Nigeria: AppZone lifts MFBs with core IT banking system
By Ben Uzor Jr, Business Day Online
Customers of microfinance banks (MFBs) in Nigeria can now operate their accounts without having to be physically present at bank branches. BankOne, an innovative platform licensed by the technology firm AppZone, allows subscribing financial institutions to use mobile devices as data capture terminals in a big step for “branchless” banking.
This Information Technology (IT) platform, according to industry watchers is fast spreading across the country and eliminates a major problem usually faced by microfinance banks: customers who do not have the luxury of leaving their business premises to perform banking transactions.
More importantly, the Central Bank of Nigeria (CBN) is targeting the reduction of financial exclusion in the country from over 40 percent in 2010 to about 20 percent in 2012. The microfinance sector, according to the apex bank is likely to play a critical role if this lofty target is to be achieved.
Available statistics show that MFBs currently represents about 3 percent of the economy, according to the National association of Microfinance Banks, which has about 820 member MFIs. Moreover, consolidation in the country’s banking sector over the last few years has been widely reported but the CBN has been working assiduously to solidify the microfinance space.
In 2010, it revoked over 200 microfinance licenses of institutions which did not meet capital requirements, before reinstating about half of them later in the year. One technology supplier to have capitalised on the development in the microfinance sectors is AppZone Group. “Once we developed the solutions, we essentially converted them to products and started licensing them”, said Emeka Emetarom, chief operating officer of AppZone in an interview.
AppZone’s commercial bank customers, which include Skye Bank, Wema Bank, First Bank and Access Bank, have funded the company’s product development efforts, to the point where it has a portfolio of offering including a card management system, an in-branch collection platform and mobile banking platform. By about 2009, AppZone decided to change direction, “We found that the way commercial banks were using our solution wasn’t very efficient”, noted Emetarom.
This was essentially due to bureaucracy within the banks, issue of changing personnel and ‘general hitches’, resulting in banks having paid for licenses but not really applying them the way they should’, the IT company felt. AppZone therefore started looking at how its technology could be applied to the unbanked in the country, and to the microfinance sector.
The firm, according to the COO discovered that MFBs did not have the funding to license software, and many of them didn’t have robust core banking applications for that reason.
AppZone decided to develop a core banking IT solution, BankOne, in addition to bringing together the payment products used by the commercial banks in a central service.
This, he further added would be available on a subscription model to microfinance institutions. The idea is that “small institutions can benefit from world class technology without having to pay million of dollars in license fees”, said Emetarom. The offering is hosted by a data centre provider, IPNX Nigeria, and is backed up at a data centre in the United States.
The main benefit to customer, according to AppZone’s COO is the price compared to other available systems. It was learnt that an MFB pays implementation fee between $1, 500 and $2, 500, and a subscription fee of about $30 per user per month.
This is tapered, so the more users an MFB have, the cheaper the fee per user. AppZone also collects transaction fees when customers use the electronic channels. There is an access fee for mobile banking of about 60 cents for example. “There are also bill payment functions, internet and SMS banking, debit cards, and so on. The intention, he went on is that once transaction fee increases, AppZone will be able to waive the subscription fees to MFBs. This way, “we can have MFBs take the system for nothing to provide financial access to their customers, and the customers can pay to use the services they are benefiting from”, say Emetarom.
BankOne has taken about 30 MFBs since its launch in late 2010. “Most are live, and a few are implementing now’. Collectively, these represent about 200,000 accounts. The number of user in each MFB varies from as low as five to as much as 80. He further added that the average is about eleven. Usage of the system, which is written in C#on.Net technology and has an SQL database varies, Emetarom suggested. “Similarities don’t go beyond the limits imposed by the central bank”. But he claims that the system is flexible enough to be configured.