European Microfinance Week 2018

PRESENTATIONS

Moderator Lonneke NOOTEBOOM from FMO opened the sessions by stating that FinTech-integration (fintegration) is an exciting topic and that it exists in many forms over the world. The aim of the session was to answer the following questions: 1) How to best start/continue/finalise your fintegration journey; 2) How to avoid common pitfalls; 3) Which best practices you or your client can deploy in the fintegration journey. During the session, a fintegration checklist with best practices was created. The panellists represented three different perspectives in this debate; a practitioner, a FinTech company and a donor. 

Edwige TAKASSI, from Equity Bank DRC, represented the practitioner view on fintegration. Equity Bank DRC started operations in 2005, with a focus on financial inclusion and financing microenterprises and SME. Currently, the bank has 485.000 clients, 700 staff members, 41 branches and total assets of USD 530 million. When in 2015, Equity Group took over the institution they decided to bring the financial inclusion strategy to the next level by shifting bricks and mortar branches to agency banking. 

The FinTech perspective was represented by Faisal ABDUL WAHAB from PCES (Process Crafting and Expert Services). PCES was founded in March 2017 and offers an international team of IT and digitalisation experts at the intersection of IT and business, with offices in Macedonia and Ghana. The company has been supporting Equity Bank DRC in their fintegration journey. According to Abdul Wahab, fintegration is different from a digitalisation process. Fintegration is about integrating two different systems from two different platforms or vendors. For example integrating a mobile banking service with the core banking service. 

Gera VOORRIPS, from Triple Jump, brought in the donor perspective. Triple Jump is an impact focused investment manager. Since 2006, they also offer advisory services in over 170 projects in 29 countries. Their advice focuses on three areas: 1) Opening up new markets for financial inclusion; 2) Digital transformation; 3) Impact monitoring & measurement. 

Nooteboom asked Takassi why they are looking at fintegration. She answered that since 2015, the Equity Group came into the shareholder structure and they had a different perspective on financial inclusion. They took Kenya as an example, where being financially included went from having a bank account to doing transactions with your phone. In the DRC, only 6% of the population has a bank account and the country stretches over 2 million square kilometers. Therefore, finding customers through mobile phones is very important. They were searching for a system where their staff could open an account in the field, independent from the use of electricity. Since they started the fintegration journey, the bank went from 100,000 clients to almost 500,000 clients at present. Over 80% of the transactions are done outside the branches. 

Equity Bank DRC had the advantage of a clear example in Kenya, where fintegration already worked. They could go and talk with the staff about their experiences with implementation. This, however, did not mean they didn’t encounter difficulties. According to Takassi, one of the major challenges was the human side of the transition. They had to convince their staff and clients that the new system was useful. It took some time before everyone understood this and worked together to achieve it. Another challenge was that when they started, there were no regulations in DRC on this topic. Equity Bank responded to this challenge by pro-actively bringing Central Bank staff to Kenya to meet the regulators there, so they could also learn from their experiences. 

Abdul Wahab, who collaborated with Equity Bank DRC on fintegration, added another challenge. Equity Bank DRC wanted to implement everything at the same time, but this does not work. Abdul Wahab stated that first, it is very important to check if your core banking system is able to handle all the changes. Replacing the core banking system is not necessary and also not the best strategy because it will take a long time and might not be flexible to new applications in the future. So, it is important to first leverage what you already have and then go step by step to enhance the core banking system. 

Voorrips stated that aligning business with IT is a key challenge in all these projects. Often, management teams are not aligned and there is a lack of integration between IT and operational plans. When Triple Jump gets a request to invest in a server, the first thing they ask is if there is a strategic view behind it and if the costs and benefits are clear. This should be established before approaching donors. 

DISCUSSION

A first question from the audience was on the costs of fintegration. Takassi answered that Equity Bank DRC spent around USD 500,000 in three years, and they are not done yet. Over time, these costs are lower than if they did not invest in these solutions. 

A second question responded to the challenge of getting your staff and clients on board. The question was if Equity Bank DRC used incentives for staff or agents to support the fintegration. Takassi responded that they made sure their own staff used their digital services. Employees could win prizes when they handed in the tickets, after using a service. This helped a lot, also because staff started to give feedback on the functionalities. With this approach, they wanted to create a partnership with their staff. They also hired a large group of trainees who could train staff and agents, until they were comfortable with the new system. 

Marloes Noppen, from Symbiotics, asked if business should follow IT solutions or the other way around. Voorrips stated that business should always have a clear vision on what they want to achieve and IT should follow. Abdul Wahab added that it is important to understand the company’s business model and to involve IT from the start of the conceptual phase to understand the capabilities of the system. They transformed the core banking system of Equity Bank DRC to a system that can integrate new technologies, without interfering in the existing system.

Nooteboom concluded with the fintegration checklist with best practices that was created during the session: 1) IT systems - understand capabilities, responsive, interoperable middleware, flexible; 2) Strategy - pro-actively bring in the regulator, involve IT in conceptual phase, align IT with operations; 3) Change management - agile change, staff involvement, project governance, staff training.