Let’s start by you telling us how your team has been using technology to drive FirstBank’s services?
As you are probably aware, First Bank is the leading institution in terms of deployment of technology and the use of technology to deliver superior banking services to its customers. In the past few years we have actually focused on what you would call a second phase of our transformation efforts which started from the Century Two project that saw us deploying modern technologies way back in the early part of the 21st century, around 2000 to 2002.
Now, what we have done in the last three years is to focus on a coordinated transformation of the business with technology again being at the core of that transformation effort. So, in the last three years, we have improved our technology infrastructure to generally improve the reliability of our services across channels; both at the branch and our electronic delivery channels.
If you relate that to the growth that we’ve also seen in the numbers that First Bank is churning out, you will see that there is consistency and a direct correlation between the improvements that we are achieving in the technology and service delivery space and the customer patronage and growth in our business both in terms of size or volume and profitability.
Therefore, in the last three years we have doubled our balance sheet and we have also increased our customer numbers from under 5 million to over 7 million accounts today and that also has translated into the share of wallet that we have of each customer. We have also been able to generate a lot more transactions from our existing customers in that process.
Other statistics that points to the impact of the transformation of our technology include things like volumes of transactions across electronic channels and you would see that First Bank leads other providers. We have more than 30 per cent share of the issued cards volume in the market space and we also process more than double the volume of transactions of the number 2 bank on the industry’s payment switching network.
That basically summarizes the impact that technology transformation has made on First Bank operation in the last few years. I think I will end that by saying what underscores our usage of technology in First Bank is the award we got last year which was tagged the Innovation Award from the Bankers Magazine, that award came out of a number of initiatives but the core initiative then was the introduction of the biometric ATM. We are the first bank and still today the only bank that have biometric ATM services, although we have not extensively rolled-out, but we have deployed it in a number of our branches.
For the benefit of the ordinary Nigerians, can you give us some insights to what you mean by biometric ATM?
So, the industry has done that move, however we at First Bank are “upping the game” and saying that there are a number of our customers that are in the rural areas, maybe that’s also because First Bank has the spread that most other banks do not have, and we have the experience of serving both the urban rich as well as the rural poor.
Some of the rural masses are not too good with numbers so when you say they should choose a PIN number, you won’t be surprised if someone chooses 1111 and so, if that person misplaces his or her card, it is very easy for a fraudster to guess the PIN number, so for such customers you also have to get their fingerprint with a biometric ATM. That’s the extra level of protection that we have introduced into the market place.
Most banks in the country presently, including First Bank seems to fall in line for foreign of IT applications, and from your own perspective, what would be your rating of local applications in Nigeria, basically?
Well, I will be very frank and objective, treating it like a balance. I think you would say that we do have skills within the Nigerian market place to manage IT. We have skills to do software development, however what tends to happen within the software space itself is that there are various categories of software, from the system software which are like the operating systems like Windows, UNIX, and the iOS that runs on Apple platform to business applications starting from simple human resource management, payroll applications to very complex systems like the ERPs that manage entire manufacturing operations or core banking software that are used to run banks.
Now, we are not playing at all in the system software space so we do not have, for instance, the operating system developed by Nigerians, even though you might have a few Nigerians contributing to the development of operating systems because each of the big players like Microsoft do have a reasonable population of Nigerians within their employ.
We also do have freelance programmers that contribute to open source software like Linux development and some of them are Nigerians. However, when it comes to actually having or owning a branded operating system product, Nigeria is not playing in that space. Now when we come to business application space we also have a number of Nigerian companies that have played very well in building human resource applications, small scale ERP solutions, and one company comes to mind easily, Systemspecs with their human manager application which have been highly successful by all means.
On enterprise applications, we also have a number of players that have attempted to play in that space and not all have been equally successful, but we have some players that have stayed upwards of 20 years in that space so you would say they have achieved some level of success and again a name that comes to mind is Computer Systems Associates; they have a core banking software which has been sold not just within West Africa but also in East Africa and other emerging markets that actually needs their solution. They have also sold a version to microfinance banks within Nigeria.
Now coming back to the question of whether Nigerian software companies have matured to the point of developing robust core banking software, I would say it’s a yes and no. Yes, to the extent that the basic skills to do it are there, and I’ve given the examples that prove that those skills are there if we focus well enough.
However, in terms of mindset, we’re not yet there. Software business is a long term business, so, you have to make investment for the long term. Nigerian investors on the contrary are mostly short term investors. So you don’t go into software with the mindset of getting back your investment in six months or twelve months. That’s what has actually not made made-in-Nigeria software to mature to that scale where they can easily compete with internationally developed applications because if you are investing for the long term, it means that you need to be able to retain certain skill set for the long-run.
If you have business architects and software architects that are working within software companies and the turnover of your staff is maybe every eighteen months, you have to recruit new staff because the good staff have left, you won’t be able to actually go for the long run and these are some of the issues that the local software developers or investors are still dealing with.
On the other hand, you need some level of capitalization to be able to hold on for that long in terms of being within the software development line so that you are not hitting the market place with an under-developed products that you want to start earning from. By and large, if we change our focus, if we change our investment mindset and focus on software as a long term business we can actually compete with other internationally developed applications in Nigeria.
Earlier on, you made mention of First Bank running on Finacle 10, what was the business decision behind this?
First Bank essentially, has four key drivers of growth or four pillars of the business strategy; one focus on growth, the second is on improving service delivery and attaining service excellence, the third is talent management being able to retain the best talent within the industry and the fourth is performance management, both at the individual level and the group level.
If you look at those pillars, central to it is service excellence because every business exist for one purpose only and that purpose is to recruit and retain profitable customers, that’s why businesses exist, so if a business is not able to meet the needs of its customers both now and into future, that business will not be a sustainable business.
So as a service enterprise, we need to continually improve our service platform, as you know infrastructure is central to most things. If you use the nation as an analogy, we are where we are partly because of failure of infrastructure so one of the key service delivery infrastructure for a bank is a core banking software, because really a bank’s business if we all think of it not as much managing money but a bank’s business is actually managing information.
Whether you are talking about ensuring that you properly keep the information for 7million accounts and ensure that there is no mix-up in the management of that information or you ensuring that the information required to dispense cash at the ATM is readily available for the ATM to work. That’s what banking is about; it’s about managing information, so we need to continually improve that platform for managing information which is a core banking infrastructure.
Presently, we have set aggressive target for ourselves in the area of service excellence and our existing platform which is the Finacle 7 cannot continue to serve us to meet those aggressive targets, so we want to be able to be quicker in introducing new products into the market place, that’s what Finacle 10 would give us as an edge over Finacle 7. We want to reduce the time it takes to process the withdrawal transaction, currently we spend an average of four (4) minutes; a customer will spend not more than four minutes in front of a teller officer to do a withdrawal transaction, we want to halve that to two minutes.
Yes, we have improved our infrastructure; our back-end infrastructure, so our processing facilities are faster, but we also need to improve on the underlining software that runs the process. We also want to simplify our processes further in the front end such that the teller spends less time trying to post transactions and spend more time interacting with the customer, that will mean some improvement of our core banking infrastructure, so all of these are the business drivers that has lead us to say we need to upgrade to Finacle 10, because it’s going to give us much more flexible service delivery infrastructure that would enable us achieve that level of service excellence that we set for ourselves.
I would like to know your take on the cash-lite Lagos and eventual deployment across the country, and what is First Bank’s readiness in the long run?
First, I would say that the cashless or cash-lite drive is the right move, we at First Bank have been moving in that direction before CBN (Central Bank of Nigeria) came up with the policy in order to drive it across the industry. Which is why, if you go back to my initial summary, some of the highlights that I made were the investments we made in actually enhancing our electronic delivery channels which has translated into us, I mean First Bank achieving a larger share of the market space for electronic transactions.
We had actually been quiet clear with our own strategy as First Bank in driving towards a cash-lite situation, because we have been trying to move or migrate our customers to the electronic channels, so that they deal less with cash. Now, having said that, it’s a good policy, it’s something that’s going to help the economy because the velocity of transactions will be much faster if you are using electronic means, and you can imagine that we have move significantly forward from a situation whereby upcountry clearing was 21 days.
I don’t know if you still remember that there was a time in Nigeria when it took 21 working days to clear a cheque if that cheque is not a local cheque and local cheque itself took about a week for you to be able to get your money to where we are today which is we have a turnaround time on clearing items which is still T+2 and that has been shortened further to a next day.
What do you mean by T+2?
T+2 means the day you submit the cheque for clearing you add two days and on the third day you are going to get credit in your account but that is being shortened further to a next day clearing which by next month actually we should be having a taste that fully. That is what has happened within the clearing system and we have seen that, that has actually impacted the volumes of transactions that go by the way of cheques rather than cash exchange.
Also, what has happened which we didn’t note is that it was like a first phase of the movement towards less cash because if it takes 21 days for you to get value for money, you would hardly do any transaction through that channel. Now, what debit card have done, because debit card by their nature are actually cheque replacements because cheques are instruments by which you access your account; debit cards are also instruments by which you access your account for payment.
With the introduction and wide-spread adoption of debit cards, we actually have gotten a faster mode of rendering payment which doesn’t even have to go through clearing, so you could say you have instant clearing with debit cards. So, if I actually want to transfer money to you, if I have a portal that allows me to debit my account using the security on my debit card and transfer money to your own account, then I would basically be giving instantaneous credit into your account, so that’s like instant settlement, what CBN has done is to try to focus us on that platform, the cash-lite policy is essentially trying to focus us on the efficiency of the platform that is built around the card and the mobile payment which it has also introduced a license for, and which are all instant settlement platform.
Essentially, what we do with exchange instrument is largely payment, exchange of value so if we are able to do payment faster, transaction velocity increases and therefore we can actually ensure that the economy becomes a lot more productive. One of the reasons which CBN has also used as a justification for the policy which is a valid reason, is the sheer cost or waste that is going into handling cash because we all know how much it takes to print one naira note and if you are frequently using it, you need to replace the note more frequently, that’s a cost that goes into CBN’s account. Besides that the bank that handle cash needs to employ people to do the cash counting and they need to pay insurance to secure the cash that is held in their vault, we know the risk of armed robbery in the country and some time the loss of lives that is associated with the easy access to cash.
So, as a policy, we agree that’s the way it should go and what we are doing at First Bank is that we are ensuring that as you adopt the alternatives to cash, you basically do not get services that are less than what you will get with the use of cash.
Our platforms are very reliable, we have moved from less than 2,000 active Point of Sale (PoS) terminals to over 8,000 that we have deployed and we do intend that by the end of the year, First Bank alone will have deployed more than 20,000 PoS is we are looking at focusing on Lagos area. Across the country we will be talking of bigger numbers, but we are focusing on Lagos because the focus this year even by the industry is really around Lagos, so we are focusing on Lagos and we are saying that Lagos can really take that depth of PoS deployment. There are a lot of places we go, all we do is go to the nearby ATM, withdraw cash so that we can pay at the point of sale, why do we need to go through that when you can swipe your card at the point of sale and actually get value.
Why is it that some of the PoS are not working?
Those are the problems that we had initially, because the industry had not focused on that. You know, there was also a time that an average bank’s branch, the chances are that the network would be down was high, or if you go to the bank’s ATM the chances that the ATM would not be online was high but when we focused on that as an industry you see that those cases are very remote; it’s not perfect right now but they are remote because most banks have multiple links, most ATMs have multiple links and the same thing is happening to the PoS right now where you have PoS that are deployed before having only a single connectivity, today we are having PoS that have multiple connectivity, multiple GPRS – Global Packet Radio Service, and all of that.
What causes some of the hiccups in transactions from time to time, especially on the issue of ATM, from your professional perspective?
You talked about challenges, we cannot operate within a vacuum, we know the state of infrastructure within the country, a lot of what we are doing right now has to ride on the infrastructure that we have; communication links, unreliable electricity.
If you actually want to run a branch that you would have an ATM and that ATM needs to be available for 24-7, it means that even when the branch has closed there must be power that is powering the ATM, we have gone ahead to install inverters to protect those equipments and ensure that there is power around the clock, so having put that background there, you would understand that there is some point of failure that could actually arise, what tends to happen is that we do have sometimes the communication links for instance in the middle of an ATM transaction so a customer has slotted in the card and the pin, and the transaction was about to take place and there is a failure of communications.
What the ATM has been trained to do is that it would actually reverse the transaction that has just failed because before parting with money, the ATM will debit the account to be sure the money exist and then dispenses money to you. However, let’s assume that the ATM had debited your account and the link fails, the ATM will wait for an acknowledgement that the debit has actually happen and then it doesn’t get, so it would return your card and also automatically it would raise a credit back into your account. We all experience it and I’m sure you have also experienced it.
If you are a First Bank customer and I hope you are, what happens is if you slot in your card and have failed transactions you would get two alerts almost at the same time, you will get the debit alert and you will get the credit alert immediately, which shows that there is no human being manually reversing the transactions because the system itself is automated to know that something has failed and to credit you back with your money.
However, sometimes that automatic process doesn’t kick in and that’s why we set up a dispute resolution mechanism which ensures that within 24 hours after such incidence of failure of the automatic reversal, someone in the back office is able to credit you back, so there is not any instance that we know, for instance, at First Bank and I believe across the industry really that someone’s account has been debited and the money is not been credited back except where people have been defrauded, because we are aware of cases of people losing possession of their cards or compromising their PIN, and in such cases there are also incomplete transactions on those account.
I am sure you know that bulk of electronic transactions rides on networks, which in-turn depends on Internet Protocols (IPs) to deliver, therefore what are banks doing on migration, especially are we looking forward to having FBN as the first Nigerian bank to hook to IP version 6?
Let’s first define the IPv4 and v6, essentially the Internet Protocol version 4, let’s keep it simple is just an addressing scheme, just like you going into a street in Lagos and you will see old number 5, new number 16, IPv4 and IPv6 are numbering schemes. IPv6 was introduced because the address space on IP version 4 was actually now more or less fully used because of the rapid growth of the internet when countries like China started trooping in and rapidly acquiring internet addresses.
Now, it doesn’t mean that all the addresses on IPv4 becomes invalid, there is no organization that is getting shut down because they are on IP version 4, and there is a transition plan that would actually allow people to have both IPv4 and IPv6 work side by side. So for my internal network for instance, I probably do not need to change the addressing scheme to IP version 6, because the number of devices and equipments that I have on my internal network can still be managed with IPv4. And as it is today, even today on the IP version 4 addresses are still able to communicate with any other hosts, right, because there is that transition management process that has been set up for a transition into IP version 6.
So, we do have a plan for a transition to IP version 6 but is really not something that is going to give us any particular edge. It is not something as you would say is quite strategic; it is not something that is going to give us an edge. Everybody will ultimately transit to IPv6 if we stretch into the very long future so but it’s not something we need to rush into, we do have a plan to ensure that there is clearly no disruption to our business due to the adoption of IPv6.
What would be your advice to Nigerians, especially First Bank customers and what’s First Bank doing in providing facilities like loan for Small and Medium Enterprises (SMEs) and encouraging those in the IT sector?
When we began, I told you that First Bank basically have the broadest operation in Nigeria serving the very rich and large institutional customers to the rural poor and how do we do that, we have our business structured around segments, so the SMEs would fall under our retail segment and we do have a group which happen to be the largest group accounting for about 50 per cent of our balance sheet which is actually the retail group, for them to be 50 per cent of our balance sheet, means that we are actually lending to them.
If you look at all the key sectors, First Bank is not just playing there but we are also leading even in lending within those sectors. If you look at agriculture, First Bank is one of the few banks that got the CBN intervention fund and that’s because of the quality of lending that we are doing within the agriculture sector and the fact that we have demonstrated to CBN that we have the processes to actually understand and support that sector.
If you look at telecoms, when the telecoms industries took off with advent of Global System for Mobile (GSM) communications, most people didn’t believe in it; we were one of the first players in that space, not just lending to the operators but also lending to their distributors and those in the downstream of the telecoms operations.
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