Dozie: Technology Will Define Digital Banking

Founder and CEO of Sparkle, a mobile-first digital bank, Mr. Uzoma Dozie, speaks about the emerging trends in the financial sector and how Sparkle is leveraging technology to demystify banking transactions and at the same time promoting growth of small businesses across the country. Emma Okonji presents the excerpts: 

Since the establishment of Sparkle in 2019, what has been the focus and drive?

I founded Sparkle in 2019 as a mobile-first digital bank that provides financial, lifestyle and business support services to Nigerians across the globe.

Sparkle provides digital banking services and creates access to financial freedom for everyone by connecting customers with simplified financial solutions. It is focused on helping small businesses to grow and upscale faster. We are building a platform that is focused on strong banking and people’s fundamentals. We are one of the very few digital banks that have good governance structure from top to bottom and Sparkle is building an ecosystem that is secured and safe. 

You were once a strong advocate of traditional banking system during the era Diamond Bank when the banks were competing with each other in the opening of physical branches across the country, but now you have shifted to digital banking system. What must have prompted the shift?

When we were still Diamond Bank, offering traditional banking services to customers, we were able to collaborate to provide digital financial services to our customers. When I was the CEO of Diamond Bank, we moved all our customers including retail customers from physical banking to mobile banking to give them enhanced banking experience. Again, at that time we collaborated with telecoms companies (Telcos) like MTN and others to develop ‘Diamond Yello, which was designed to provide banking tools to MTN customers and we took mobile banking to market women. Diamond Bank was the first bank to go digital and paperless and as CEO of the bank then, I was carrying out all my transactions on the mobile app. We collaborated with other players in the digital financial space to take digital banking forward. After the merger between Diamond Bank and Access Bank, I saw the need to take digital banking some stems further.

At a point the younger generation, who are the GenZs do not want to carry cash as they prefer digital baking transactions in a seamless way. So what I did was to take the strong traditional banking values such as proper risk management and restore of value of customers and I combined them with the great value of Fintech, which is using technology to create better banking experiences for customers, and to remove operational and financial risks. So I have the experience of both the traditional bank and the digital bank. Before Covid-19, Sparkle had already adopted digital lifestyle for its customers and employees.  

What are the differentiating factors between traditional banking and digital banking and what are the advantages of digital banking system over traditional banking system?

The differentiating factors are the people and the different types of risks and opportunities. The traditional banking system can be likened to physical newspapers, while the digital banking system can be likened to online version of newspapers. There is a limit to which the customer could do with the physical paper, but the online version is unlimited in scope. There is also a boundary limit in the distribution of physical newspapers, whereas there are no limits in online transmission of electronic copies of newspapers. Newspaper is static such that once a publication goes out in a day, nothing can be added to it. If there is a breaking news, that news has to wait till the next newspaper publication the next day. But with the online version of news publication, which is digital in nature, breaking news can be published, even after the online media had already published for the day. They can continue to upload and publish stories online as they break, without waiting for the next day publication. In the banking sector, customers that practice traditional banking, still take operational risk of going to the banking hall to carry out financial transacts, but with digital banking, customers can transact from their mobile devices in the comfort of their homes and offices, without visiting a bank’s branch. Digital banking has several advantages over the traditional banking system. Digital banking is driven by data, which gives accuracy and accountability. Digital banking is more cost effective than the traditional banking system, Sparkle, for instance, which is into full time digital banking, provides inventory, invoicing taxation services and customer database. So Sparkle is actually helping small businesses to grow their business without stepping out of their environment. So digital banking keeps it simple, transparent and cost-effective.

Do you still see any future prospects in traditional banking, given the era of digital transformation that is cutting across all sectors of the global economy?

Traditional banks still have bright future. Today, the top five banks are responsible for 80 per cent of bank transactions in Nigeria. Traditional banks have the legacy and experience. Nigeria as a country is blessed with her youthful population, where 75 per cent of the population is youth, who are the millennials and the GenZs. What traditional banks are doing now, is to deploy digital services in their core banking operations, and by so doing, they are gradually reducing the number of bank branches that they currently have, but at a much slower rate. I see more of the mergers in the traditional banking system. It will take generations for traditional banks to be phased out of the banking system.

Financial experts are calling for collaboration between the traditional banks and the digital banks. What is your take on such call?

Collaboration is key and I so much support and encourage it. Diamond Bank became successful at some points because it was open to collaboration. Banks are beginning to invest in technology and digital banks are in the forefront, leveraging technology for enhanced financial service offerings. But before collaboration, banks must agree to the rules of the game. For any bank to grow big and expand its operations, such banks must consider collaboration as a key element for growth and expansion. For banks to agree on moving cash from point ‘A’ to point ‘B’, the banks involve in the transactions must agree on the standard and rules of the transaction, and that is collaboration for growth. Collaboration brings about trust in the system. It was through collaboration that the traditional banks came together to establish agency network that will enable them reach out to more customers in rural and underserved communities. They also collaborated to establish shared infrastructure and they are all enjoying the benefits of collaboration, as they collaborate on standard.

You have been championing digital transformation at Sparkle. To what extent has this been achieved and what has been the impact of Sparkle on customers?

Sparkle has demystified banking operations and made the operations a lot easier for its customers. A good example is the payment link, which enables financial transaction without using any bank account. If I send my driver to a pharmacist store to get some drugs and he gets there and sends me a request link, I can send him money immediately and he receives it instantly to pay for the drugs. That payment link from Sparkle, makes financial transactions a lot easier and trusted. Before, this same transaction can go through about seven different steps before the transaction is processed, but we have been able to reduce the transaction time and even make the process more secure. At the end of every month, we usually send transaction updates to all our customers to enable them have record of their transaction history to our customers. On the small business side, Sparkle is helping them to become more successful in their businesses. So these are some of the impact we are creating for our customers. Again, we will be starting lending to customers this quarter of the year, and when we begin lending, customers will have the opportunity to get loans at a very low interest rate.

How will you rate the impact of Fintech in driving development in the financial sector?

Fintechs are fast changing the ways financial transactions are carried out in the financial sector, as they leverage on emerging technologies to provide banking solutions that have made banking transactions a lot easier and safer. As a digital bank, Sparkle is also leveraging emerging technologies to provide banking services for its customers and helping small businesses to upscale in their businesses. We understand risks and we know how best to manage risks on behalf of our customers. When we started Sparkle in 2019, we were using robots and not humans to process financial transactions and that enabled us to provide 24/7 services to our customers. We are currently looking at means and ways to incorporate Generative AI (GenAI) into our operations to make us more intelligent and also to make our customers more intelligent when dealing with them. The GenAI will help our customers to understand their business better and they can ask questions about banking and business growth and get immediate answers. So that is how Sparkle is using technology to make a difference in the financial sector.  

The Central Bank of Nigeria recently came up with some policies that did not go down well with digital banks. What do you make of such policies?

I think the policies of the Central Bank of Nigeria (CBN) in the financial space are very much welcomed because such policies are meant to build trust and transparency in the financial sector. It takes the action of a small group of people to destroy the trust that had already been built around the financial industry, and that is why regulation and policy implementation are key in today’s digital era where technology reigns over and above baking transactions. Today financial businesses are moving from physical to digital and the cyber criminals that play in the digital space, are coming up with new techniques to hack into the database and network of organisations and businesses, just to disrupt operations. I am optimistic that the CBN will come up with more governance policies to safeguard the industry and to build trust in the financial sector of the Nigerian economy.

Cyber attack on financial institutions is on the rise, a development that has raised fears among customers of banks. What measures are being taking to address this?

Cyber attacks are actually on the rise and this is as a result of the use of emerging technologies in driving digital banking. More of the banking services have been moved to the cloud and hackers that operate in that space are doing everything possible to launch online attacks on systems and networks, just to gain unauthorised access into organisation’s websites and systems. The best way to address the online fraud is for businesses and organisations to invest more in technology solutions that can mitigate those threats. There is also need for collaboration among financial institutions, and banks must be willing and ready to report any attack on their system so that the financial institution ecosystem can learn and take adequate precautions. Under-reporting of financial fraud will not help the ecosystem to grow as it should. Sparkle is part of the Financial Technology Association of Nigeria (FintechNGR) and I am currently the Chairman of FintechNGR CEO’s Committee. One of the things we do in that committee is to encourage collaboration and information sharing as well as the timely reporting of cyber attacks of any magnitude.

How will you access the performance of digital banks in meeting the financial inclusion drive of the Central Bank of Nigeria? 

In my view, financial inclusion is a destination and it requires some hand-holding to succeed. As a digital bank, we have our limits, because not all digital banks can do corporate banking, financial inclusion drive and merchant investment banking at the same time, but one thing that is key is collaboration. We can all collaborate to achieve the financial inclusion drive of the CBN. The fundamental issue is not financial inclusion but identity management, where everyone is identified and profiled. Another area that is key is social inclusion, which covers health, education and food, but we cannot have social inclusion without identity management. I say this because if a country cannot meet up with its social inclusion and the country has over 50 per cent of its population living below the poverty line, then such country cannot achieve financial inclusion.