TSA is an Opportunity to Showcase Indigenous Technology to the World
Although FinTech is a financial technology that supports banking and financial services, it has been preconceived as a disruptive technology. In Nigeria as well as other countries, there are fears that the initiative may take over the role played by the banking institutions. In this interview with Kunle Aderinokun, Managing Director of SystemSpecs Ltd, Mr. John Obaro, dispels the perception. SystemSpecs is Nigeria’s leading fintech firm and owners of Remita, a payment software, which currently serves corporate organisations across the country and the Treasury Single Account. Obaro opens up on the process that led to its selection as theTSA operator and once again clears the controversy surrounding its transaction fee. Obaro also speaks on how SystemSpecs, which he founded over 26 years ago has continued to change the landscape of financial technology in the country while highlighting the company’s extensive social investments in education and health. Excerpts:
FinTech companies are always perceived as threats to banks. From experience, what are the challenges System Specs has encountered in co operating with mainstream financial institutions? In the first place, it is not quite right that FinTechs are a direct threat to banks. They are a threat to traditional banks that choose to remain conservative. Forward-looking banks will be excited about the possibilities of FinTechs. They will look at how to maximise partnerships with technology companies. In Nigeria, not all the banks are on the same level of cooperation with the FinTech industry. Some banks recognise that they stand to gain more by embracing FinTech, but some are still a bit confused and will need to be further informed to be part of the future of banking. FinTechs are only firms that have been able to use their resources to re-engineer some of the processes in traditional banking. FinTechs cannot go alone, they need banks and that is where the partnership comes in. So, the confident banks recognise the need for this kind of partnership and the win-win model comes in. For instance, SystemSpecs came up with a solution for clients to see and oprated their accounts across multiple banks on a single screen. Initially some banks were scared but the truth is, the focus should not be on the banks, it should be on the customers. What do your customers want? A typical customer has account in multiple banks for various reasons. If you want to have an idea of what is going on, while Bank A may then think giving that solution to their customer is a threat to their own business, Bank B recognises that the way to hold customers is to give them what they want because after a while these customers will begin to shift their businesses to banks that put their own priority first and not banks that are trying to lock them down by any means.
System Specs started over 26 years ago, how have you been able to remain relevant in the industry despite the proliferation of start-ups?
The interesting thing about software development is that you have to be innovative. Things change a lot. So yes, we started out twenty-six years ago and better still, I left school 39 years ago. At first, we did accounting with a foreign firm, then we did payroll and human resource management by ourselves indigenously and those were very successful. About twelve years ago when the PENCOM Act was enacted, we saw that those processing payrolls will need to prepare schedules for different PFAs (Pension Fund Administrators). That was when we conceived Remita. We found a way to move salaries from the employers’ bank accounts to the employees’ bank accounts, irrespective of where they are. At the same time, we started thinking of how we could deliver schedules to PFAs and PFCs as well as pay tax. That was how we started the first version of Remita. I will probably call it Remita 001. It was well received, I remember we launched the product then with Late Fatai Rolling Dollar, we just wanted to use him to represent pensioners.
After we had conquered the payroll payment space, we went for a presentation at a multinational firm and the expatriate finance director made an observation: “This is a very good product, it will help me to meet salary payments, but I have a lot of other payments. Do you mean that I will continue to do those payments manually? It is going to create confusion to have some processes automated, some manual.” That day, we lost the deal but went back to the drawing board; we started brainstorming on how to include vendor payments. That was how we created a solution that will not only do bulk payments for salaries, but also do single payments for vendors. That solution laid the foundation for our involvement in the implementation of Nigeria’s Treasury Single Account, TSA.
What are the challenges System Specs encountered in executing the TSA?
Well, we have had challenges and we have had fun. Overall, I will say it has been good getting to know a lot of things. The biggest challenge was that we probably came ahead of our time. As at the time we implemented the Treasury Single Account, not many people understood what it was about, so we became a victim of the backlash of that development. Initially, a lot of negative emotion was whipped up because people were not willing to listen or understand the value that Remita was bringing to the table.
There was a bit of controversy about our charge too. Remita, banks and the Central Bank of Nigeria share 1per cent transaction fee, which is actually a non-issue in the overall scheme of things both in terms of international pricing or even in terms of local pricing. Most PoS payments in Nigeria are 1.5per cent, only recently was it reduced by CBN but generally it is 1.5per cent and outside the country you will get rates above 3per cent. At 1per cent, it was an excellent deal for government but because many people didn’t understand what we were getting, there was an uproar. It was further compounded by the fact that many people see SystemSpecs as apolitical and that if you’re going to play in that terrain you need strong political presence. But we felt no, there is a place for politics and there is a place for professionalism. Now, more people now understand what TSA has done for the economy and we remain proud that an indigenous company is behind this. Just before we came in, the previous government had decided to delay TSA for at least another two years because they believed that there was no technology that could support it. We showed that it could be done, it was quite some rigorous process to reassure the CBN and foreign consultants that we could handle the project. We feel very proud and happy that we were able to pull it through.
You said that the government planned on de laying the TSA for another two years, were you involved at the initial stage?
They had planned to delay it for another two years because they had concluded that there was no technology before they became aware of Remita. Incidentally, CBN came in for their inspection of electronic platforms in Nigeria and that was when they saw what we were doing. Thereafter, we were invited to Abuja to make our presentation and we got the TSA project.
TSA actually started under the previous administration and we managed the project from the beginning, but it was of a smaller scale. The payments were less, just about 200 MDAs were on the TSA then for out-payments. The collection side was still on the pilot. This current administration was the one that gave life to whole process when the President adopted it as a full policy of the government and directed that all MDAs should come onboard.
Before TSA, has SystemSpecs ever worked with the government? Yes, we had worked with some state gov- ernments. We had worked with the Federal government through the World Bank on IPPIS, Integrated Personnel and Payroll Information System. SystemSpecs did the pilot for the TSA with seven MDAs, later leading to thirteen MDAs. It was a World Bank bid, we competed with 14 other firms, mainly international software providers and we were selected. If you read former President Olusegun Obasanjo’s book on his presidential years, he commended SystemSpecs. He was proud that the company that brought IPPIS that successful bond was a Nigerian company, SystemSpecs. So yes, we have worked with the government.
Remit a is often confused as a product owned by the federal government, can you please clarify this by explaining the role you play in your business with the government?
Remita is a software that allows you to move money from point A to point B. We also deliver payment schedules to match payments where necessary. We started out actually supporting corporates, our focus was more on the corporate world. Yes, when the federal government opportunity came, it was a big one, but that is not where we started. In fact, it came about because we had succeeded in the corporate world. So, we had a number of oil companies, many multinationals and some indigenous companies that were already using Remita. That was part of what gave assurance to the government to bring us on board. It is a big project and we are grateful for that opportunity, but that is not where we started. It is certainly not our last bus stop. After stabilising TSA now, our next port of call is actually going to be SMEs and MSMEs. In the next few days, we are doing a launch for that focus because it is the same concept that you are using to run TSA that a typical business should use to run itself. You want to be able to have a single view of your operations. Many corporates have accounts across multiple banks. You need a dashboard to be able to see what you are doing and what is happening there. So that is part of what we will bring to the table. It is also for individuals to be able to keep track of their finances. Pay your bills, we have a number of dealers on the platform. You pay your bills, make transfers, create standing orders, view your balances, all on the single platform.
System Specs is now mostly famous for Remit a, what led to the development of Remita?
We had a human resource application focused on payroll. We were running payroll for quite a number of organizations and at the end of the month, we will prepare bank reports to be attached to a schedule to take to each bank. With changes in technology, it got to a point where we could deliver the schedules on CD, in those days. It was an interesting innovation at that point that you would write schedules on CDs and these organisations could take the CDs to the banks. Interswitch came in along the line and we felt instead of taking CDs to the banks we might as well electronically transmit data through Interswitch to the banks. Our very first customer on Remita was Interswitch. We were able to transmit data to the bank but unfortunately, at that point in time, Interswitch itself was also settling down and had some challenges with bulk payments. We thought, we might as well write our routines to take care of bulk payments. That was how we applied to CBN for our own license and we started bulk payments. After we perfected bulk payments we moved on to single payments, which is the one for vendors. In summary, we started from payroll, to transmission to the banks, to bulk payments and then single payments and today we are a full blown FinTech organisation.
Apart from Remit a, what are the other products System Specs offer and what problems do they solve?
Incidentally, part of the challenge we have had is that we started from Human Manager, talking of our own indigenous products, but Remita itself now has an inbuilt payroll and HR which is supposed to be a lot easier for organisations especially SMEs and Micro SMEs to implement by themselves. So, within Remita, we have a payment module, a collection module, a payroll, and a HR module. We have also moved into the loans market. We are working in partnership with loan providers to provide a platform for them to give loans to our clients. For instance, quite a number of organisations pay their salaries through our platforms we are able to work with banks and other loan providers to give loan to them while we assist in the repayment process. That way everybody is happy. Our customers are able to get easy access to loans, banks are better assured of repayments and therefore the interest rates can be lower because the default rate would be lower. We are bringing lenders and borrowers together in a secured platform to create a win-win for all parties.