Amidst a national struggle, championed by the Central Bank of Nigeria to bridge financial exclusion gaps in Nigeria, Ope Adeoye, the Chief Executive Officer of OnePipe in this interview with BUSINESS METRICS, gives hope that achieving the country’s financial inclusion targets can come easier and faster by leveraging on embedded finance which democratises finance and enables SMEs and non-financial players to offer financial services across various platforms.
B.Metrics: With a 0.9 percent growth, Nigeria’s financial inclusion rate improved to 64.1 per cent in 2020 from 63.2 percent in 2018. What are some of the challenges affecting the slow growth of Nigeria’s financial inclusion index?
O.Adeoye: Nigeria today has a high proportion of the informal sector and the leading proposition to them being offered today by traditional financial institutions are not very attractive to them or rather not reflective of their realities.
B.Metrics: What is embedded finance and how important is it for driving financial inclusion in Nigeria?
O.Adeoye: Embedded Finance makes it possible for non-financial companies to offer financial services. It primarily involves the integration of financial services with traditionally non-financial components such as a business or product. To help drive financial inclusion, embedded finance will provide a viable means for SMEs to drive growth in capital for areas like farming, retail, logistics and distribution such that these SMEs will have access to credit programs that can help finance their businesses which then helps to drive economic growth.
B.Metrics: How disruptive is embedded finance likely to be in the financial ecosystem?
O.Adeoye: There is somewhat a wide and agreed consensus that embedded finance could possibly be a big wave in the financial ecosystem similar to the uptrend already identified with blockchain technology. Businesses and institutions including the traditional banks and MFBs are well on the way to setting themselves up for the demand in solving some of the challenges being faced by SMEs and the likes due to limited availability of financial technological powered options.
B.Metrics: What are some of the untapped opportunities that embedded finance can introduce to the business sector in Nigeria?
O.Adeoye: There seems to be demand for working capital by SMEs and I think this could be one of the untapped opportunities with embedded finance whereby loans will be offered primarily based off on an already established relationship between one or more related entities within a supply chain, be it businesses, institutions or even community groups that would traditionally not have been visible to formal financial entities like banks if not for the layer of embedded finance introduced to capture this transactional relationship and opportunity.
B.Metrics: How can embedded finance integrate the informal sector into the banking ecosystem?
O.Adeoye: Perhaps more openness and willingness to embrace embedded finance from non-traditional businesses, institutions and influential entities will help with this such that their captive audience could benefit from the financial services and products being offered. For example, OnePipe’s partnership with Releaf (Releaf sources produce from over 1,800 smallholder farmers in the southern part of Nigeria with a vision to industrialize food processing in Africa) enabled farmers to dial a short code to have accounts issued to them without much hassle involved or visiting a bank branch (which are usually miles away). For several of these farmers, this partnership offered them the opportunity to have their BVNs enrolled, made possible by the support of OnePipe’s partner banks in this case. More initiatives and partnerships like this will be quite helpful to the informal sector and a viable way to integrate them into the backing ecosystem.
B.Metrics: How ready do you think financial institutions (banks) and businesses in the nation are to integrate embedded finance?
O.Adeoye: The early indicators point to a growing readiness to embrace embedded finance in Nigeria. Traditional banks have already begun to offer open banking and financial services to external entities to build innovative and impactful products that could help transform the banking ecosystem whereby truly any individual can benefit from access to these services and products. Fidelity and OnePipe have developed an innovative partnership that provides an embedded finance suite within the PayGatePlus platform which was officially unveiled in March such that virtual accounts can be issued to facilitate various types of financial transactions, mentioning a few (online payments and collections, Buy Now Pay Later BNPL, funds transfer, settlements and reporting). OnePipe expects to have more of these partnerships that provide value added opportunities for individuals, merchants and institutions.
B.Metrics: How might regulation affect the growth of embedded finance in the nation?
O.Adeoye: The concept of embedded finance is still quite early, and there are no clear operating guidelines for it therefore everyone is still trying to stay within the framework of existing regulatory guidelines. Last year, the CBN had taken a significant step to announce open banking guidelines, so we are positive that we will still see more of these steps in the coming years.
B.Metrics: Give us one practical example of a business that has integrated embedded financing successfully — how are they doing it?
O.Adeoye: Releaf leverages digital financial services to increase the financial well-being of its partner farmers while improving its own operations. OnePipe has worked closely with Releaf to improve the operational process which had a bottleneck with cash inefficiency. OnePipe’s partnership with multiple banks and a reliable digital lender has made it possible for Releaf to provision bank accounts for farmers which could be accessed via USSD, web and mobile. With these Releaf Wallets, payments for produce are paid directly into these farmers accounts such that smallholder farmers will be able to build a digital trail that makes it possible for them to benefit from credit programs, digital lending and reliable saving schemes.
B.Metrics: What is that one piece of advice that you would offer to Nigerian business owners with regards to embedded finance?
O.Adeoye: There are innovative opportunities that could be opened up via embedded finance for business owners that would directly benefit their businesses and customers. In Nigeria, these benefits are already being realized by some of the partnerships OnePipe has for example in the FMCG sector and agriculture sector. Embedded finance depending on the business use case could facilitate operational efficiency, customer loyalty, financial inclusion, increased monetization potential for the business, better access to credit and digital lending programs, high yield saving schemes, efficient cash flow management and much more.
B.Metrics: What should we watch out for regarding embedded finance in Nigeria in the next 5 years?
O.Adeoye: In the next 5 years, in specific value chains where the informal sector is prevalent, we envisage a play where digitisation will sweep through these sectors and businesses will step in to provide these financial services for sectors like agriculture, transportation and trade. OnePipe will be playing a key role that improves the quality of the digitisation effort in driving this eventuality.