How eTranzact started USSD revolution, by Toluwalope
Niyi Toluwalope, a transformational leader, assumed the position of Chief Executive Officer of eTranzact International PLC, Nigeria’s premier fintech company, five years ago, with the mandate to transform the company into a leading force in the country’s electronic payment. Since then, the company’s growth, across different indices, has improved with some of its key products becoming household names in the payment ecosystem. In this interview with GEOFF IYATSE, he speaks on the company’s journey to prominence.
Going down memory lane, how did this start?
I joined eTranzact as the Chief Finance Officer and became the interim CEO in 2018. Within seven months, I was confirmed as a substantive CEO. That was when we began our transformational journey, trying to reposition eTranzact as the leading financial technology company. We have made much progress with the support of the Board and shareholders. We had to raise additional funding to be able to reposition ourselves, and upgrade our core technology infrastructure, as well as hire smart people while retaining our best people so that we could put our best foot forward as we compete in the financial technology and digital payment space.
In specific terms, what role has the company played in the evolution of Nigeria’s e-payment system and digital economy?
eTranzact is the pioneer in the ecosystem. We started six months before our biggest competitor, and the idea rode on the back of the GSM telephone licences that were auctioned and licensed in 2001. Many people did not anticipate that the telcos would enjoy the kind of growth witnessed in the past few years.
One of the ideas that came up was how we could leverage the devices in the hands of people so that what they have with them could be what they use to do financial transactions. These are the things that led to the concept of SMS banking, which eTranzact pioneered, and mobile banking. Today, everybody is doing SMS banking – whether you are a digital bank, a commercial bank, a microfinance institution or even a wallet-based system. It is the same concept. The only difference is that wallets are virtual mobile banking tied to specific accounts. These are evolving, landmark ideas that eTranzact created back then.
One of the quick problems we solved is the challenge of payment of school fees. In the past, if you are based in the old Gongola State and you were attending the University of Ibadan, you would have to come to Ibadan, go to the specific branch used by the institution. If the branch was in Bodija, you could not pay your fees in the one at Mokola. It had to be in Bodija. That was a serious challenge and our solution solved that.
One of the pioneer solutions eTranzact introduced to address the challenge was Payoutlet. How does it work? Since eTranzact is integrated with all the banks in the country and, by extension, all the bank branches in the country, all you need is to say you want to pay school fees on the University of Ibadan eTranzact platform. Once it opens, you are given a reference number that confirms that you have paid. eTranzact real-time online platform can sort all our funds across every bank branch and route them to the branch of the University. That was an idea eTranzact pioneered, and it is what is driving internally-generated revenue (IGR) collections. Every collection type that anybody is doing today, rides on this concept. And we started it.
In 2012, at a Saturday strategy session, we deliberated on how we could make payments as seamless as people learn music. It has to be simple enough for anyone to use. Just like how the iPhone was developed. A device that is simple and easy to use by anyone.
How did the USSD innovation happen?
Before now, there were already mobile applications. But you had to open the app; you had to sign in; you had to go to the menu; you had to look for a specific application. And we said: it is possible to create a string – a structured supplementary service data (USSD). Then, you type *389# to give you a menu where you select an option and click to complete a transaction. That was how we created the concept of USSD in Nigeria, which everybody is running after today. By the way, the USSD code *389# also represents the main characters that make up eTranzact – ETZ.
We partnered with the mobile networks to situate it for airtime top-up. That was the first USSD top-up that telcos took up. But everybody has adopted it differently today with their different strings. Going forward, the NCC made it easier for people to get their licences.
That is another transformational idea eTranzact brought to the payment system. Today, the fastest-growing payment channel is the USSD. It doubles year-on-year, and we have not seen anything yet. The fast-growing demographic, probably the 18 to 30 years, are the ones that use the USSD most because it’s on the go. You do a string, press the number and you are done.
For us, that has been one of the biggest innovations that have come out of this country. Other climes – America and the United Kingdom for instance – are not on this level yet. They have structures that restrict this type of payment.
Look at how late it was for mobile banking to catch on in the US. Mobile banking has been in Nigeria since 2008. I have had a bank account in America since 2001 when I moved to the United States, and I didn’t start using the mobile bank app until about 2015. That was when they allowed mobile banking.
The reason some of these things thrive in this part of the world is that we are using fintech, solution products and digital payments to solve our problems. It is solving our social and daily problems. It is not a nice-to-have or a lifestyle. It is not like I want to upgrade my lifestyle; I want to be seen as a cool person. No, it is solving our daily problems. You can still remember the days of tally numbers – you went to a bank and picked a tally. The CBN has also helped. CBN has created a guideline that allows instant payment.
In South Africa and some other countries, you cannot get value instantly. You have to wait until the next day. If you do a transfer, it is until the next day the second party gets it, except I go to the bank and move cash and put it into the bank account of the second party. But in Nigeria, it is instant. And it solves our problems – infrastructure, transportation and logistics.
These are some of the things that have helped Nigeria position in digital payment, which is driving all of the funding we are seeing from private equity. We are over 200 million Nigerians. A big chunk of the population – at least 50 per cent – is driving a lot of these good things that we see. And we have not even scratched the surface yet. I see three levels of growth when I look at a strategy. First, who are your peers? Are you operating at the level of your peers? Nigeria is not even operating at the level of digital payment penetration of its peers when you compare it with South Africa, Kenya and Egypt. The second level of growth is the momentum you have. The population we have is three or four times more than any of those countries. We need to leverage that potential. If our peers are doing 60 per cent of their population, we also need to do that proportion to be at the same level. Then, you begin to leverage the remaining side of your population, which is supposed to be on digital payments.
Nigeria is the place to be in digital payment. It is explosive, and that is what is driving all of this private equity. As difficult and overwhelming as insecurity is; as difficult as the terrain is; as difficult as the macroeconomic environment is; as difficult as the FX illiquidity is, private equity is still flowing into the Nigeria market fintech space. I am happy that eTranzact is the pioneer of this.
Do you think you will get sufficient credit for the role you have played in nurturing the sector, including the creation of the USSD concept?
We have received a lot of recognition, but they are not sufficient. We innovate and allow our works to tell our story. That is the truth. We need to begin to tell our story as part of our readiness for the next phase of innovation and transformation. We are working hard to set the stage again for the future of electronic and digital payment.
What have been the challenges and how have you surmounted them?
Digital payment is not something you can do just as a fintech. You need to constantly collaborate with banks and partners. We have done quite well in those collaborations. Apart from banks, you can only sell solutions to serve those that are unbanked. If you look at Nigeria, we have over 200 million people. Today, 130 million Nigerians have mobile phones, they are taking money from somewhere to buy airtime. That is a financial transaction. Now, how are those 130 million people paying for the things they buy? Some of them are paying from their bank accounts. Today, we have about 60 million bank verification numbers (BVNs). It means that you have 60 million valid bank accounts or individuals that are banking. Let us even assume that all the 60 million accounts are active and that 60 million payments are from bank accounts. If you take away 60 million account holders from 130 million phone users, you have about 70 million left.
This suggests that we have 70 million Nigerians who are not doing financial transactions or in the financial services ecosystem.
How are those people doing their transactions? These people have their money in their pouches, under their beds, pillows, carpets, roofs, tanks and wherever. Those are the real Nigerians that need financial services and that is where a lot of the growth is going to come from.
How do you harness those people? That’s the challenge. That’s what keeps us awake every night. We have run a few scenarios because, as much as you think that those guys are primitive, they are organised. A lot of these people still make old-fashioned contributions. And think about it, they select someone who has a good reputation and everybody pays religiously while records are taken. That means they have created a savings and loan system that is very manual. But has worked for several years. They don’t like banks, they don’t want to go to banks and they don’t believe in the banking system. How do we take our solutions, training and support to these cluster groups? You need to first get those people into the payment ecosystem and gradually bring them into the bank system. For us, our pocket money solution is the future. We have 70 million people that are waiting to be banked. If you can bank one million of those people and give them a service that addresses their problems, grant them credits and digitise a lot of the other things they do, you have created another corporate economy.
How has Nigeria’s digital payment influenced the company and its product offering?
It has been phenomenal. Look at our transaction processing capability. In 2021, we processed about N39 trillion. Last year, we did over N50 trillion in transaction and value processes. That is huge, but it is based on a level. By the time we fully deploy our new core infrastructure, we will have the highest processing capacity in the country. So, we are open for business. As a pioneer, we have triggered some of the changes seen in the industry. The changes have transformed the understanding of how business is done digitally, and we have benefited from that.
We have done a lot for the government. We have deployed solutions in the public sector to digitise the process of salary payments, pension payments, pension remittances, national housing fund collection/remittance, national health insurance collections and remittances and many others. We have invested a lot in the government’s digital initiatives. We have digitised the process from distributing cash to displaced and poor Nigerians to card payment. We give them cards now and those cards are linked to wallets. From our corporate-based solution, we credit all those wallets one time. The wallets represent the cards, all of these beneficiaries take those cards to our cashpoint agents, eTranzact or any cashpoint agents and get value. eTranzact is at the forefront of transformation in the payment system.
Let us look at the unique selling points of your flagship proucts and services.
PocketMoni is our response to financial inclusion. PocketMoni, as an app, and money cash points – super-agent framework are revolutionary. We have almost 30,000 agents now across the country today. They handle any transaction you may wish to do in a banking hall.
One of the big lessons from COVID-19 is the partnership interest from banks. Banks wanted to discourage congregations in banking halls. So, they were looking for Infrastructure providers like eTranzact to situate all of their banking services in our solutions. Today, you can open an account; can do simple transactions; that can capture BVN and NIN, and can do simple transactions through our agents.
Those are some of the things PocketMoni Cash Point is doing in partnership with banks and agencies of governments. For us, the sky is the starting point and opportunities abound. To be honest, we just need to collaborate more with the right agencies, government, virtual services and CBN.
You are part of the e-payment company that is listed on the stock exchange, do you see this as a bragging right?
It is a bragging right. Our business is fully transparent. Anybody can review our records.
Are you impressed by the performance?
So far, if you look at when we assumed leadership in 2018 till date, the share price has doubled. There is, perhaps, no other company on the stock exchange that has doubled its share price in the period. That is the biggest bragging right you can have. The stock is not even available because people that hold it do not want to sell owing to the strong fundamentals of the company. For me, the best success story any company can tell is that shareholders have confidence in the future of the company and that they want to hold tight to the shares.
Can we look at the next phase of growth of this company? How is the planned restructuring into a holding company going to impact the company?
The holding company restructuring is going to position us to think more about subsidiaries and even expand our pan-African strategy. Through the holding company, we are going to go pan-Africa. We are very interested in organic and inorganic growth. We are in the market to look for smaller companies that align with our strategy and give us a step ahead of further access into the markets we want to operate. We will do some strategic acquisitions; that will increase our reach as a holding company. It is an exciting period. We raised some money last year and the year before for specific proposals. We are not in a funfair valuation game; we are raising money to solve problems.