‘an affordable platform through cloud computing that does not needlessly tie down their capital in expensive IT infrastructure, nor does it eat into their OPEX cost, since they shall not have to maintain an expensive IT Department. This is the beginning of so many things we are going to do together with MTN; we are going to look at Hospitals, Hotels, Insurance and all those who are locked out of being able to provide competitive services due to IT deficiency. CWG and MTN will break the barrier”. Adedeji Adesemoye who represented the Deputy Governor, Central Bank of Nigeria (CBN) expressed CBN’s appreciation for the partnership between CWG and MTN to develop this technology for Microfinance Banking. He further affirmed that the solution is welcomed by the institution as it includes key benefits and functionalities expected by CBN. He asserted that with MTN Xaas ‘supervisory structure that will enhance transparency is assured.” If an MFI only needs a computer to run the system, what is there not to like? It seems that MTN XaaS lives up to its promise to provide “a service platform that efficiently enables micro-finance banking operations and interbank collaboration without the cost and complexity of ownership.”
‘Majority of entrepreneurs would ask family and friends for capital while 20%, despite not having the collateral or credit history, would approach commercial banks. Only 17% of respondent choose micro-finance’ www.technologybanker.com | 19
FEATURE
Choosing CORE Banking Solution: All-inclusive vs. Boutique Approach Banking CEOs have been highlighting the advantage of core banking solution, where CORE stands for ‘centralised online real-time environment’ and not its literal meaning ‘primary’ or ‘central point.’ Significant cost reduction is one of the biggest benefits of moving to core banking system by Andrew Thompson
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n addition, core banking solution has enabled banks to handle a large number of customers and transactions. Banking has never been as accessible as it is now. For example, Infosys Finacle processes an average of 3.45 million transactions per day while Temenos T24process 3 million transactions a day. Processing transactions at this scale is expensive, if not impossible especially for smaller banks, without the help of core banking solutions. It is, indeed, undeniable that core banking solution is an integral part of modern banking. However, with so many solutions available in the market, with many vendors describing their products in term of benefits without explaining the changes they will make to deliver their promise, choosing the right product that meets the bank’s needs is not as easy as 1-2-3. So, how should the bank ensures that it is choosing the right solution for its needs? Should it go with the most powerful solution? Or should it go for the most popular brand? How about cost? Is the most expensive solution the best solution? Should the bank choose an ‘all inclusive solution’ or a ‘boutique solution?’
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‘All-inclusive’ approach
We define ‘All-inclusive’ approach as ‘choosing a core banking solution that does everything, and buying both products and services from one vendor.’ It is just like booking an all-inclusive holiday package, trusting the company to provide you with the best service and experience. There are four levels of core banking solution in the market. The first level is simple and only covers Client Information File, General Ledger and Transaction Engine & Posting; simply automating basic tasks required to serve the banks’ core customers, the retail customers. With the ‘all-inclusive’ approach, a bank buys a core banking solution that covers all these basic functions and more. ‘All inclusive’ CBS has the capacity to manage activities within the bank and other financial institutions under its group. It incorporates solution for retail banking such as the basic task mentioned previously, plus Loans & Deposit Systems, Trade Finance, Reports & Analytics, CRM and Service Based Architecture. In short, it does everything that a large bank needs. One of the best examples of ‘all-inclusive’ core banking solution is Oracle Flexcube, which is deployed by Ecobank Nigeria Plc after its merger with the now Oceanic Bank International.
First Bank Nigeria uses both Financle and Oracle parts of the core banking system infrastructure from various vendors. Additionally, the bank has only one point of contact when things go wrong. Additionally, employing multivendor core banking solution means that banks have to ensure that the solution from different vendors can smoothly interact with each other. This process takes time to set up. However, going for this approach may mean that perfectly working CBS are replaced and banks are dependent on just one vendor, which means that they lose their negotiating power, and they are more vulnerable as they can’t be sure that their vendor will keep up with the pace, or will still be in business five years down the line, even if the vendor is a big company with a trusted brand, and stable financial status. No business is invincible, and the market is littered with flailing businesses that were once superpowers. Boutique approach, on the other hand, enables banks to upgrade or acquire a solution just specific to their needs. They are also not reliant on just a single vendor, and, therefore have more negotiating power. On the downside, they have to deal with various vendors, who have the propensity to blame the other when systems don’t work as expected. And of course, there is the problem of system compatibility.
Ecobank Nigeria Chooses Oracle Flexcube
‘Boutique’ Approach
Unlike the ‘all-inclusive’ approach, ‘boutique’ is buying individual solutions and optimising them according to the banks’ needs. Boutique solutions are not as powerful as ‘all-inclusive’ solution and do not have the same wide range of functionality as the all- inclusive solution, but they are the best in their league. By buying the best product of its category, the bank ensures that it uses the solution that is right for its needs. Big banks with complex infrastructure and legacy system tend to use this approach. First Bank Nigeria, for example, uses both Finacle and Oracle core banking solutions.
Comparing both Approaches
Products and services supplied by one vendor almost always come preconfigured to work with each other, therefore, the bank reduces the cost of buying different
There is no definitive right or wrong approach to take when choosing the right solution for an institution. Both approaches involve risks. If you are in-charge of deciding which IT solution to procure for your institution, you need three important elements: defined corporate strategy, clear understanding of the bank’s requirements, and common sense.
‘Banking has never been as accessible as it is now. For example, Infosys Finacle processes an average of 3.45 million transactions per day while Temenos T24process 3 million transactions a day’
www.technologybanker.com | 21
INTERVIEW
Africa: From the Eyes of a Banker Despite the global recession, the African Banking sector is enjoying many positive changes. Technology Banker speaks to Raj Singh, Chief Operating Officer of Chase Kenya, to find out his views about the sector and its future stakeholder confidence for the people and businesses in the communities we serve.
Q What is your brightest expectation for Chase Bank? vision is to be The Premier Pan African A Our Relationship Bank offering one stop financial solutions.
you can change one thing in the banking sector in Q IfAfrica, what will it be?
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Q How did you come to be in your current role? me give you a bit of my background, I have 15 A Let years’ experience in banking and financial service in
multiple geographies. I have worked in India, Nigeria and Kenya. From an academic perspective, I have a degree in Commerce. I am also a Chartered Accountant and a Fellow of The Institute of Chartered Accountants of India, Company Secretary (Associate of The Institute of Company Secretaries of India). I also hold an MBA in Finance, which I gained from NMIMS-Mumbai, in India.
I suppose that my 15 years of successful hands on experience providing a wide range of products and services within the finance and banking domain combined with my experience and knowledge of mobile technology have been the primary reason that lead me to my current role.
makes Chase Bank’s brand different from its Q What competitors?
A
Our strategy is simple; we focus on exceptional customer service and building strong relationships. This strategy permeates all sectors of our business from our vision to how we treat our customers and staff. We relentlessly redefine customer value by enhancing quality financial solutions delivery and
I would like to see that banking sector in Africa embark on implementing efficient centralisation process by centralizing banking operation whereby taking care of the technological challenges, process alignment and keeping a balance between centralisation and branch autonomy as well as ensuring customer focused service KPIs during centralisation. I would further like to see a very high level of operational excellence in a Multi-Channel operation environment in Africa.
is your brightest expectation for the banking Q What sector in the years ahead?
A
I am sure that in the years ahead, banking sector in Africa is set to become more organised with streamline operation, have reduced operational cost and by offering more innovative and tailor made products through conventional as well as robust and innovative electronic services & distribution channels.
Q What is the best thing about the African Market? is a growing market. Africa’s economy is on A Africa the move. The continent’s GDP rose by approx. 5%
in the last 10 years. It is the fastest growing economic region in the world and the traditional barriers are gradually being broken down. Today Africa is where emerging markets were 15-20 years ago. Consumer growth potential is huge; Africa is the second most populous continent with close to 900 million people. Investors will miss out on a huge opportunity if they avoid vibrant and changing Africa. There is a fast growth in a continent of misconceptions. African lions are beginning to take their place next to dragons and tigers.
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TELECOMMUNICATION NEWS
Tanzania: Competition Across Telecom Operators Intensifies According to the quarterly report by the Tanzania Communications Regulatory Authority (TCRA), Zantel has the ultimate number of subscribers after acquiring 17% growth rate. It also has become the best performing network operator. The company’s subscriptions rose from 1.51 million in March to 2.35 million in June. Its subscribers have significantly increased by 845,628 in just 3 months. Airtel Tanzania subscription increased by 2.3%, and Tigo by merely 0.9%. Vodacom Tanzania has lost a number of subscriptions but still remains at the top with 44% market share.
Somcable to Supply Wireless Broadband to 1 million Subscribers by 2015
Neotel Posts Increase Revenue and EBITDA Neotel, second leading fixed-line operator in South Africa has recorded a growth double than the current industry growth rate. The company’s income for the first half of the year has revealed that it is gaining positively against its rival, Telkom SA. Based on the Neotel’s reports, it has acquired a 10% increase on y-o-y revenue, 276% increase on it takings before interest, taxation as well as depreciation (EBITDA) and 49% improvement in free cash flow.
Allied Mobile Communications to Handle Airtel’s Retail Customer Service
Somcable, fibre-optic service provider in Somaliland has revealed its plans to provide about 1 million subscribers with a high-speed broadband by the year 2015. The company signed an agreement with Bluwan, a South African provider of wireless systems to work with the project.
Airtel Zambia has terminated its retail customer service employees on contract to come up with a unified customer service system. Airtel Zambia has signed an agreement with Allied Mobile Communications, a South African company, to outsource its retail customer service across the country.
The approximately $3 million project will enable Somacable to supply high-speed internet as well as voice-over internet protocol (VoIP) including IPTV and other video on demand service. Bluwan will use its ‘Fibre Through The Air’ (FTTA) Access solution to provide a fibre quality, of up to 8 GB wireless broadband access, to Somcable’s subscribers.
Although retail business concerns will be addressed to Allied Mobile Communications, Airtel will still accountable to supply its 5 million customers’ needs. Airtel still has the right to terminate the agreement with the outsourcing company if it fails to deliver exemplary retail customer service, as indicated in their contract.
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TECHNOLOGY PAGE
Cloud Computing - Simplified by Lin-ay D they are designing. However, this network may have to connect to another network, of which the workings they didn’t know. To show that the other network is beyond their knowledge; they would put it inside a cloud. Therefore, cloud came to indicate an unknown network or network of networks. So, put simply, cloud computing is a concept of permanently storing data in servers located offsite and temporarily storing it in your device, such as your computers, mobile phones, tablets, etc., without the need for you to know the workings behind it.
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et us say your particular responsibilities include ensuring that your bank is using the right technology to deliver its services efficiently using the most cost effective solution. So, you are on the look-out for a solution. Along comes an expert selling you the current most innovative solution: cloud computing. When you ask them to explain what cloud computing is, you get this answer: “Cloud Computing is the provision of infrastructure components and services. The components that are housed in the cloud on the diagram are client devices, servers and data centres. It can virtualise your application, but some applications may require specific underlying hardware component.” This is the time when you say: ‘Hang on a minute, can you run that past me again?’ Everyone’s definition of cloud computing, is indeed, very cloudy. Some describe cloud computing as an up-todate version of service computing: just virtual servers accessible through the internet. Others define it broadly as anything that customers need (both software and hardware) delivered through the internet. So allow us to murky the water even more. First; you may already know this, ‘cloud’ in ‘cloud computing’ has nothing to do with white, fluffy clouds up in the sky. It traces its origin back to the early days of network design. Network engineers spent most of their time understanding how devices and network connect with each other. They, of course, know the network
Where is the data stored? Your data is stored within a network of data centres, which can be located in any part of the world. Your data is then encoded and distributed randomly to a whole host of servers and data storage channels. This process ensures data security. The data is copied across a number of data handling centres, which ensures that quality and continuous availability are protected. Hence, came the common understanding that cloud computing is simply an upgraded virtual service accessible via the internet. However, vendors have developed different ways to offer the service to customers to cover more than just data storage.
Currently, there are three ways you can use cloud computing. These are: Infrastructure as a Service (IaaS): Provides flexible ondemand access to server capacity, network connection and storage space with flexibility to meet varying requirements. Platform as a Service (PaaS): Offers access to a set of computer modules that will help you create end user applications. These modules are usually presented as web services. Software as a Service (SaaS): Offers you access to highend application, without the costs of expensive licenses or hardware upgrades. It reduces spending on software licenses, application setup and maintenance. SaaS is also referred to as ‘hosted applications.’ You can choose to only use one, or for more complex needs, you can combine all three.
‘Cloud came to indicate an unknown network or network of networks.’ www.technologybanker.com | 25
INTERVIEW
Nigeria’s Mobile Money Landscape and Challenges Ahead VTNETWORK LIMITED (VCASH) has received the final approval by the Central Bank of Nigeria to rollout mobile payment for all Nigerians. It plans to change the Nigerian financial landscape by building on top of its payment platform, Virtual Terminal Network (VTN), set to formally roll out in early 2013. Technology Banker talks to VTNEWORK’s CEO, Peter Ojo, to find out his views on the mobile money market in Nigeria
can ICT and Mobile Payment help improve the Q How inclusion and participation of rural populace in the financial system in Nigeria? money gives users 25 hours in a day. “Mobile A Mobile money” is cash converted to electronic form, where it becomes more efficient. Nigerians who used their mobile phone to send a payment could save one hour daily (and also avoid potential theft of cash).
As of December 2011, there are over 17 million subscribers using M-Pesa. If each transaction saved the subscriber one hour per day, productivity would jump by 17 million hours, or 1,863 years! And Nigeria has more than double the number of mobile phones compared to Kenya. What further development could be achieved in Nigeria by having over 2,500 years extra to think?
Remittances sent through mobile money increase rural incomes. Person-to-person money transfer can boost incomes of rural recipients through the ease, security, and affordability that allow their loved ones to send money home more frequently. In Kenya, where the industry started in 2007 and has since boomed, mobile money recipients report increases of 5 to 30 per cent in their incomes. This represents a significant boost for rural households, for whom remittances can represent most of their cash income.
Mobile money brings business innovations to villages. It has changed merchant transfer. With a mobile phone in their hand, the merchants don’t have to be there in person to sell and collect
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payment. It is more efficient for merchants to use a technology solution, such as an e-commerce website or m-commerce application to allow payment sent directly into their account, and for payment to trigger their service. Well-designed and well-executed services can directly improve life in remote areas. In Kenya, mobile money is used to encourage savings and lending, to purchase crop or livestock insurance, even to make clean water available. These can be replicated in Nigeria. And there is a need for new innovations to come out of Nigeria, such mobile cross border remittances for migrant workers from Nigeria’s neighbours.
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It offers financial inclusion that includes the poor. Mobile money has a potential to encourage formal savings among the unbanked and in a safe and productive way, earning interest, and not sitting idle and vulnerable under mattresses or at the bottom of dustbins. Currently, we have functioning micro-saving and micro-loan modules that we will introduce with partners this year. However, there are two large issues looming: revenue share and regulation. In Kenya, Equity Bank’s M-KESHO micro-financial services include credit, savings and insurance products. The arrangements between the bank and the telecom providers are that the financial services’ revenue accrues to Equity Bank while telecoms get a transactional amount for every deposit going into
the MKESHO account. I think that negotiations in Nigeria may yield a similar approach. As for future regulation, this is an area where all players in Nigeria need to cooperate to maximize efficiency through seamless interconnectivity and interoperability. The unbanked are not monolithic and include households with a great range of incomes. While higher-income households will be able to afford these new services, the very poor may not. Equity Bank estimates M-KESHO’s end-to-end transaction costs at the equivalent of N110. If these numbers hold true in Nigeria these micro-services can deliver financial inclusion to households with annual incomes as low as about N60,000. Below this threshold, people will be recipients but not able to make purchases, due to the transaction costs. True downmarket financial inclusion requires these costs be much lower. For branchless banking to take off in Nigeria and for it to reach the common person, all participants, including the regulators, must be aware that there is not a lot of money in mobile money, it is a low-margin, high-volume business.
you believe that mobile money is the answer to Q Do financial inclusion? money is not a magic bullet for financial A Mobile inclusion. Only a few countries such as Kenya, Philippines, Uganda, Tanzania and South Africa are highly successful with mobile money services. That is mainly due to smart regulation, allowing innovation to flourish. The ability for regulators to balance risk while allowing innovation to continue unimpeded is key to rapid adoption as it allow operators to deploy new services in the market.
It takes time for innovation to be accepted in the market. The mobile payment model that has worked very well in Kenya, may not work in Nigeria. While most mobile money providers are focusing on P2P, the Nigeria market requires more innovation and numerous services that need to be leveraged on mobile money. The focus should be on those services rather than money movement, because money will always follow if there are needed services in place. Everyone is focused on the large remittance flows. But to reach the poor migrants from Niger or Chad wishing to send money home is not so financially attractive, and is complex given the different regulators, different telecoms, and Forex issues. That is where important work needs to be done. And VTN platform can leverage change to socially and economically empower the common rural person.
A recent survey by the World Bank shows that accessibility to financial services does not necessarily correlate with usage. Individuals may have access to financial services, but they may not use it because of lack of money, high cost or limited service appeal. Mobile payment should be significantly low cost and rapid. It should be viewed as an enabler of commerce rather than strictly moving money.
your opinion, what is the role of banks in mobile Q Inpayment in Nigeria? payment will not be possible anywhere A Mobile without the banks. They are the ultimate custodians of the physical cash, while mobile payment operators are basically data managers. In Nigeria however, a few banks applied and received the license to rollout mobile payment services. I come from a family of bankers, in fact my dad was an area bank manager at Standard bank (now First Bank) in the late 70’s. If I were to advise him, I’d say, Dad, spend most of your time courting the non-bank led mobile payment providers and less time pursuing mobile payment service.
I personally believe that any bank that understands this will be stronger in the long run. The mobile payment service and the dynamics of the terrain, apart from the liquidity is everything a typical bank would rather not participate in.
www.technologybanker.com | 29
the CBN right by not allowing the Telco’s to lead Q Ismobile payment in Nigeria?
the CBN regulatory framework, the Telco’s A Under are not allowed to lead mobile payment in Nigeria, but rather open up their network to all providers, so none were licensed. Again, the bank example is applicable here. For every mobile payment transaction, the Telco’s are involved one way or the other because they provide the internet access, voice, SMS and USSD service. Mobile payment is not possible without the Telco’s, so in the end, they make revenue per transaction. From this perspective, I think the Telco’s are a part of the chain. Getting involved as licensed mobile payment operators themselves is another dimension which I think the CBN is guiding against in the Nigeria market.
what is next for mobile money in Nigeria; and for Q So, VTN in particular? is a large country. There are over 100 mobile A Nigeria phone lines in Nigeria. 70% of adults don’t have bank accounts in a country of over 160 million. Fund remittance among two unbanked individual could take days or several hours if they live in the same city. I think that, for Nigeria, the bulk of initial activities will be urban to urban, with urban to rural following, as there are definite challenges in rural areas. We have merchants who have expressed interest in becoming VTN agents as far as Kano, Nassarawa, Taraba, Yobe, Kebbi, Bornu and Katsina. This is an important first step.
‘Our years of preparation have provided us with the understanding and vision to overcome the challenges ahead’
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The challenges in rural areas, and in isolated urban centres like Maiduguri, include a disperse population and weak connectivity, of both telecom signals and the internet.
Overcoming these challenges to bring benefits to rural areas requires will-power and making the necessary collaborative partnerships with government and industry.
INTERVIEW
How Does the Common Person See the African Technology Landscape It’s no secret that analysts and experts believe that Africa is in the cusp of technology revolution and mobile technology is changing the lives of the African people. But what do the common people think? Technology Banker speaks to Morakinyo Oluwatobiloba, a student from Nigeria and asked him his experience and views on the current technology landscape in Africa and I see that it keeps businesses stay on top of best practices and upcoming changes that are critical to making sure their companies are taking advantage of opportunities for their brands. But I think that if they simply lump social media into their current marketing activities, it may make their efforts ineffective; it takes dedication and discipline to stay up-to-date on the social sphere and manage growing communities. makes Africa a viable market for technology, Q What banking and telecommunication products?
A
There are so many ways. Businesses across Nigeria and Africa are trying to solve myriads of problems from communication to agriculture, payment/ commerce and so on yet there is a sector in the continent that is in dire need of the tech revolution; the educational sector. It would be nice to see real technology ideas meant to make education a far easier, enjoyable and fruitful process.
E-commerce and Payment Solutions are still huge potential market in Nigeria and the rest of Africa. If the mobile money deployments go on smoothly, the way payments and purchases of items and services are done will change. Nigeria still faces some payment challenges when it comes to doing business with the western world. Whoever can come up with creative solutions to this will attract significant benefits.
you tell us about yourself and your experience Q Can with technology?
A
I am still a student in Nigeria. I do a lot of online work, searching for relevant information that can help Africans at large. All my life, I dream of having an impact on Africa’s technological advancement. I believe I’ll get there one day. I believe that Technology is about bringing new things into existence that will improve the standard of living and add value to the world.
is your view of the current Technology Q What landscape in Africa?
A
I think we are currently doing well. African technology is getting better. Everywhere I go I see machines or devices working for us. Mobile technology has changed the way we communicate. Technology has improved us in many ways. We now use our mini devices to do banking. We are also advancing in education. And I think technology is keeping our Entertainment World going. But I think the best is yet to come.
do Africans benefit from social media and Q How other technology innovation?
A
I think social keep us updated about new solutions, tools and strategies. I’m very active in social media
is the future for technology and banking in Q What Africa?
A
The future is great, we have a big population and there is a lot of ground and spaces available for investors to explore. Also, the whole world is looking at Africa; I think the global melt down in the west has directed investors toward Africa. The Foreign market is already saturated but there are lots of opportunities in Africa. But bad politics, infrastructural delay and corruption are causing problems. Some investors may feel like they have to go through the mouth of a lion to get to the treasures.
www.technologybanker.com | 31
NEW APPOINTMENTS:
Who’s Who in the African Banking, Finance and Telecommunication Sector The economic strength of an organisation largely depends on the effectiveness of its leaders. This month, meet the newly appointed leaders who are expected to take African banking, finance and telecommunication sectors to a higher level
Segun Ogunsanya Appointment: Chief Executive Officer, Airtel Country: Nigeria Specialty: Banking and Finance Management Segun Ogunsanya, former Managing Director and CEO of Nigerian Bottling Company, was appointed as the new Chief Executive Officer (CEO) of Airtel Nigeria. Ogunsaya has over 24 years of experience across various organizations and sectors. Ogunsanya is a Chartered Accountant who holds a Bachelor of Science in Electrical and Electronics Engineering Degree from the University of Ife, Southern Nigeria. He started his career with the finance department of Coca-Cola Company and progressively shifted to senior roles in the bottling operations across various countries in Africa.
Wendy Lucas-Bull Appointment: Non-Executive Chairwoman, Absa Group & Absa Bank Country: Africa Specialty: Financial Services Absa announced the appointment of Wendy Lucas-Bull as its new Non-Executive Chairwoman, leading Absa group and Absa Banks in Africa. Prior to her appointment, she was an Independent Non-Executive Director on Nedbank’s Board since 2008. Having been in the board of directors for various companies in different sectors, both public and private, she brings with her extensive experience and expertise.
32 | Technology Banker December 2012
Craig Bond Appointment: Chief Executive, Absa Bank Country: Africa Specialty: Banking Management Craig Bond, former Chief Executive (CE) of Standard China has been appointed as the new Chief Executive of Absa Bank Africa’s Retail and Business banking. Bond brings with him more than 20 years of banking experience. Bringing in Bond with his knowledge acquired during his term with the Standard Bank, can be a major coup to both Absa and Barclays.
Peter Schlebusch Appointment: Group Chief Executive Officer, Personal and Business Banking, Standard Bank Country: South Africa Specialty: Banking Management Former Chief Executive Officer (CEO) for Absa SA, Personal and Business banking unit, Peter Schlebusch, has been appointed to be the new Standard Bank SA Group Chief Executive Officer for Personal and Business banking. Schlebusch is expected to increase the group’s penetration in the region, achieve an enhanced return on equity in Africa and increase values of investments made by Standard Bank.
Other Appointments at a glance: The Standard Bank has reshuffled its leaders and appointed the following to head key departments: • Funeka Ntombela - new Chief Executive Officer (CEO) of Personal and Business Banking. • Leon Barnard - new Head of Vehicle and Asset Finance. • Audrey Mothupi - new Head of the Inclusive Banking in South Africa • Chris Sweeney - new Head of Card Division in Personal and Business Banking Airtel has appointed Rajan Swaroop as its Non-Executive Director on the Board in Airtel Nigeria. Meanwhile, Louis Lubala and Antoine Pambaro were appointed as the new Managing Directors of Airtel in the Democratic Republic of Congo and Gabon respectively.
www.technologybanker.com | 33
EVENTS FOR YOUR DIARY
What: AITEC Southern Africa ICT Summit When: 5th - 6th December 2012 Where: JCICC, Maputo, Mozambique Website: http://aitecafrica.com/event/view/85
What: Asian Financial Forum 2013 When: 14th - 15th January 2013 Where: Hong Kong Convention & Exhibition Centre, Wan Chai, Hong Kong Website: http://www.asianfinancialforum.com/en/index.htm
What: Telecoms IQ – Big Data Analytics Asia 2013 When: 16th - 17th January 2013 Where: Amara Hotel, Singapore Website: http://www.bigdata-asia.com/Event.aspx?id=806044
What: IBEX India 2013 – International Banking Expo 2013 When: 17th - 19th January 2013 Where: Mumbai, India, Asia Website: http://www.ibexindia.com/index.html
What: 5th Annual Roaming Congress Mena When: 20th - 22nd January 2013 Where: Al Murooj Rotana Hotel, Dubai, UAE Website: http://mena.roamingworldcongress.com/
What: PTC Conference When: 20th - 23rd January 2013 Where: Hilton Hawaiian Village, Waikiki Resort Honolulu, Hawaii Website: http://www.ptc.org/ptc13/?page_id=6
What: WDM & Next Generation Optical Networking APAC When: 28th - 30th January 2013 Where: Hotel Novotel Clarke Quay, Singapore Website: http://apac.nextgenerationoptical.com
What: Finance for your Future 2013 When: 14th - 16th February 2013 Where: KICC, Nairobi, Kenya Website: http://aitecafrica.com/event/view/97
34 | Technology Banker December 2012
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www.technologybanker.com | 35
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