Nigeria is a cash dominant society, with around 100 million plus Nigerians having little to no access to financial services. These people are the target market for Bankly - the unbanked.
Bankly yesterday announced that it has closed a $2 million seed round. The fintech startup, founded by Tomilola Adejana and Fredrick Adams in 2018, digitalizes cash for the unbanked.
Bankly is digitizing the informal thrift collections system known with different names such as esusu or ajo in Nigeria.
The unbanked resort to these traditional systems because they work completely offline, in the absence of a banking system nearby or a disregard for one. In this system - esusu or ajo - they collate and save cash with a thrift collector responsible for disbursing funds when due.
This system comes with its issues however. Firstly, the security issues that arise when the thrift collector goes missing with the money or is feared dead, leaving no clue where the savings are kept. Then there is the limited access where members cannot consistently save if absent from a particular location. The third is the lack of customer data since most don’t have an online banking presence.
What Bankly has done is to digitize their whole process of collating money, allowing these unbanked people to save using online and offline methods.
Bankly has, over the past 18 months, has been building out its distribution and agent networks. Here, customers can deposit and withdraw cash with a Bankly agent any time. This solves the issue of access as there are thousands of agents in these cash-dependent communities.
When the information of this new set of customers is collected and saved on its platform, Bankly starts to build engaging communities where these people can collectively save their income with the agents. Slowly, an online banking presence is built for them.
With most of their money in a bank and little or no cash to buy airtime or make payments, they would frequently opt to access these services online via their mobile phones.
Onboarding these new set of customers means they get to save and transact more over time. This opens up access to credit and with more value created, there’s a new set of banked people, which leads to financial inclusion in the long run.
According to CEO Adejana, “The first phase is building agent networks which is good, but that’s not the goal.” She continued, “Just in the same way mobile inclusion happened, you need to then focus on acquiring customers who, after transferring cash to their mobile accounts, use it to buy airtime or make payments. We call that the three-phase process. The distribution first, then focusing on the consumer, after that full digitization. This is how we reach financial inclusion.”
Bankly, with its insights into customer behaviour and transactions, also provides “data-as-a-service” to other service providers to offer tailored products and services to Nigeria’s informal sector.
The Fintech startup operates like a traditional bank but with fewer assets, revenue, customers and operational costs. However, since it doesn’t spend a lot in acquiring customers and building physical presences, it can pass on those cost savings to customers as interests and still make decent margins.
Agents on the platform also take commissions for any transaction a customer makes through them. This time last year, the company had a little over 2,000 agents across the country. Now, that number has grown to 15,000.
The company still plans to add more agents with the new investment received. To increase its 35,000 customer base in cash-dependent communities, Bankly will also provide direct-to-consumer products in the coming months.
In Bankly’s three years of operation, Adejana cites finding the right partners, talent and most importantly, the right investors as challenges that the company has faced. According to Adejana, some investments offered to the company weren't accepted. This is due to the nature of Bankly’s business. Only investors who aligned with the company’s plans for the unbanked were let in.
In her words, “We’ve had to be patient to make sure that we were talking to people who deeply understand the problem and are passionate about solving it and are not about getting returns as soon as possible.”
These investors include lead Vault, the holding company of VANSO (a fintech that was sold to Interswitch in 2016), Plug and Play Ventures, Rising Tide Africa and Chrysalis Capital.
Speaking about the funding, Idris Alubankudi Saliu, partner at Vault said, “Given our over 20 years of experience in Nigeria’s fintech industry and previous exits, we strongly believe that Bankly understands the nuanced needs of this market — not to mention the team, strategy, and technology — to succeed in bringing affordable financial services to the unbanked. We are delighted to participate in this financing round as Bankly moves into its next growth stage.”
Bankly wants to, in the next three years, grow its customer base to 2 million unbanked Nigerians. The goal is to support the Central Bank of Nigeria’s National Financial Inclusion Strategy of increasing the number of banked Nigerians from 60% to 80% by 2020. A year on, that strategy is yet to be actualized. But Adejana says Bankly is working with these regulators toward a more realistic target of 2025.
She said, “We’re thrilled to have closed this milestone fundraise and to have such seasoned fintech investors who understand the market join us on this journey to bank Nigeria’s unbanked. Now we have built the agent network and are poised to serve customers directly via offline and online channels. Partnerships, collaboration, and a deep understanding of the needs of the unbanked will be vital to our success.”
Adejana believes that to truly attain financial inclusion in Nigeria, the onus lies with the fintechs to have long-term views just as the telcos and fast-moving customer goods did in the past. This increases the pie of customers fintechs can serve instead of taking a slice of an existing one. “For financial services to reach the last mile, it has to be distributed the same way fast-moving consumer goods are distributed,” she added.
Nigeria in focus:
Population: 200.9 million (2019)
GDP: $448.12 billion (2019)
GDP Per Capita: $2,229 (2019)
