After 10 years at Ernst & Young during which he was selected among ‘Top 15 Leaders’ by the Indian Institute of Management, Akshay Grover, the acting Chief Executive Officer of Cellulant, has spent the past decade working on industry-transforming fintech projects in different parts of Africa, Asia and other emerging markets. In this interview with GEOFF IYATSE, he spoke on Africa’s leading role in the global digital payment system, regulatory divergence and the value proposition of the new Cellulant.
What is your assessment of Africa’s payment ecosystem? The beauty of Africa is that it is ahead of the rest of the world in payment system. When the rest of the world was still doing credit/debit cards, Africa went ahead with mobile payment. About 15 years ago, mobile payment was already gaining acceptance. If you look at data, credit and debit cards form a very small percentage of financial transactions. Where does the transaction happen? Much of the transactions happen via mobile money.
We have the frontrunner of digital payment adoption across the continent. This is more advanced than debit and credit card transactions. The next revolution is coming from what I call alternate payment, which means any other payment mode besides cash. Today, you can make payment directly from any bank account when you walk into any store, using USSD or QR code.
The world is moving away from traditional plastic money to alternate payment. How do I pay with my mobile phone? How do I pay from my bank account directly? How do I pay without moving cash around? That is where the landscape is heading.
Looking at the economics of digital payment, how do you see it transforming Africa in the next five to 10 years? What are the prospects? Mobile phone penetration is growing very fast across Africa. In some places, it is up to 90 per cent. What that does is to give an average person power to transform the economy. What that means is that they will not depend on any other physical infrastructure besides a mobile network and phone to participate in the economy. That means he has the ability to hold money and receive money.
With this, people have the ability to spend money as frictionless as that can be. It is less cumbersome to go to an automated teller machine (ATM) to swipe a card. It is even much more cumbersome to go into a physical branch of a bank only from 8 am to 4 pm from Monday to Friday to transact. When you can do financial transactions 24/7 throughout the week, there is no difference between somebody who lives hundreds of miles away in rural areas and somebody who lives in Marriott Hotel in Lagos in terms of what they can do. There is no limit on the man in the rural area.
That is a huge liberation for the economy because that enables everyone to participate in the economy. That enables people to consume, which is a major factor in driving economic growth and development.
Why hasn’t digital payment been able to reduce the huge amount of money outside the financial system in Africa? It may be true that there is still a huge amount of unbanked money in Nigeria. But it may not be true of other African countries. The gross domestic product (GDP) of Kenya is $90 billion but Safaricom’s yearly transaction in the country is about $60 billion, which means two-thirds of the GDP is being processed by the company. If you look at the last five years, even in Nigeria, the share of digital payment is increasing rapidly – whether it is bank transfer or mobile payment. While it takes time for consumer behaviour to change, my take is that regulation is very key. And regulation in Nigeria has been very supportive, which is the reason the rates of agency banking have become very low. The Central Bank of Nigeria (CBN) is encouraging consumers to use the agent networks effectively. It is still a cash network but you can look at it as cash through digital.
There are lots of businesses, including Cellulant, working behind the scenes to change the cash culture. The regulator is also regularly reviewing the rules to support the industry. Over time, the cash culture will reduce and more of the unbanked will increasingly see the need to embrace change.
The ecosystem is becoming increasingly competitive while new players are joining the fray daily. What is unique in Cellulant’s offerings? At some point, Cellulant’s business strategy was to focus on the online digital market. For instance, if you wanted to book an airline ticket to come to Nigeria and elsewhere from Nigeria, you would be using the Cellulant platform.
However, we said that the market was very big but it was probably less than five per cent of the financial transaction that was taking place. Maybe over 95 per cent of that was taking place in the offline world. So, if the online market could give us $10 billion, the offline market could give us much more. We resolved that we needed to make a difference in the offline market.
A few months ago, we came up with a solution specifically for the Nigerian market. If you walked into a store, what payment options would you have? They were credit cards, debit cards or cash. There was no fourth option. We created an option to enable anybody with a bank account to make a payment directly from their banks. Apart from Cellulant, the solution is only offered by GTBank. With our solution, the merchant gets instant payment notification. And that is very important because the merchant needs to get a notification for exchange to take place. We have seen phenomenal responses from the merchants. I can talk about this for hours but this is just to give you an idea of what we are doing to solve payment challenges in the country.
What volume of investments are you looking at in the next few years? About two and half years ago, Cellulant raised close to $50 million. We are investing the money in the whole of our market, not only Nigeria. But in our footprint, Nigeria and Kenya are the two largest markets. Obviously, a large chunk of the money will be invested in Nigeria. We expect that we will raise more capital as we progress because we are growing aggressively. We have been growing 10 per cent month-on-month in recent times. In Nigeria, the growth rate is even higher, about 25 per cent. To that extent, more capital will be deployed to Nigeria to intervene in the payment system as we raise more funds. We are on the verge of raising fresh capital, and a big chunk of it will be invested in the Nigerian market.
What is the next phase of expansion in the Nigerian market? When you solve a problem, you create value for your customers. In the process, you also create value for yourself, the government and the entire ecosystem. Our objective is to create value and grow. How big we will be is a different question to answer. I imagine that we will be, at least, 10 to 20 times our current size in three to four years. That means we should be doubling or tripling our size every single year. Across the group today, we process around $1.1 billion transactions. These are transfers from banks to wallets, wallets to banks and others. We should scale up this volume in the coming months.
Our vision is to be the most prolific and efficient digital payment platform in Africa.
You have had a robust career across the board, including investment banking. How do you translate your experience to running an efficient digital payment business? In my previous life, I was an investment banker. I also built a technology business along with its founder across Africa. I have strong financial promotion experience, a deep understanding of Africa and know how fintech works. I understand how different countries react to the same message and how different people receive a message. These are important for building a successful business.
Digital currencies are as disruptive today as the entire fintech. Do you see digital currency as a mere fad or the future? I think the world will embrace digital currencies whether we like them or not. Today, different countries are working on central bank digital currencies (CBDCs), and there is a strong feeling that currencies will, in the future, not be physical. Is digital currency the future? That is clear. It is a different question if that will be cryptocurrencies or any other form of electronic money. Is cryptocurrency going to replace fiat money? I don’t have an answer to that.
Will your company want to play in the digital currency revolution? We will have to. If you are a payment system solution provider, you must necessarily be involved in the payment mechanism of the day. But we will do so within the existing regulatory allowance in every country.
While the CBN currently oversees the regulation of fintech, some people say a separate specialised regulator is necessary? What model of regulation would you advocate? Across the world, there are financial service regulators that cover not only the bank but also insurance and other sectors. There are some cases where they are separated. There are no specific models; different countries have created different templates.
Should fintech be regulated? Yes, I think they should be regulated because they operate in the same financial system. There have to be baseline regulations but the regulators must be adaptive. If you subject small fintech to the same regulations, they will not survive.
There are concerns that overregulation could kill innovation, the very essence of fintech. Do you share this concern?
What are your thoughts about the way African governments regulate the sector? Too much regulation kills innovation. There is no doubt about that. I think it is all about striking a balance. I think it is important for industry players to have a conversation with regulators. Treating regulators with arm’s length distance is not the best.
My experience about Africa is that people are very open to hear your point of view. This may not mean they will do what you want them to do. Regulation should focus on protecting the market but where do you draw the line between protection and stifling innovation? There should be a distinction.
Should banks fret over the emergence of fintech? The banks should not be scared. They should understand that there is enough room for everyone to operate. There is sufficient space for cooperation among the industry players. That cooperation is already ongoing. We are currently partnering with the banks on revenue and operation sharing.
The fear of banks comes from the fact that they have not been as agile and swift as the market demands in the past years. The younger generations are not used to queuing to withdraw money at the ATM. But the banks have been slow in responding to the needs. That is why we have fintech; now that the operators are here, the banks should seek ways to partner with them for mutual gains.