Piggybank.ng is a Nigerian Financial Technology (Fintech) startup and they run a simple online savings scheme where they make periodic deductions for customers to save towards targets.
Their clients also earn interest income on the savings made. All that is required is to link a debit card to their platform online only. I was at first intrigued by the name. It is catchy and straight to the point. It is a savings product and nothing more.
As a Financial Technology company, I wondered if they had approval from the Central Bank of Nigeria to use the term “bank.” I later found out that they had all bases covered and were powered by a Microfinance bank. “Piggy bank” itself is a generic English term used to denote the earliest means of storage of money, using a hollow ceramic statue of a pig.
With hindsight, the idea behind PiggyBank.Ng seems so straightforward and convenient, you’d wonder why the banks had not thought of doing this themselves all this while. At a time when most of the other payments and Fintech startups were looking for how to make money from facilitating transactions, this startup decided to help the subscriber save money and earn interest income instead. A winning value proposition any time.
To me, the most intriguing part of the startup was their decision to partner with a Microfinance bank rather than a traditional commercial bank. I believe it was a very smart move. Until very recently, local technology companies had struggled to partner with commercial banks on products. Decision making by commercial banks was typically slow, and trust was also a problem on both sides. Commercial banks were also very careful to avoid regulatory sanctions and were averse to drastic change. Bank and telco partnerships did not fare better.
Wema bank changed all of this when they launched their digital bank called ALAT recently. ALAT also incorporates the savings feature of Piggybank while providing a full bank account complete with debit cards. It seems the Nigerian commercial banks have finally woken up to the new age of Fintech products. I expect more commercial banks to launch theirs shortly.
Banking and Tech Synergy
It is no longer a secret that the largest Microfinance Bank in Nigeria is probably as big as one of the smaller banks. This layer of banking rarely gets attention from the media or public because of the perception of lack of sophistication. They typically don’t focus resources on building their brands and image the way other commercial banks do. They just get things done in the market and are probably the financial institutions who lend the most to the average Nigerian entrepreneur.
Another reason why microfinance institutions have not been very visible is that they are typically not present in urban areas and they use minimal technology. That is now changing rapidly as a lot of them are discovering the advantages of tech.
Tech adoption by microfinance institutions in the last couple of years has been at a frenzied pace as it has become a competitive differentiator. Companies like Oradian and AppZone are also competing to bring technology to these institutions quickly, and they are achieving great success. Oradian which was co-founded by a Nigerian has been so successful that it has expanded to the Philippines. They are offering them the same technology they developed for Nigerian microfinance firms.
Using technology to take microfinance mainstream in Nigeria is following several approaches. While a lot of Microfinance institutions are adopting technology driven processes, some new Fintech players (especially those in the personal lending space) have also decided to give themselves room to operate freely by licensing as Micro Finance Banks. While Fintech companies like Piggybank have found microfinance institutions to be the perfect partners when it comes to getting their products to the market rapidly, I believe they are also perfect partners for most consumer technology businesses targeting the mass market.
The potential scope for partnership between Nigerian Technology companies and Microfinance banks is almost limitless. They are a great avenue to reach small business customers who would not ordinarily have considered technology for their day to day operations. Microfinance banks need their clients to adopt technology as well so that their services can become much more efficient. For instance, MFIs also stand to benefit more from a robust mobile financial services infrastructure than most other institutions. Cash disbursement of loans and cash collections by loan officers is a significant burden. I believe that the CBN’s cashless initiative should have started from Microfinance banks and not commercial banks.
Microfinance institutions typically lack resources, so they are therefore much more open to partnerships. Technology companies can also take advantage of this to have a head start in defining standards for this layer of banking far ahead of others. Oradian, for instance, was the first to connect all the institutions using their platform together using the Stellar.Org Blockchain-based infrastructure platform. Microfinance banks are also far ahead of commercial banks on agency banking initiatives. It is an imperative for them and not just a “nice to have” regulatory requirement.
With commercial and microfinance institutions now adopting technology driven products as differentiators, PiggyBank and ALAT are the first of a massive wave of Fintech which will possibly bring transcendence to Nigerian banking. Nigerian technology is back once again to playing a strategic role in Nigerian Financial Services.