Uzoma Dozie: Digital Financial Services Are Cheaper, Help in Improving Lives of Citizens

Well known as a promoter of financial inclusion and digital banking, Mr. Uzoma Dozie is the Founder and Chief Executive of Sparkle, a digital-powered microfinance bank. In this interview, he speaks about the opportunities the recent aggressive drive towards cashless policy created for his company, its plans for the future and the need for Nigerians to embrace digital financial services. Obinna Chima brings the excerpts:

What is your take on the Central Bank of Nigeria’s recent attempt to enforce the cashless policy by limiting the amount of cash in the economy?

The overall idea of what the Central Bank of Nigeria (CBN) is trying to do is to help engender economic growth.  By reducing cash, you are trying to reduce the cost of transactions and also make it more secured to do transactions. People have been used to moving cash about and here, you are trying to make them have less of cash, which is safer, more secured and more experiential. Nigeria has a financial inclusion agenda and digital solutions would help the country achieve it. They always say cash is king, but during the lockdown when cash couldn’t move, we saw that people were stranded because they couldn’t do transactions. Clearly, cash has limitations of what it can do and if we continue to use cash, we wouldn’t be able to scale and we wouldn’t be able to reach the bottom of the pyramid and we wouldn’t be able to scale in terms of even lending money to people.

 The thing about cashless is that when you are using digital financial inclusion, you are able to capture a lot of information. If I know more about the people and what they are doing, then I can lend more to them even without looking at their statement. That is the issue. Now, why hasn’t it been successful as it should be? You must understand that there are some bottlenecks that need to be resolved. The first is infrastructure. Secondly, education. Education is a big part because if people don’t understand how to use technology or what the benefits are, it becomes a challenge. The third one is affordability. Nigeria is probably one of the poorest countries in the world and has the highest number of poor people in the world. So, if you cannot afford a digital phone or internet, how are you going to transact? Even the whole idea of identity is an issue. How are you going to identify people? So, we have to tackle those things if we are going to scale. But do we have any other choice other than digital financial inclusion? No, we don’t, and that is where the world is going to. So, we have to focus on digital enablement and ensure that even the poorest has a tool that can access and also connect with society. It is probably cheaper for me to give someone a phone than to take you to different parts of Nigeria. So, we must build that infrastructure to make sure that there is internet connectivity everywhere, and also the devices and tools to connect are available. Believe me, going cashless is much cheaper, transparent and digital also gives better information on how to allocate resources effectively to improve the lives of the citizens.

But some have argued that the severe cash crunch experience was as a result of implementing the cashless policy and the naira redesign same time?

I would say, the ideas were fantastic. But then again, the transition should have been better. There were many things happening at the same time, which made the implementation difficult. But, I think they have sown the seeds in people’s mind that there is an alternative. One thing that has helped organisations like ours is disruption. There is no progress without disruption. When you look at the COVID-19 and the global lockdown, where people couldn’t move cash, it created awareness on the need for alternative banking channels. COVID-19 created awareness of alternative banking channels, which lockdown created appreciation of these channels. People knew about digital, but the lockdown forced them to adopt digital platforms. The naira redesign and cash limit policy could have been done better so that both policies would co-exist. Secondly, there is also the need for more digital liquidity. Digital liquidity is the ability for me to go to the person selling corn on the streets and be able to use QR Code for payment and other digital platforms effectively. For the institutions, they must also have the right infrastructure and the up-time must be much higher. Just like during COVID-19 when everyone moved from physical to digital, there was no capacity and this was what we saw during the recent enforcement of cashless. We saw a surge and some of the banks couldn’t cope with that.

But the surge in transactions and the inability of the traditional banks to meet customers’ demand created opportunities for digital banks like yours?

Yes, there was increased awareness, appreciation and adoption of our services. The first thing the situation did was that, it created awareness as people were looking for other options. Although we had been doing digital marketing, the cash crunch created more awareness and visibility for us. And when people try it, the experience and speed gave them confidence. So, adoption was very high. Since we started, we have had close to one million downloads. Some people would just download and keep on their phones without activating it. So, with the cash crunch, a lot of such persons started using the app. We also saw people who had opened accounts, but were not using it, started using those accounts. Our transactions volume moved from over 12,000 daily to over 20,000 daily and in terms of value, we now do over N400 million daily. And you know word of mouth is quite strong and so people who have experienced our service, now tell others about us. Fortunately for us, we had gone through a system upgrade which was meant to increase capacity. So, we didn’t get caught up in the capacity issue as accounts were working and transactions were going smoothly during that period of surge. It also helped in validating that digital is here to say. Also, another thing for us which is very key is that there were no issues of fraud. Cyber threat is one of those things that people are scared of with digital organisations. We made sure that we developed a trusted organisation before we went out marketing our bank so that anybody who uses Sparkle feels safe that their transactions and data privacy are well protected.

Nigeria recently had a general election. Do you think the country is ripe for electronic voting, a situation whereby technology would be used from the beginning of the process to the end?

So, with biometrics, the probability of fraud is eliminated significantly, which is very important. But, where you are going to find challenge is in the area of infrastructure. The person in the rural communities where there is no internet connectivity, how will he be able to vote if he doesn’t have mobile phone? Are there centres where people can go and vote conveniently? How far does he need to travel to use internet connection to vote? How can they do it with less pressure? If all these are put in place, the cost of election would reduce drastically and people would find it difficult to rig and also prevent people from being targeted and attacked. Also, you would have visibility as you are able to see the votes as they are being cast. I believe that a time would come for electronic voting with the right infrastructure. We need that digital leadership and we need people that understand the capabilities and the power of what technology can do and you can see that happening in many countries of the world. How you deploy technology is going to depend on the vision of the people you choose as leaders.

Sparkle is three years in operation, what has been the experience so far for you, moving from a traditional banking system to running a digital bank?

Personally, I would say that it has been an education because working in a traditional bank and moving to a digital bank is completely different. I think the transition was easier and interesting for me because when I was at Diamond Bank, we built a retail platform and in doing that, we had to work with fintechs. So, I understood the digital ecosystem. So, I moved from a traditional banking system to a hybrid traditional system and now digital. So, it was an education for me. We started just around the time of COVID-19, from working 9am to 5pm daily to remote working and now, we are in hybrid stage where people are working from different parts of the world. The world of work has completely changed. Today, I understand better the power of small businesses in Nigeria.  When you are working in a traditional bank, I think you are beclouded by a lot of corporates and big businesses. But now, we are working in a space whereby you have to attend to the needs of millions of individuals and millions of entrepreneurs and small businesses. So, that whole work ethics is completely different and how you deal with that is completely different. Another thing is the entrepreneurial journey. As a chief executive officer at Diamond Bank, I had all the resources at my beck and call, but as an entrepreneur, you have to learn human resources, technology, marketing and development, compliance and how to deal with the regulator from a different perspective. Commercial banking and microfinance banking are two different things, although they do almost the same thing. For me, now, I have a better understanding of building technology and businesses. As an entrepreneur, there is a limit of the risk you can take and your capital is limited. With my experience in traditional banking, I am able to take the good things and drop the bad things. So, here, we built our own banking application and we understand that small businesses are key to financial inclusion. We have created platforms that address challenges of small businesses. Today, with Sparkle, small businesses can open a bank account without actually going to the bank. With Sparkle, they are able to access services such as payroll, inventory management, taxation and we were able to do that by first of all understanding the customers journey and also understanding how banking works and how we can leverage technology to do that. Sparkle is a lifestyle banking platform, so whether it is making decision for your business or health, information is very key. With that, we have created a platform that gives you information about everything.

Why do you think people should bank with Sparkle, what are your unique selling points?

I know the strength of Sparkle and I also know the strength of all the commercial banks in the country today. One of the biggest strength of the traditional banks is trust. Customers trust them because they have been around for a long time, they have gone through several economic cycles, they have capital and they can absorb shocks in the economy and some of them are also adapting to the new ways. But, they have legacy thinking unfortunately. Even from a digital perspective, the digital leadership required is not as advanced as that of Sparkle. I will tell you that I live through my mobile app. I don’t have a secretary, I don’t have a personal assistant, I don’t write cheques, I do all these digitally. So, I have to make sure that my solutions are able to help me do whatever I want and also for Sparkle customers. Show me a traditional bank CEO that does 50 per cent of his transactions by himself through digital solutions. It may be difficult to find. Secondly, Sparkle is very easy to use and the app is user-friendly. People don’t change unless they are compelled to and disruptive situation compel people to change. So, we built the Sparkle app around what people do. Today, if you go to traditional banks, you are categorised as either savings or current account customer, but with Sparkle you only have one account and we offer customised products. That is very difficult in traditional banking. We serve our customers in whatever way they want to be served, with no additional cost, but if you go to a traditional bank, you would be charged for those services. Our app was built around how Nigerians are and what they are and as their lifestyle change, we respond. We built the app, so we don’t have to rely on a third party to help us respond to changes in customers’ behavior. So, there are many reasons why Sparkle is the bank for everyone and some of them are access information for better decisions, freedom to do your transactions anywhere and also it was built for the millennials. The Gen Z’s of today want you to come to them, they want customised services and they don’t want to pay for it. These are all what we are offering at Sparkle.

Are there plans to upgrade Sparkle from a microfinance bank to commercial bank in the future?

The regulatory environment is changing and one thing I can say about the CBN is that it is a progressive organisation. When I think of the interactions with different regulators in Africa and some parts of the world, I will say the CBN is quite progressive. When you think of the Know-Your-Customers (KYC) initiative, the eNaira, tokenisation of cards, open banking, the national card scheme, and several others. So, it is now left to us to take advantage of them. We should be able to do much more for our customers, and to do that, we need a bigger licence. If the licensing regime today does not change, then we would definitely go for a commercial banking licence someday. Financial system stability is dependent on the players in the market. You are only as strong as your weakest link. Today, I have a microfinance banking licence and I am a digital bank, but if I don’t adequately put the governance structure, the cyber-security and if something happens in a digital bank, it might affect the entire system. So, for us, it is about making sure that the total system is safe. You also don’t want a situation whereby you get a licence that you are underutilising. If we have a commercial licence, we are not going to have branches and the only thing we are going to use capital for is technology.

So, what would you consider as Sparkle’s biggest stories in the past three years?

Firstly, the fact that people know about Sparkle is a big achievement because when I think of the people that we started with, a lot of them are no longer in business. The CBN few days ago came out with a list of microfinance institutions that are digital banks and we were one of them. Secondly, we are the only platform that has an end-to-end solution for small businesses and we have been able to do that successfully. Our brand is getting stronger and we have raised money from the market and we are about to do another capital raising. Now that we have established the brand, it is now time to allocate money in creating more awareness because we are not as visible as we are. So, we are looking at raising about $5 million. At Sparkle, we leverage on technology. Here, the people behind the organisation have always been less than 40 persons, compared to our competitors. We use systems for procedural things and one of the areas we are very excited about is artificial intelligence. In fact, we have invested a lot on digital science and we have a fantastic team helping us create more exciting products for our customers.  The future of banking is going to be chat-based and we are positioned for that. As we go into a new government and a new dispensation whereby we have to energise the economy, the engine of any economy are the small businesses. We are positioned to help those businesses by providing a platform for them to obtain loans. We are going to be lending to them at a price they can afford and responsibly.