By Babajide Komolafe

The Nigerian electronic payment market, estimated at $4.3 billion, has enjoyed phenomenal growth since 2005. One of the driving forces behind this growth is InterSwitch Nigeria Limited, the first electronic payment transaction switching company which provides the first infrastructure that makes it possible for card holders to use their cards on the ATM or POS of any bank or organisation. In this interview, Mitchel Elegbe, the Managing Director/Chief Executive of InterSwitch, explains efforts to protect card holders from fruad, the recent alliance with MasterCard and the company’s efforts to boost online payment transactions through its quickteller website.

Exerpts:

There is increasing concern over security of transactions through payment cards. How is InterSwitch responding to this?

Mitchel Elegbe

Security is how you design and how you operate before the marketing you desire. So what happened at InterSwitch is that we had a system in place that did not have fraud for many years, not because fraudsters do not exist. For many years, we did not see fraud. When fraud suddenly started, the first question we asked ourselves was what happened? Such instances happen. When fraud started, there were certain changes that might have taken place, such as a new environment and those changes create opportunities for fraud.

When you have been in a system for a very long time, and something changed, the question you will ask yourself is: ‘What changed?’ Now in a place like Nigeria where there are lots of people that don’t have jobs but they are well educated, fraud can easily spread. So it was usual for fraud to spread in Nigeria. Look at 419, there is no advertisement; even those in Gambia saw it happen. That is what happened to us, so fraud started.

So how do you think we can take care of fraud?

The first point was to recognise and confirm that there is fraud and that the system has not been compromised. The InterSwitch system was never ever compromised and let me tell you why it was not compromised. You know in this market we will like to blame everybody first when such things happen. If our system was compromised, 24 banks would have tried to hang us. So our system was not compromised. Though fraud took place, but the question is how did it happen?

What we did was, rather than focus on changing people, we selected those areas where we think fraud was happening and decided to focus on such. We did this in many ways. It was when fraud started that I knew that somebody could look at your card with 17, 18, 19 digits and in a few seconds memorise everything. We never knew that before but these kinds of things happen. Education was one of our responses to this. At the same time, we started protecting ourselves. We introduced something unusual; we went for PCI’s certification or what they call PCI’s Network Certification and we are the first to get it in this market. In addition to that, we moved to chip and pin.

Nigeria is the only country I know that has moved from magnetic strip to Chip & PIN in one year and everything works and we made it happen with Verve card. No other place has done it yet. So what has happened in the last two years is that we moved to Verve which is a more secured card – more expensive but more secured. We’ve learnt a lot of lessons; we now have insurance on the Verve card which we’ll be launching soon. This is a scheme that allows us to provide insurance on your Verve card. We have not launched it yet because Central Bank of Nigeria is still putting the policy framework in place. When it comes out, we will likely be the first to launch it. We did the insurance because we are doing everything to solve the issue of fraud, and to make sure it does not happen to you.

We have launched what we call Money Guard before which is basically something that allows you to get an SMS anytime your card is used. The system is such that if you get an SMS and you are not the one using the card, you can reply with SMS and we can confiscate your card and the card stops working. We have improved it now to what we call Verve Card Control and what is Card Control? It is an application that allows you turn off your card with your mobile phone. If I’m going to sleep, I can decide to turn it off. If I’m travelling abroad, with the hope of leaving my card in Nigeria, I turn off the card without going to the bank and when I come back, I can turn it on.

How does this work?

It is on phone, we will show it to you. If you want it, all you need do is to put it on your phone. We are yet to launch this system. Once we are ready to launch it, we will invite the media. The point I’m trying to make is that there are nine security initiatives to protect card holders that we have put in place and we are the only one that have done this.

InterSwitch recently entered the retail segment of the epayment market with quickteller.com. How far do you want to go with this retail strategy, not only in Nigeria but also in Africa?

What motivated us was not the money. If you go back to eight years ago, most of us who started interSwitch were very young people. We are happy earning our salaries and the company we are working for. But somehow, we just got tired of systems, the way some things are run in the country and thought we needed to solve some problems. We wanted to be sure it was Nigerians that solved it and that is why like you have heard, we did not invite any expatriate to do it. We used software from other people but we have learnt to use it and do it ourselves, so that is the driving factor.

There are lots of things we could do in the payment field but we decided to focus on one area we felt nobody was focusing on which we thought was necessary and that is switching and that’s why we gave ourselves the name InterSwitch. We are the only payment company in Nigeria that from our name you can tell what we sell.

Now we have different switches coming up, but we came up with switch, anyone that comes up after us saw what we were doing and wanted to join. The point I’m trying to make is that we try doing these things not because we wanted to but because nobody was doing it, so we decided we wanted to show how. Once we’ve started showing how and things started coming in, everybody now wants to come in, but they are not willing to dig the ground that we dug.

If you look at Quickteller, the concept is not new. But since nobody did it, we had to do it in Nigeria. InterSwitch never had a card called Verve for how many years. We only did it now because somebody had to do it. That is why today, we are an integrated transaction switching and payment processing company. For MasterCard for example, we don’t switch, we process. For Verve, we process and we switch. So the kind of product we have determines what we do. Everything we do, whether it is corporate or retail, is either switching or processing.

What informed InterSwitch’s partnership with MasterCard which produced the MasterCard Verve card?

If you try to look at the category of people that will like to use a payment card, they all have different requirements. If you are a payment product, you will want to target everybody. Ok now, there is a category of people you cannot target, you have to look for an alliance to help you target those people.

In the case of payment, I am a Nigerian, I live in Nigeria, and I earn my salary in Naira so a normal debit card that I can use in Nigeria is adequate for me. Until the day I decide I am travelling abroad for either holiday or meeting, I suddenly need a way to pay when I go abroad. Unfortunately, your traditional Verve does not work for you because it was designed to be the card you can use in Nigeria. But I have customers who use Verve and will like to have this kind of card. So to meet the needs of the customers, I need to look for people I can partner with. So we look at different people available and we decided to partner MasterCard.

MasterCard had a need, although you have a MasterCard like the one for GTBank that you can use in Nigeria, but you cannot do everything Verve can do. So the decision was how we can create that card that can do everything that most people will want – what we call the ideal card – the super card. So what did we do? Master Card and InterSwitch sat together to discuss if we can create that card that can be used locally. When you are in Nigeria, it operates like Verve; you get the benefits of Verve. When you go abroad, it behaves like Master Card, so that is MasterCard Verve for you. So the idea is to deal with the set of people that usually move from Nigeria to other countries, from time to time.

With that card being the determinant, we are sure there is a market segment we need to deal with. There are many other segments we need to deal with also. Among them is the fact that the way the white man designed the traditional credit card, will not work in Nigeria for many reasons. One, we don’t know who you are. There is this idea of credibility growth necessary but they are not quite where they should be now. In the meantime, how do you give the man on the street credit?

So there is another alliance we might need to have to create a credit card for you and I in Nigeria. So alliances work for us, and the Master Verve Card is one of such alliances.

What is the share of InterSwitch in the Nigerian payment card market?

I’m not the one again that will tell you that InterSwitch has the largest market share that has surpassed the backdrop. I can give you some indications and I will start from what we know. We know that as at December last year, Verve has 67% market share, Visa has 26%, MasterCard 16% market share. So what has happened between January and May? I don’t have the exact figure but I can tell you some indications between January and May. We have launched MasterCard Verve, and we have almost 1.5 million Master Card Verve as we speak and those 1.5 million cards came from banks who were never using them before because they were using other cards such as Visa.

What I’m saying is that we have eaten into that market. So if you look at the Interswitch platform right now, we have 67% there before, we have MasterCard 16%. All the MasterCard in Nigeria today on our platform is the chip card. That is 67 plus 16 which is over 70%. So you can say for the card business, we have 70% of the cards. Now because most of our transactions are account-driven, Interswitch Verve and MasterCard Verve are the only cards today that can be used on all the ATMs in Nigeria.