MUST READ: Why Intuitive Exchange is The Future Of Payments In Africa, by Mitchelle Elegbe

By November 17, 2015Blog

Speech By The Group Managing Director, Interswitch, Mitchell Elegbe

Good evening distinguished guests, the board of directors of Interswitch, our friends from the banks here present, Ladies and Gentlemen. Today is a very happy day for us all at Interswitch. About three years ago, we met in this same hall to celebrate ten years of Interswitch. Right after that, we got into a situation where we had to basically sell the organisation to private equity. That brought in Helios Investment partners, Adlevo Capital and the International Finance Corporation (IFC).

As expected, our lives had to change with the involvement of the private equity partners. With this change came a lot of challenges and expectations, and I am happy to say a few years down the line, we believe we have been able to keep up with the progress, the growth expectations of our new owners and of course you our partners and our friends. My job today is very simple – I’m not going to talk about the Interswitch brand. Cheery has done a very good job of that. I just want to share with you some very brief presentation slides that I will term as “Presentation of Hope”.

A lot of interesting things have happened in this market and continue to happen. Despite all of these challenges, with your support we have continued to excel and what I want to share with you today is the story of excellence and the interesting things that Interswitch has done, and why we believe that we still have good reason to look forward to the future.

L-R: Group Service Delivery, Interswitch, Wale Olayisade, Group CFO, Interswitch, Peter O’Toole, Head, Financial Control, Interswitch, Chinomso Nwachukwu, Group Managing Director, Interswitch, Mitchell Elegbe, Divisional CEO, Switching and Processing, Interswitch, Akeem Lawal and Divisional CEO, Financial Inclusions Services, Interswitch, Mike Ogbalu at the launch of the new Interswitch Corporate Identity in Lagos on Tuesday.

L-R: Group Service Delivery, Interswitch, Wale Olayisade, Group CFO, Interswitch, Peter O’Toole, Head, Financial Control, Interswitch, Chinomso Nwachukwu, Group Managing Director, Interswitch, Mitchell Elegbe, Divisional CEO, Switching and Processing, Interswitch, Akeem Lawal and Divisional CEO, Financial Inclusions Services, Interswitch, Mike Ogbalu at the launch of the new Interswitch Corporate Identity in Lagos on Tuesday.

Tonight, Interswitch will like to challenge you to switch the way you see transactions. In 2002 when we started, the challenge was that of infrastructure. How do we get banks to collaborate and compete at the same time? What was that infrastructure that was required to ensure that people could get convenience, and access to their money anytime, anywhere and in a very consistent manner?

Working with you the banks, our friends and of course the good staff at Interswitch, we were able to surmount that challenge and today we have a country where basically every bank is connected to that payment infrastructure. Right after that, we decided to build products. Today we are telling you that we see something else happening and we would like to key into that future. That is basically the essence of my presentation today.

The Marketing Team, Interswitch

The Marketing Team, Interswitch

Most of you know the business of Interswitch, so I am not going to spend time telling you that. We are here because in one form or the other, we have been engaging with Interswitch. The important thing here is that it is all about convenience, being able to transact safely, and creating value for stakeholders. By stakeholders I mean not just you yourselves as customers, but also staff of Interswitch and of course the shareholders of the company.

Overtime, we have basically restructured our business to focus on various industry. Today, even though we started by focusing on financial institutions, we have moved beyond that and we now focus on social systems and services. By this I mean governments and all the services that government renders to the people like transportation, education, health and the likes. Today, Interswitch has solutions running in hospitals. Today Interswitch has solutions running in governments. 32 out of the 36 state governments in Nigeria are running our solutions for revenue collections. The entire country’s tax receipts are collected on our platform and these solutions have all been built by the same people you have known at Interswitch.

L-R, GMD Interswitch, Mitchell Elegbe, CMO Interswitch, Cherry Eromosele and CEO, Interswitch Gambia, Vincent Ogbunude at the Interswitch Corporate Identity Refresh On Tuseday in Eko Hotel

Today we focus a lot on communication and lifestyle. It is very easy for you to purchase airtime using your cards, pay your bills using your cards and purchase airline tickets using your cards. These are innovations that we brought to bear on the marketplace. Beyond that, we have gone into other industry segments just to ensure that we can take the value we created working with the banks into these other areas.

Now the challenge for us is to commence a journey that we have called “Striving Toward Northeast.” Whenever we make this presentation internally, what comes to the minds of the people in the office about “Northeast” is Sambisa Forest. Yes, it is a difficult place to go, but it is something that we need to deal with as a nation if we are going to get the kind of value we want to create. We believe that Interswitch is in that position to strive to go Northeast. What exactly do we mean by “Northeast”?

We are saying that we had an Interswitch that created an infrastructure and we hogged that infrastructure. We believed it belonged to us and so we tried to shut people out of that infrastructure. Today, we have commoditized it. Switching fees in this market has gone from N35 to N5 and some of you pay well below N5. Our ultimate goal is to take switching to N1. To make it a non-issue for you whenever you want to do transactions.

In other words, we want to so democratize switching that it becomes a commodity that nobody thinks about. That infrastructure is one that everybody and anybody can use and it should be at almost no cost to you. What that means is that we need to begin to move beyond the basic infrastructure. In the last few years, we have tried to create new products for collections and for disbursements. Some of them have done very well. Some others haven’t done quite so well. In all of this, you have been patient with us, giving us enough time to correct whatever errors may exist and create better products for you.

Where we want to go to next is to take products to a situation whereby they become intuitive to you. Recently we commissioned a study and the insight we got from that was that Nigerians and indeed Africans do not care about mobile phones for making payments. They don’t care about cards. They just want to make payments whenever they want to make payments, and they want to do it in a very intuitive manner. That is the passion we now have at Interswitch. How can we create intuitive ways of making payments?

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You are playing Candy Crush and you run out of lives like I do from time to time – and you just want to pay. You want to click one button and make the payment. You run out of airtime and you want to top-up. You just want to click one button. You are chatting with your friend on BBM or Whatsapp, and your friend says “Please can I get some money from you?” Without leaving Whatsapp or BBM, you want to do that transfer. That is what we call intuitive exchange and that is what we are trying to do.

In this direction, we are not ignorant of the fact that Interswitch may be killing some of its existing businesses. Our view is that we would rather be the ones to kill these businesses that we have created than allow someone else to do it – provided in the process of doing that, we create value for our various customers. We equally are not ignorant of the challenges of the banking environment today, and this is specifically for our banking friends. What we are saying is that there has to be new ways of generating transactions. With a population of over 150 million people, if any country stands a good chance of doing that, it has to be Interswitch and the banks in Nigeria.

Recently, we decided to take a very bold step and we created a dedicated subsidiary to focus on financial inclusion. We are happy about the 40 million+ banked customers, but we believe we need to do something about the over 1oo million others who are financially excluded. That is something that has consumed us in recent times. We made the investment and we want to see how we can drive real financial inclusion in this market, and we are hoping that as usual, we can count on your support to make that happen.

So how is the business doing? We thought we should share some figures with you. You will see that we have 32 million+ Verve cards out there. Some of you who are very much aware of the statistics will say “No, that is not correct. It is something much less than that.” I am putting this figure up publicly – it is 32 million+. What I am basically saying is that some of the things I am talking to you about tonight – such as this Intuitive Exchange – are things we have started over a year ago.

We have seen consumers respond. Of those 32 million cards, about 50% of them are cards carrying out Intuitive Exchange in this market today.  So what we are talking about is not just a dream. It is reality happening before us and what we are saying is that we are now at a position where we think we should ramp up that growth and get true value going forward.

You are aware that Quickteller has been in this market for quite some time but we have not really put any muscle behind Quickteller. It has just been going on its own. We now want to put some muscle behind it. Quickteller today has over 3 million active users using various channels and we have over 5,000 merchants using a product like WebPay to accept payments online in real time. You are all aware that we have over 150,000 POS terminals in this market and that continues to grow. On a yearly basis, we do over 3.9 billion transactions on the payment switch itself. Our collections business does about 1.2 trillion Naira worth of transactions yearly and in terms of transaction value that is processed on the switch, you are looking at about 7 trillion Naira.

With all of these figures, we can boldly say that we believe we are still scratching the surface because as we all know, payment penetration today in Nigeria is still less than 10%. There are places we know of where penetration is over 80%. So if you are in a country of 150 million people where penetration is less than 10%, you immediately recognize that there is quite a lot of things to be done, and these things cannot be done by Interswitch alone. We have come to the realization that no payment company in Nigeria will die. They will all continue to grow because the opportunities are just too great out there and we see that from time to time.

Therefore, our focus right now is not necessarily how to outsmart the competition – we would like to do that but that is not the focus. Our focus is how to go after the opportunities that exist, but in doing that, we do not like leaving food on the table. So we try everything we can to grab as much as we can grab. We are very happy to partner with our friends out there if they believe in what we are doing and they would like to work with us, and I will show you some examples of how we are doing that today.

The long and short of it all is that last year, we did revenues of over N30bn and of this revenue, 93% is recurring. In other words we have a very good business model. Transactions in Nigeria have had their challenges. Many years ago as you aware, we had a lot of fraud. Some of you banks remember how your customers came back to you to return their cards saying “I did not ask you for this cards. We do not want these cards.”

Working with the likes of Visa, Mastercard, Unified Payments and Verve, we as an industry moved from a magnetic stripe environment to a chip and pin environment and we are all wiser for it today. That growth has continued. There have been different regulations that have come up. In some cases, we had to comply in less than 30 days, including losing 10 million cards in one month some years ago which you can see as the depression on the chart. As an industry, we were able to recover from that. There is no organisation that will lose 10 million customers in one month and still not declare a loss. That basically goes to show to you the resilience of the Interswitch business model.

We have done some very interesting things but are not quite where we want to be. We continue to have issues of downtime as we begin to evolve into that kind of infrastructure that will encourage intuitive exchange, we are implementing various technologies – Active as you all know – in the course of doing this in recent times, we have had downtime as you all know. Some of you have called us. On behalf of Interswitch, we would like to apologize for the pains we have caused. We are saying that we will not stop. We will continue to improve.

There are a lot of things we know. There are a lot of things we still do not know, and we reach out to our friends and partners to assist us where we need help. One thing you must take away tonight is the fact that when it comes to our dedication to improve, we will not stop. In recent times, we have proven that, our most recent one being our certification for CMMI Level 3. From what I am told, that is one step toward making sure that the software we write and provide to you the banks to give to your customers could get a lot better. That process has started. It is not going to stop. We are at Level 3 now and our ultimate goal is Level 5.

In the course of this journey, we have received numerous awards. I’m not going to waste your time tonight trying to list these awards but one that really gladdens my heart was the one we got last year from Deloitte where we were listed as the fastest growing technology company in Africa. We have received many awards and each award is special in its own right, but that award that talks about growth, which is basically what Interswitch is all about, is one that really gladdens our hearts. We do hope that in subsequent years, we can continue to report back with that story of growth.

I talked about partnering with people that could traditionally become competition and this is something that really touches me. I have been called “founder” of Interswitch. I did not embark on this journey alone. I had people like Akeem and Charles with me from the onset. You cannot embark on this kind of journey based on your own knowledge of things. You need people along the way. One of the things that I say this country did for Interswitch is this: I am a founder that never put a kobo of my savings into the business because the Central Bank at the time had the SMEs fund and we basically tapped into that because those nine banks believed in the vision that we put forward and they basically gave us the money with which we started

I am happy to announce that since we got that money, we have not gone back. That money was N200 million. We never went back to ask for more even though the business plan was for N450 million. We got only N200 million and with good judgement and understanding from the staff of Interswitch, we were able to take that N200 million and do a lot of things we it. We sold the business in 2010 at N26 billion. The company has remained profitable since the second year. This is the 13th year. Today, we have set aside $10 million for what we have called the e-payment Growth Fund.

We do recognize the fact that there are people who have got brighter ideas today than we had during our time, but may not have access to the kind of funding that we had in 2002 when we started. So this growth fund is Interswitch trying to give back to society in a way that can also help nurture some of these organisations to grow. It is our vision and our hope that in the not-too-distant future, this growth fund will actually create companies that may end up being bigger than Interswitch in stature and in every other ramification than you can think about.

We have made our first investment already, that is in a company called African Courier Express – a group of young guys who have taken monies of friends and families to start up a business and we felt that we should support them from where they are now and see how we can grow it into the future. Tunde and Etchen are here. We gave them about $750,000 as a first step toward that journey. We have just received approval to also invest in Slim Trader and we will be giving them about $1 million. The point I am trying to make here is that this country has blessed Interswitch and we believe we need to give back. We would like to give back in ways that we know to support entrepreneurship, support education and support leadership.

As you all know, we are owned by private equity. The honeymoon comes to an end sometime, and that is coming soon. One of the options we are looking at now is how our private equity partners will exit the company. We think it is a good thing to consider various options but one option that gladdens our heart is one that will enable a lot more Nigerians participate and benefit in the value that we have created at Interswitch. In doing this, we have asked ourselves “Are we qualified to embark on this journey? Do we have the right story to tell?” We have been told that we have a good story to tell.

What you are seeing on your screen is Interswitch taking publicly available data to benchmark ourselves against many others, and what we are seeing from that benchmark is good. We think therefore that going forward, we will be looking at ways through which we can continue to grow the business, knowing fully well that this country has given us good value and we would like to democratize that value by getting a lot more people involved in it.

Leadership is core to the success of Interswitch. I have talked about Akeem and Charles, but the business of Interswitch is not about Akeem, Charles and Mitchell alone. There are many other people that have joined us. Our good friend Chinyere Don-Okofu used to be on the client side. When we heard that Chinyere was on the market, it became something that consumed us. I can’t remember how long it took, but I think it took me almost a year to convince her to join us because having interacted with her, as a provider of service, I realized that it would be a blessing to Interswitch if such an individual was part of us. It took us some time but finally she joined us.

That process will continue. As we continue to grow, we recognize that within Interswitch we are going to need help. We cannot do it all alone and there are good friends we have made out there that we believe can join us from time to time. The latest friend to join Interswitch is Mike Ogbalu who has joined us to help champion the initiatives around financial inclusion. Finally, I would like to share with you where we think this business will be in the year 2020. I know 2020 is the magical year that guy was talking about but for us it is just the next five years.

What the strategy team came up with is what they have called Interswitch 5.5.5. In other words they are saying that they will like Interswitch to be in five regions in Africa using the five value –driven areas you see on the screen and we want to do that in the next five years. We know we can achieve this. The opportunities are there, but we do need your support. We have always had your support and we hope we can continue to count on your support to achieve that going forward.

I would like to end by saying that what we are trying to do with Intuitive Exchange is to see how we can bring technology seamlessly into the lives of people. In other words, technology and payment should become lifestyle. It should be something you do when you need to do it without thinking about it. You want light in your house – you reach out for the switch, you have light. You want water in your house – you reach out for the tap, you turn it on and you have water. You want to make payment, you should do so with just one click.

Thank You.


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