On Friday, 12th January 2018, the United Bank for Africa (UBA) announced Leo their chatBot which leverages Facebook’s messenger platform to assist (new and potential) customers in carrying out common banking services. These services include: sending money, buying top-up (recharge card) and checking of one’s account balance.
Earlier this month, I had written about banks and financial services where I quoted the infamous “prophecy” by Bill Gates about banking being necessary but banks not. Coupled with the massive reliance on social, digital and mobile this self-fulfilling prophecy’s pace has been accelerated.
And as I rightly mentioned, companies out of Nigeria (particularly banks) are not lagging behind in this financial services revolution.
In Q4 of 2017, we demoed ALAT, a fully-digital bank by an established deposit money bank, Wema, incorporated in Nigeria.
This was one of the first popular innovations by a traditional bank, we had heard of in Nigeria. The ALAT organisation offered her users (who did not have to be existing Wema bank users) access to banking services such as account opening, user-verification and account management without having to physically visit a bank branch. Granted, it has similarities with digital banking and other financial chatbots like the one we are about to introduce to you today, Leo. But it is fundamentally different in that it operates as a standalone organisation (as opposed to just a product of a company) and boast a fully digital footprint. Philip Ese, an executive in the ALAT organisation covers this in detail on his blog.
Prior to that, many Nigerian banks had implemented USSD technology where users didn’t need a connection to the internet to carry out basic, small-scale banking operations. To which the CBN moved to create a regulatory framework to reduce the risks associated with it such as fraud.
Good-to-know: USSD – Unstructured Supplementary Service Data
USSD technology is a protocol by the GSM network to communicate with a service provider’s platform.
It is a session-based, real-time communication technology that is usually accessed through a string enclosed by a leading asterisk (*) and a hash (#) at the end.
Unlike SMS (Short Messaging Service) technology, it doesn’t store data on the phone or in-application. It’s interactivity/command-driven nature makes it more user-friendly.
Usually, it is faster in concluding transactions and handset agnostic (excerpt from a CBN document).
For instance, to initiate USSD technology with UBA user had to dial *919# and then follow the directions.
Hence, banked citizens had an additional option for convenient banking via USSD. Yet, about 51% of Nigerian adults still remained underserved/financially excluded.
However, in a country where there are about 20million FB users (the highest in any African country), it makes sense that a bank incorporated in Nigeria deploys such a solution to further serve her existing 14million global customers and potentially acquire new ones. Leveraging Facebook’s ever-growing global platform (from 1M to 1B users in less than a decade), they could entice new (even pan-African) customers to their platform, with an entry-point being Leo (which allows users create a bank account via FB messenger).
In Africa, Facebook has about 160.2Million users and hypothetically and over-ambitiously speaking, we could be looking at UBA’s potential market (customers).
Cost vs Benefits of building Leo and deploying on Messenger
At a glance, one could argue that the benefits of developing such a solution would vastly outnumber the cost and they’ll be right.
To build a digital solution like Leo, it takes a development team which could be a special task force from the Bank’s equivalent of a TMT division.
TMT – Technology, Media and Telecom
Hence, in a sense, there really might not be an additional cost. As it’s going to be the regular costs (salary and marketing expense).
However, the benefit here includes what we’ve already discussed above. They include:
- increased reach and exposure to new customers which could lead to more revenue
- increased satisfaction of existing customers which keep them loyal to UBA,
- increased engagement and transactions which earns UBA dollars in form of transaction charges
Yet there remains a conflict of interest.
Open Banking fostering competition
There are somethings UBA needs to take into consideration even as they progress in what they have termed a “collaboration” between them on Facebook, a social media platform.
- Facebook’s role as a platform and not an exclusive partner
- Facebook’s interest in payments, a significant offering of banks
- Data privacy and Security of Users data being transmitted on the FB platform
I belong to everyone and I belong to no one – social media
Facebook’s role as a platform, not an exclusive partner
I belong to everyone…
The fact that UBA is probably one of the first Nigerian banks to implement ChatBots of FB doesn’t mean other banks like Diamond and Guaranty Trust will be prevented from building bots on FB.
Here is a classic case of where Facebook can use the phrase “I belong to everyone…” in that, anyone can use their service, so long it means gains for them. Gains in form of more time spent on their platform. Also, a more subtle gain is data which I’ll explore as the last point.
Facebook’s interest in payments creates a conflict of interest with banks using them
“…I belong to no one” – fictitious Facebook
Although Facebook has said they are not trying to build a payments business, that might change now with the new directive, Open Banking (aka PSD2), passed by the UK Government which came into force two days ago.
PSD2 – Second Payment Services Directive
What Open Banking does is to open up Banks ‘monopoly’ on customer’s data and puts that data in the hands of the customer, thereby making it portable as well as make reduce switching costs of moving from one provider to another. 80% of UK’s citizens’ bank with the country’s top 9 banks which include Barclays, HSBC and Lloyds. And that is potentially about to change as banks are now mandated to share data with third-parties based on the customers directive.
Open Banking will make it easier for big tech companies like Facebook to get into banking at greater depth. As we already know in the world of digital, DATA rules. Hence, we might see Facebook come up with a product that might compete with Banks digital solutions leveraging the available data. Just like Google shopping competes with other e-commerce stores for Ads run by Google.
Data Privacy and security
Although in Nigeria, we are loose when it comes to enforcing (digital) laws, in other climes like the UK and the European continent at large, they are quite big on data protection and management. The who has access to data?, what can it be used for?, where will it be stored? and how will it be manipulated? are questions they actively ask and document in their Data Protection Directive.
Since Leo, is built on Facebook’s platform, therefore, it is expected that they will have access to this data on that servers. What it can be used for is something UBA needs to address with Facebook to reach a mutual agreement. Financial data is quite sensitive and it is not uncommon for platforms like Facebook to have a data breach. UBA will need to manage and prepare for the advent of such. And one way will be through documented agreements (like SLAs and NDAs) on data privacy and security.
Conclusion
It’s exciting to see the future of banking in Nigeria. Whether laws like Open Banking will be passed in Nigeria or not. UBA can protect themselves and their consumers by not over-relying on third-parties like Facebook and creating the necessary level of data protection and service level agreements (SLAs) to ensure their users have a smooth service.
In the next post, we show you how to get started with Leo. You can follow this writer on Twitter: @dadaben_
