From the name, ALAT was developed to solve a local problem. In spite of the global focus on paperless, branchless and borderless banking, Nigeria seems to more apt for a digital bank.
From the stables of Wema Bank, the folks behind ALAT are passionate that with their vision to make Nigeria’s first digital bank work beyond the shore of Nigeria. In this exclusive interview with Nnamdi Azodo, Product Owner of ALAT, he laid out how it all started and the bigger picture for the venture.
What gave way to the thought of creating a digital bank in the first place?
In the past, our parents use to have to go to a bank for whole day. They go early, get a number, then go out to go do something else, come back to the queue and still continue waiting. The generation we are in now we have been so spoilt with instant gratification, instant coffee, and instant everything you can think of, instant social gratification; that is why I can post a picture and expect my friends to start liking it immediately. Our parents used to take pictures and wait two weeks for the photographer to ‘wash’ it; that’s no longer the case. We are in the time of instant gratification.
ALAT is solving that problem of I don’t want to wait for any service; bring it to me, bring it fast and then customize for me. A lot of industries have been disrupted except banking, banking has remained in the old ways of doing things and if it does not change, the world will overthrow it, particularly in Nigeria.
There is a digital bank in the UK that has gotten full banking license like Atom and Monzo. Are you looking at that model going forward? And how easy is that to come by in Nigeria?
As of today, ALAT, is being positioned as a separate entity from the parent; Wema. I am an entirely different individual from my father, even though we have a connection. ALAT is the offspring of Wema but not necessarily the same thing with Wema. As of today, the Central Bank of Nigeria does not have a framework for regulating digital banks in this country; the CBN is not at this moment issuing licenses to digital banks per se.
There is a framework for banking regulation targeted at digital banks, for once, that were the order of the day; it’s a good thing we have the first-move advantage, we can always pick that up once the regulation is ready.
In the UK and the US, some of these start-ups are the one to approach some of their regulators and their Central Banks to create a regulatory framework for them. Will you be doing that and probably in conjunction with competition?
Many at times, regulators are years behind innovation, so you are right in what you pointed at. We are making cases to get what can suit us because you can’t regulate the traditional banking system in the way you would regulate the digital banking system.
I can’t say about years but we have not approached the CBN today because of the people in banking committee; the CEO, COO, etc, they are beginning to wake up to this reality and I’m pretty sure this will happen very soon.
How long did it take to build? Is this 100% local product we are looking at and how are you looking at enhancing what you already have?
Thank you for asking this question, there has been several rumours, questions and people assuming that it was an off the shelve application that we bought. ALAT is 100% built by Nigerians for the world. So Last year, Wema Bank decided to go all out digital and selected a team of non-conformist who believed that we are tired of what we used to know, can we just change things around here?
The team is made up of young Nigerians and no foreigners, set out with the mandate to create something that we would be proud of and we can use. Someone once said that if you can’t find the textbook you are looking for, you write it.
ALAT is 100% conceived and developed by Nigerians for Nigerians and the world. The plan we have is to regularly update this application, ALAT is built as a bank from start to end, and you will not require a physical structure. The product roadmap is years into the future as at today, May 2nd was our first launch, May 29th we will have an update ALAT version 2.0 with more features and more functionality. By June 28th, we will have another update with more multi-choice and functionality.
Is it not too fast to release new features?
What we are doing is features and functionality because ALAT was built on feedback so every single day on Twitter, Facebook, etc., and other social media platform, people call in or sending in emails. We are getting feedbacks and they are very useful so we are looking at incorporating as much as possible within the time that we have. Some of them are new features; some features of new features and improved functionality because users’ experiences are complicated.
Somebody wants an icon on the left hand side another feels it should be on the right hand side because he is right handed. A lot of customer research is going into these things that we are doing and we are applying them from time to time.
So basically, when I look at the model of what you have; you actually give interest to customers who save or put their money into the system. So how is that different from typical banks?
Today, the average interest that the bank pay is 4.2%, the lowest rate that CBN allows them to pay is 4.2% of savings but ALAT is paying 10%; that is three times what other banks pay. The reason is that ALAT does not have physical structure everywhere, where you work 24 hours; your AC will need to be on, dispenser will have water, you will need deposit slips, etc. all these things are taking these costs and giving it back to the customers and because we have low operating costs, that is why ALAT can afford to pay 10% on interest.
One of the challenges of most African innovations like this is that they don’t scale very fast, some money bags might come to compete and scale very fast. Are you looking at West Africa market, and where will you be looking at in West Africa?
The plan and the product map is years into the future and we have been getting feedbacks from outside Nigerian. Today, you can sign up if you are in the US, as long as you have a means of receiving one time password, OTP, that we will send to authenticate that you are right user. As long as you have access to validate that; you can sign up on ALAT, so its not restricted by region but to scale properly into other African countries and the rest of the world; it’s a gradual process and very obvious; when we get to that bridge, we will be crossing it very likely with our neighboring countries; Ghana and Kenya. Kenya, as we know, is actually a big mobile money technology in this continent. So we are looking at those things but that are in the few releases along the line. Once you are on the app store, you are on the web; you are open to the world.
What are the assumptions that you had when you were developing this application that you have invalidated, can you mention some of those and what you have been doing to correct them?
Very wonderful question, before, bankers sit in their office and design a product that they think will work and ask people to buy. On ALAT, every single thing was validated on the street before construction and design started. We went to universities, different campuses, markets, offices, even Nigeria Law School, different places just asking people what they want.
For example, people want to save; many at times the problem is not that you are not making money. Many of us that are working, making a certain amount of money, and at the end of the month you find out that you are struggling. Savings is a hard thing for us in this clime so savings was a big one and the rate of adoption is amazing. People were happy to save, especially when you pay interest as high as 10% but more importantly, when we did different customers focus groups, when we researched on the street, people said they wanted to save; usually they would open a bank account somewhere; leave that one there but it was not automated. So they wanted a way to automate their savings.
Today on ALAT, we have two saving structure; One is Fixed, on Fixed if you say I want to save for the next 3 months, it means you cannot withdraw unless you want to end it.
The other one is Flexi; you can withdraw to a certain 50% every month of your savings. Even the name Fixed and Flexible was suggested by a lady during a focus group. Because life emergencies happen, sometimes, I will need to collect out of my money, so let’s call that one Flexi then because some other things are definite; for example, paying rent in Lagos in every 12 month, school fees every 3 months. Things like that, you can save with fixed. So the lady said why don’t we call that one fixed; the other one Flexi and that was how we came up with the name.
So savings is one of those things we validated. People don’t want to fill form; people hate forms; so we designed the signup process for example without having to fill formd for anything. With five clicks and you have a standard savings account but that is not all if you open account in a traditional bank today, you will fill a form having about 80 something fields after filling that form they will open your account when you go back to ask for debit card, they will give you another form to fill and everything you are writing, they already have it.
When you sign up without filling any form in less than 5 minutes, you get an account number so you can request for your debit card. You will not fill any form, all you need to do is swipe, look at the back if you like it, and click on it. It will show you the back, and if you don’t like you continue swiping till you pick a design you want. Once you make a choice of the one you want the only thing you are going to type is the address you want it delivered. So people hate to fill form queue up, people wants to save money and earn interest. These are some of the things we’ve validated.
In terms of numbers, can you share some numbers, sign ups, number of cards people have actually ordered?
Actually, I wouldn’t say because as we speak, someone is opening an account and another person is also requesting for cards, but we are have 10,000 new accounts or sign ups since our launch and that is pretty impressive. We have nearly a thousand accounts opening a day, because I can sit somewhere, at a Rhapsody or Beer Hugs in Ikeja and just download the application, sign up, and open an account without talking to anybody, you can sit with a glass of water or beer or whatever. So our rate is about a thousand a day since its launch. There is a card that has this really pretty design, it’s taken about 75% of our card request. People intend to love it more, there are 3 card designs but this particular design has about 75% choice rate. The card is free; the delivery to any address you like is free.
Basically, in terms of what are the remaining checklists for you to check before you become a proper bank? I mean a proper digital bank that there is nothing really that a traditional bank offers that you don’t because you have a card now, you have an account number, savings; one is Flexible, the other is Fixed. What are those things that you are keeping in view that will get you to that destination.
Like I mention, we have regular update and releases, today we only open account on naira, we are aware that some of our customers want accounts in dollars, pounds, etc. so that’s one of the things down the line. Another thing down the line is being able to bid for treasury bills, just practically everything a bank should be, you know this banking system was not built in a day, so this iterations will take a little while but we are constantly and regularly doing that and we have a road map to guide our plan. I just don’t wake up one day and say; let us do dollars. We have to be sure that at this moment; opening a dollar account is the most useful, best and expedient use of our resources.
In terms of security, a product like this is omnipresent and so the biggest risk to business today is not actually hacking and cyber warfare. People want money and don’t mind doing it for the crime. People want to actually make a statement like a warfare. How have you invested in cyber security that will give people that confidence?
For a traditional bank where you are still required to work, CCTV will be watching you, if you want to withdraw money someone is already capturing your face, etc. their level of security will be less than what is required of us because we don’t get to see you; so security is key. I have a chat in my system of what people wanted. Security ranked very high in what they wanted especially with the fact that this is completely online and I need to be sure that if I move my life savings, it’s going to remain there whenever I need it. So security is key for us, and this is one of the things we did to make sure we qualify for that. We have some of the best programming hands you can find in this country. I am not a programmer but for me to praise another person this way, we went the extra miles to get the best of the best.
Now, we also got some ethical hackers among the team besides writing codes; somebody’s full job is to hack this application; looking at the unit testing, vulnerability testing, regressive testing, possible threat position, etc. we have an internal team, that is trying on daily basis to spoil that will auto-crack us because if we don’t do it ourselves, they will do it for us, so it’s an addition to passing our own internal test. We hired an independent security company, Deloitte actually worked on this project with us. Every single side of it; tear the app inside-out. The mobile and the web version, and they certified us good to go and you know their reputation is very important to them.
Being a digital bank, what’s the biggest area of cost for you?
Technology! The top 3 is building software, security and every aspect of the server, licenses you buy, building software, and technology is the biggest cost. Technology skill also a major cost. The team is about 60-65% engineers. So it’s more of a tech set-up than a bank. We are about a 100 plus of team member.
By the time you grow up to 30,000 customers the same set of people cant handle them so how many people are you looking into?
At the beginning of this project from the first day of commencement of work we were 12 pioneer members that sketched most of the basic things that people worked on, so every now and then we are increasing the number and improving the process, so we are looking to grow into hubs, now the good thing is that growing into thousands does not mean building thousand offices, so the cost will still be relatively cheap.
From a Nigerian context, where is the market for you despite the fact that you are a digital bank anybody in Maiduguri, Borno, etc. can sign up, what are the key market? Based on our experience close to 70% of money is being spent in Lagos and then Port-Harcourt, and Abuja, so what are the key market so you don’t waste resources?
I’ll answer the market in two prongs. First, by audience we are targeting 3 the main specific audience; the Youth, the Young Professionals and a Young Entrepreneurs. These guys are upwardly mobile; they are internet and savvy, they live their lives on mobile. The average person checks his phone about 300 times a day, some people way more than the others in Snapchat, Twitter, etc. so these guys lives on their phone. So by audience, these 3 are our primary target. It’s not restricted to anybody but these 3 are our primary target.
Secondly, by location, Lagos is the commercial capital of this country, in fact West Africa so first of all Lagos is the key market for us and about 21 million people living in Lagos, that’s more than the population of Kano, Togo and Central Republic put together. So Lagos is very important for us. Next is Abuja and Port-Harcourt, then the biggest cities like Kano who also has numbers; what guides our city is Internet penetration with about 95 million people having Internet access in this country there is a big market. We are strategic about going into this market.
Wema Bank is controlling this, but how do you really want to create that proper delineation so that at the end of the day, they will actually see ALAT as a digital bank.
ALAT is as you mention, WEMA bank is the parent of ALAT, ALAT is a child of its own, already growing and blossoming, so ALAT is built as a separate entity right from the name because there is nothing stopping you from adding all these features on WEMA app mobile and save the cost of building an app from the beginning and save the content on WEMA app. But we were told not to do that so there is a clear distinction between WEMA bank customers and ALAT customers.
A lot of customers in WEMA bank, the age range can vary from 19-60 years WEMA bank, but on ALAT, we noticed a shorter age bracket of 25 years, so there is a clear difference the branding is different; the people that process physical locations are different WEMA has its head office at 54 Marina; ALAT only office in Nigeria Victoria Island, so we are deliberate and conscious of the fact. It is important to know that there is a trusted financial institution behind our bank. WEMA bank is Nigeria’s longest surviving indigenous bank at 72 years old; other banks that are older are not indigenous. So there is that assurance that some people are behind this and there is that separation to say that these guys are separate. We are careful with the branding, propositions, if you make a request of card in WEMA today. You will make the same payment that other bank charges, if you make a card request in ALAT today; it’s free.
Do you have a separate customer care line?
Yes, we have contact center entirely different from the ones you call when you want to reach WEMA bank. WEMA bank on twitter is @wemabank, while ALAT is on twitter @alat_ng, so they are entirely separate teams. The office at Victoria Island has everything but a separate entity from WEMA Bank.
In the next 2 years, how many active customers do you want to have?
ALAT is viewed that we are targeting by May 2nd 2018, we will be 1 years old and ALAT is expecting to have about 350,000 new customers growing at that rate for the next 3 years.