The now-frequent presence of agitated customers in long queues in the banking hall emphasizes the need for a wholly digital bank.

Kuda Bank is the first institution that comes close to meeting this need, where customers can carry out all their banking transactions without having to visit a physical branch.

Kuda Bank, founded by Babs Ogundeyi and Mustapha Musty, started out in 2016 as Kudimoney (“the bank of the free”), online-only savings, and lending platform, and had gone through a couple of funding rounds before transitioning into Nigeria’s first actual digital-only bank without a physical location.

Speaking after Kudimoney got its full banking license from the Central Bank of Nigeria and transitioned into Kuda Bank, Babs Ogundeyi said: “We’re excited to usher in a new era in consumer banking and serve the many Africans, who we believe are frustrated with traditional banks Starting with Nigeria, we’ll launch a new kind of bank with a continued focus on improving our members’ financial lives rather than trying to burden them with hidden fees and excessive charges”

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This move made it clear that Kuda bank is not just another savings app or mobile wallet but an actual bank. The bank’s deposits are insured by the Nigerian deposit insurance corporation (NDIC).

A model for the Gen Z

Kuda bank is modeled for the Millennial and the Gen ‘z’ internet-savvy population, providing them the same banking services irrespective of location, but without the time and stress that comes with conventional banking.

It is an all-round improvement of the banking services. For instance, users can open a Kuda account by simply downloading the app and signing up, after which they get a free debit card delivered at no cost nationwide within two weeks.

With these, one can easily save the time of queuing in the bank and resolve complaints from a mobile device without having to visit any bank.

To make it easy for users to resolve transaction issues that may occur while using the app, Kuda provides the 30-digit session ID for every transaction.

This isn’t an industry standard and normally, you have to call your bank to request this reference number when things go wrong.

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Anticipating user needs and providing convenient solutions, in Kuda’s thinking, should define the age of digital banking.

Kuda Bank also has an automatic savings option where users can save automatically and earn up t0 15% annual interest.

The bank charges, card, and account maintenance fees which have become a nightmare to Account holders, do not apply to the Bank.

As part of the launch promotion, the bank offered 25 free interbank transfers monthly for all customers who opened a Kuda account before January 1, 2020 while extra transfers to other banks cost N10 each.

Kuda has a wide branch network where customers can make deposits for free, thanks to its partnership with three of Nigeria’s biggest banks.

Debit cards are also issued by access bank, pursuant to a license from Visa International & Verve.

Speaking at the bank’s first town hall meeting at Radisson Blu Hotel, Ikeja, CEO, and founder Babs Ogundeyi explained that the model saves the bank heavy cost of running network branches, and this further translates into free banking services for customers.

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The bank also offers a high level of security to protect customers’ personal information from unauthorized use, and allows them to freeze debit cards from the app when it goes missing.

Other security features include; a validation mechanism for every user, a circuit-breaking mechanism that flags down transactions higher than the usual range. This way, if a customer that usually does ₦50, 000 transfers, suddenly attempt an N500, 000 transfer, it will be flagged to alert the customer of a potential mistake, or of a fraudulent transaction.

Partnerships and collaborations

Besides its partnerships with Access Bank, Guaranty Trust Bank, and Zenith Bank, Kuda Bank recently became the first Nigerian bank to be added as part of the Binance P2P payment options, making it possible for people carrying out Peer trading of cryptocurrency on Binance to make and receive payments with their Kuda Account.

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Its ‘Spend and Save’ feature is similar to what is found on other Fintech apps, and it automates the removal of 2% of every expense made from the user’s balance as savings for a rainy-day fund.

Like other competing Fintech, Kuda Bank also has to do a KYC feature that verifies user information using the Bank Verification Number (BVN).

But the absence of a physical branch means that Kuda bank services cannot be used by a first-time account holder.

There is the hope that the bank would address this issue with a BVN feature that gives it independence from other banks, but the technology with which this is to be achieved is not yet certain. It may also consider providing loans.

More players in the space means that in no time, the competition will be based on customer-friendly rates and excellent services.

Imagine that you put all your money in one jar, and all your bills in another jar. Chances are that the jar of bills is the one that would never run dry.

Month after month, people spend a huge percentage of their income on living expenses from rent to food, transportation, utilities, and the likes. More often than not, they forget to set aside a little money for themselves. Simply put, they pay everyone else but themselves.

This was the concept around which Piggyvest (formerly Piggybank) was built. Speaking at the Nairametrics Business Half Hour show, Co-founder of Piggyvest, Joshua Chibueze, said that the purpose of Piggyvest was to help people create an automated system, where they could pay themselves first, by setting aside a fixed amount or percentage, before making other expenses.

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Describing the Fintech, Joshua posed a number of questions, “Piggyvest is that place you keep money that is your own money. Beyond having multiple bank accounts, how do you pay yourself? You work month after month, and pay bills, but where do you pay yourself? Where do you keep money that belongs to you and only you? How do you plan towards those heavyweight bills.”

How a piggybank tweet birthed PiggyVest

On the last day of December 2015, a lady posted a tweet that went viral. The tweet detailed how she had saved N365,000 by faithfully setting aside N1000 in a wooden piggy bank every day of the year. According to her, she ensured to pay herself, by setting aside the sum before making any other expense.

As people continued to share the post and comment about how they might not have the discipline to accomplish it, Joshua and his team (Odunayo Eweniyi, Somto Ifezue, and others, who were working on PushCV at the time), decided to find a way to digitize the process, so salary earners and the self-employed could also set aside money for their personal projects and financial goals. They sampled thoughts from some of their PushCV clients and found it was a concept many would really be interested in.

Three weeks later, the first version of Piggybank had been launched, although it took till April 2016, before the fully tested version was ready for use.

“It was not all easy because we were trying to do something no one had done in Nigeria. The other companies doing something similar were outside the country, so all we had to rely on was the customer feedback.”

No member of the team had any banking experience, so building the app was a total reflection of customer feedback and user experience. Notwithstanding, they understood that people were concerned about the security of funds; hence, they gradually progressed to the use of bank-level security to ensure against hacking.

In subsequent years, the team added an extra layer of security with a two-factor authentication preventing transactions, unless the user could provide the password and the answer to the security question.

Other steps include; SMS verification instead of email verification, as e-mails are more susceptible to hacking than mobile numbers.

From 1,000 to over 1 million users

At the outset, the intention was to get to the first 1000 users. “We felt that if we could get to 1000 users, it would be worth it. We ran on our funds and did not make any money in the first year, because we were still trying to understand our users and find our feet,” he said.

After successfully helping users save 21 million in the first year and over 70 million in the second year; the company attracted investors, and by 2018 they had secured a $ 1.1million round in seed funding. This came as a plus, because the business had grown organically at the time, and was already profitable enough to sustain its operations.

Fintech versus Asset managers

Piggybank first partnered with a couple of Microfinance banks, before partnering with a Commercial bank. In 2018, they raised some $1.1million from investors and acquired a microfinance bank license, a money lenders license, and a cooperative license, allowing them to operate a Trustee agreement with an external asset manager.

There are products tailored for different reasons, so people trying to establish their savings culture could go for an option that allows them to save consistently, and withdraw once in a quarter. There are also options that could allow users to steadily build an investment culture, and others meant for people saving towards a project.

In April 2019, the company rebranded and became Piggyvest. It currently serves over a million users, helping them save and invest “billions of Naira every month that they would probably be tempted to badly spend.”

The more interesting part is that there are no fees for the services, but customers get to make some money, as Piggyvest splits the returns with customers; however, users may have to pay a 2.5% charge, when a customer withdraws his funds before the agreed date.

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Breaking the trust challenge

Financial institutions in Nigeria generally have to deal with the challenge of trust deficit among the customers, but this is even more for fintechs like Piggyvest. According to Joshua, despite taking added measures to secure customers’ funds, any delayed transaction tends to breed some distrust among the users, and the company has to deal with this by providing information.

“This is the reason why we don’t do more of marketing but prefer to let people sell us with their testimonies. Customers tend to believe more the testimonials from other satisfied customers, and this how we have gotten over 1.5 million users and improved customer trust,” he explained.

When the economy went into lockdown, the business showed itself to be pandemic proof, as savings improved after the initial shock. The remote working policy was introduced, so that even in the aftermath of the lockdown, operations continued unhindered.

“We are a customer-centric brand, and the feedback from customers is our motivation. We are out to give them the best experience ever,” he concluded.

The ‘Police is your friend’ is a cliché many are familiar with, but most do not know that this friendship extends to financial services. Incorporated as a community bank in 1993, with License No. FC 00200, the Nigerian Police Force (NPF) Microfinance bank has been providing banking services to the Nigerian banking public for almost three decades.  

However, it is one of those stocks that hardly make the headlines, except for landmark events. This friendly microfinance bank is the pick for Nairametrics corporate profile this week.  

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Incorporation  

NPF Microfinance Bank Plc (Formerly NPF Community Bank Ltd), was incorporated on 19th May, 1993, to provide services such as retail banking, loans and advances, and other allied services to both serving and retired officers and men of Nigeria Police Force, its ancillary institutions, and later on, the general banking public.  

The Bank mission says it is targeted at providing “banking and other permissible financial services to poor and low-income households and micro enterprises,” with emphasis on members of the NPF Community. 

It commenced operations on 20th August, 1993 with a single branch in Ikoyi, having obtained a CBN provisional license to operate as a community bank. The bank obtained its full license to operate as a Community Bank on 24th January 2002. Five years later, it converted from its Community Bank status to a Microfinance Bank, following a CBN directive which allowed it to open branches in all the states. It was registered as a Public Limited Company on 13 July, 2006, and received an approval-in-principle to operate as a Microfinance Bank on 10 May 2007. 

NPF microfinance bank obtained the final license on December 4, 2007, but its stocks did not get listed on the main board of the NSE, until December 2010, after 17 years of operations. 

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Its stock price is considered quite stable, trading within a narrow band, with its price-earnings ratio estimated to be about 9.45 times earnings, slightly higher than the 9.3 times earnings, which is the average PE ratio on the NSE. 

The bank’s authorized capital at inception was N500,000.00, made up of 500,000 ordinary shares of N1.00 each. This has grown over the years to its current level of N2 billion, made up of N4 billion ordinary shares of 50k each, of which 2,286,637,766 ordinary shares of 50k each, are issued and fully paid up. 

At a share price of N1.22, the current Market Cap is put at N2.789 billion.  

Branch network has increased to about 35 branches across several states in the country. In August 2019, the bank reaffirmed an earlier decision to embark on another public offer to raise funds for the purpose of incorporating Information Technology to meet customers’ needs and branch improvement, and to fund a three-year strategy from 2019 to 2021. 

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Management  

Mr. Akinwunmi M. Lawal has been Managing Director since June 2014, while the Board of Directors has been chaired by Azubuko Joel Udah (Esq.) since 2015. 

Mr. John Kwabe Tizhe and Mr. Francis C. Nelson are Executive Directors; while Mr. Usman Isa Baba, Mr Aminu Saleh Pai, Mr Jibrin G. Gane, Mr. Salihu Argungu Hashimu, Mr. Abdulrahman Satumari, Mr. Dasuki Danbappa Galadanchi, Mrs. Rakiya Edota Shehu, and Mr. Mohammed D. Saeed are Non-Executive Directors. 

Recent financials 

Although the NPF microfinance bank may not boast of a large customer base like most of the popular commercial and microfinance banks in the country, the bank has consistently shown favorable financials over the decades. The bank stocks is highly illiquid, but it has consistently and successfully paid dividends for the last 21 years, paying as much as N114.3 million in dividends for 2018.  

The audited results for FY 2018, shows a N300 million growth in gross earnings from N3.6 billion in 2017 to N3.9 billion in 2018, while there was a decline in profit. This decline is partly traceable to the 128.6% increase in marketing expenses from N63 million in 2017 to N144 million in 2018, while Directors’ remuneration rose 63%, from N65 million in 2017 to N106 million in 2018. 

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Profit before tax fell sharply from N819 million in 2017 to N287 million in 2018, and Profit after tax also dropped from N631 million in 2017 to N195 million in 2018.  For 2019, the Profit Before tax shot up to over N1 billion, while Profit after tax grew to N796.4 million.  

Within the 2018 financial year, customer deposit grew by 14.67% from N9.126 billion to N10.465 billion, while total asset increased from N15.952 billion in 2017 to N17.597 billion in 2018. In comparison, 2019 customer deposits grew further to N11.32 billion, and total assets increased further to N19.58 billion.  

The bank attributed the poor performance in 2018 to the adoption of the IFRS 9, which caused a rise in net impairments, a N700 million growth in operating expenses, as well as a N266.48 million fraud committed by one of its middle management staff in the Sokoto branch. Although N35 million was recovered of the sum, shareholders bore the brunt of the loss, as dividend per share dropped from 17 kobo in 2017 to 5 kobo in 2018.  

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Whatever steps the company took to prevent a repeat of frauds, it was not effective; because 2019 saw an increase in frauds committed by members of its staff. The bank recorded frauds amounting to N2.1 million in four separate incidences, and another N12.26 million ATM electronic fraud. Though some of the money was recovered, over N12 million remained unrecovered at the end of the financial year.   

Conclusion 

NPF microfinance bank has shown resilience over the years, and this is reflected in its consistent positive performance. However, it will have to work more on tightening lose ends to prevent cases of fraud and forgeries, which dips into its yearly profits and takes a chunk from shareholders dividends.