By Prince Osuagwu
Nigeria’s financial sector has in the last six years witnessed dramatic changes and this is not referring to just the reforms. First, commercial banks got to  realise that lowering barriers to entry like waving off the cash requirements of minimum balances in opening bank accounts to zero minimum balances, can increase retail accounts.

TECHNOLOGY TRANSFER: E.susu agent educating a rural customer

Second, banks also have realized that lowering costs of transactions across other bank accounts attracts more customers

As a result of these changes, the number of bank accounts has increased greatly and deposits have equally increased.
Again and most importantly, banks have also come to full terms with the fact that Information Technology (IT) plays a major role in their product designs and service deliveries. Today, from Card services, Automated Teller Machines (ATMs), to Customer Contact Solution Centres, Mobile banking, Tele banking, and  electronic banking or online banking, optimizing IT application is key to seamless service delivery and the much desired total customer experience.
This explains the huge investment in IT infrastructure by many of the banks in recent times.

However, studies have shown that many Nigerians, for numerous reasons, are still unbanked and lack access to formal financial services.

Most painfully is that the informal sector through which billions of naira circulates, suffers more of this and it has impacted negatively on the country’s economic growth and development. A body of evidence shows that access to financial services, and indeed overall financial development, is crucial to economic growth and poverty reduction.

Lack of access to formal financial services limits market exchanges, increases risk and limits opportunities to save.
Without formal financial services, households rely on informal services that are associated with high transaction costs. Perhaps this is why increasing access to formal financial services to the majority of households in developing countries remains an important policy goal of governments and Central Banks.

It has also been recognized that even for those with bank accounts, physical distances to bank branches or points of financial service add significantly to transactions costs. For instance, the markets in Nigeria are quite big that an estimated 10.9 million informal traders contribute some US$23 billion to the country’s GDP. Yet about half of these traders aren’t formally banked.

Saving for this group takes the form of stocking cash under mattresses, in cooking pots, or through cooperative savings associations known as generally as esusu. Esusu is a local dialect for thrift savings.

Many of the traders are habitually weighed down with very busy days and left with no time to head off to a bank branch to deposit their takings. Add to this, is  a general distrust of banks because conventional banking has not been as effective in this market as compared to mature markets.

A few financial institutions in the country still operate under the mistaken premise that low-income populations do not save and are bad borrowers, paving the way for licensing of the Microfinance banks.

Incidentally, the Microfinance banks MFBs, which were meant to effectively shatter these myths were not spared by the financial crisis, leaving many of them in very bad shape. MFIs were supposed to serve as models such that when poor people have access to financial services, not only do they save, but, they also have high repayment rates when they borrow, but the health check carried out on 58 MFBs recently by the Central Bank of Nigeria (CBN) recently, shows that many of Nigeria’s 931 licensed MFBs are not doing well.

Now even though MFBs have recorded some success in their attempt at making formal financial services available to millions of poor people in Nigeria, the number of sign-ups still represents a tiny fraction of the underserved population in the country as the majority still lack access to formal financial services.

The traditional approach of branch-banking requires substantial investments in both infrastructure and personnel, and thus cannot be deployed fast enough in reaching millions of unbanked people, majority of whom reside in rural areas with historical zero access to financial services.

That could be why one of the new generation banks, Standard IBTC bank, recently embarked on a survey and revealed a startling report that more than 70% of the Nigerian population  still do not have access to financial services due to factors such as logistics, cost, and lack of financial literacy and compatible financial products.

Nigeria’s banking culture according to the survey report indicated that an estimated 74% of the adult population has never been banked, 85% of adult females are unbanked, 61% of the unbanked would like a bank account, only 3% of the adult population use a microfinance bank and 73% of adult Nigerians are financially excluded  without any formal or informal access to finance.

This corroborated the CBN’s recent report that about 65%of Nigerians lack access to credit facilities. This disturbing data certainly raises the question of what can be done and urgently to correct this anomaly.

Apparently cashing in on the knowledge that where creativity and innovation becomes vital, technological innovations and customized products or services are known to have been effectively deployed to transform all sorts of situations, the bank decided to plug in on the whole it identified in its survey. It launched e.susu, an alternative banking service platform which could pass as electronic esusu.  The platform according to the bank, rides on a secure IT solution and enables this group of people to make financial transactions or transfers across the country conveniently and at low cost.

Stanbic IBTC’s e.susu, is also an alternative branchless banking platform which represents a good example of how low-cost approaches that use modern technology can effectively expand the financial services frontier.

According to Stanbic IBTC Bank’s Head of Information Technology Strategy and Special Project, Mr. Bashir Gidado, the technology that was deployed for e.susu is made up of three components, namely the Point of Sale (POS) collection device used by agents; a loop system deployed in the banks’ data centre  and the connectivity to that loop system either through General Package Radio Service (GPRS) or the bank’s Local Area Network (LAN) and on the back-end is the banking application server.

What this means is that when a transaction is carried out on the POC it communicates with the loop system and the loop system ensures that all transactions are transfered to the Equinox banking application server on a batch basis.
Gidado said that “in terms of connectivity the system is connected to the POC through our LAN which is completely secured, since it’s a closed network environment but we could also have another connectivity through GPRS connect the POC right back to the server in the back-end”.

He said that although the GPRS application of the process has been fully installed, the bank is yet to activate it and so it depends wholly on the LAN connectivity which means that after laoding the Agents’ POC with deposits, it is taken back to the bank and connected to the LAN before the transactions are transferred to the loop system.

Security wise, he noted that it was impossible for anybody to hack into the bank’s system because everything in the process was done within the bank’s network environment, adding that the bank also realised that the risk depositors of the traditional esusu always have is having their deposits carted away by agents and therefore desined its e.susu in a way that the POC has a preset maximum transaction limit of N30, 000, meaning that the e.susu agents must return to the bank to connect the POC to the system to upload before it is reset for the agent to return to field.

Stanbic IBTC is convinced that e.susu is the solution to bringing  formal financial services to the unbanked. The product according to the bank was designed with simplicity, security, and flexibility as three guiding objectives  .

“E.susu is easy to sign-up for,so a customer’s literacy level really does not matter. So whether you are a petty trader, shoe maker, carpenter, motor mechanic, or even a fisherman, e.susu is for you. All that any interested customer need to do is walk into the nearest Stanbic IBTC Bank branch and fill-out a simple form, have his/her bio data registered onto the Stanbic IBTC Bank system and the customer has an account activated in his/her name and is instantly issued an ATM card which incorporates the holder’s passport photograph. At this point the customer can make deposits, check account balance and make other transactions on the POC. The e.susu agents apart from carrying proper identification are geared in Stanbic IBTC E.susu branded uniforms for easy identification.

The wide gap which exists between Nigeria’s formal and informal sectors is what Stanbic IBTC is striving to either completely bridge or at least close further with e.susu. Traditional esusu basically is the oldest informal means of collecting and saving money through a savings club or partnership but it is not without its shortfalls. So even for the select few who patronize the local cooperative savings associations, they do so at a great risk basically and cost as only a few esusu groups operate within any written laws. Majority operate with unwritten laws but on only oath of allegiance and mutual trust.

The general practice is that esusu associations contribute a fixed amount periodically and give all or part of the accumulated funds to one or more member(s) in rotation until all members have benefited from the pool. However, this does not always play out smoothly and many of such arrangements are riddled with agreement breaches, frequent defaults and rancour due to absence of structured and written governing ethics and laws. Nevertheless, it remains the most predominant type of informal finance in Nigeria.

Stanbic IBTC is targeting the unbanked with its e.susu alternative banking product which the bank initially kicked off with the intention to service the trader market but has evolved into a platform that meets the needs of others categories of the financially underserved through its convenient no-hassle and branchless banking approach.

Its introduction perhaps also came at a time when the CBN is exploring more astute ways to include more people in the informal sector into the formal banking system.

Stanbic IBTC Bank’s Chief Executive Officer, Mr. Chris Newson, stated that even though developing the product was very challenging, the trader segment harnesses the very essence of the company’s vision of being a leading player in global emerging markets. “Our mission is to create a robust operating platform for them to save conveniently, access credits and banking services with ease”, said Newson.

According to the bank chief, work commenced on this segment in September 2008 with comprehensive researching, data gathering, planning and other due diligence before moving on to concept designing and development of the product and eventually piloted the concept for three months in four market locations in September 2009. Upon the success of the pilot, the demand for the product was enormous and lessons learnt in the live market very enriching.
Having achieved the expected result, Stanbic IBTC kicked off a nationwide rollout of its e.susu in March 2010.

Newson is confident that e.susu will revolutionise financial services activation in the informal sector and significantly help reduce the estimated N1.2 trillion unbanked monies said to be in circulation in the country.

He however cautioned the regulatory oversight not lag behind technological innovations and the primary factor will be the creation of an enabling environment through the establishment of prudent oversight that guarantees the simultaneous achievement of access and financial stability.

According to Newson, the main objective of Stanbic IBTC Bank is to provide a product and service that people can embrace and trust, without fear of losing their money, and e.susu perfectly fulfils that requirement. He assured that the bank will continue to invest in background research and improvements of the e.susu platform to guarantee continued safety of the transactions.