Mr. Simon Hughes of International Banker interviews Mr. Obeahon Ohiwerei, Managing Director and CEO of Keystone Bank.
Today, International Banker is joined by Mr. Obeahon Ohiwerei, Managing Director and CEO of Keystone Bank, to discuss the bank’s digital strategy, new product offerings and his own role at the bank. Very good to have you with us.
Listen, let’s start with the bank’s flagship customer loyalty and reward scheme. How does it work?
The bank’s flagship loyalty scheme is called a cash-tokening initiative, that rewards customer loyalty and repeat business by customers. Why did we do that? Because we started from a point of, from a disadvantaged point, as a bank because of what we were before, where we were before as a bank. And we consolidated the position of the bank pretty fast. We had to come up with an initiative that will tie our customers to us and continue to reward them. Now how does this system work? If you activate your account, your dormant account, for instance, and conduct a certain number of transactions, you get a cash token from us. Now this cash token during our weekly draws would enable you, O.K., you could, you could win between $15, O.K., and $270,000 during our weekly draws. All right. Again, it’s not only account activation. If you, for instance, also use our ATMs a certain number of times, it entitles you to a cash token. If you maintain certain balances in your account over a period, it entitles you to a cash token. It’s a life-changing opportunity for our customers. Now, those who bank with us, the SMEs and the corporates that bank with us, also can sign on to this initiative such that they buy the cash tokens and gift them to their customers. I’ll give you an example. Hilton Hotel. Instead of giving discounts, corporate discounts, on accommodation, they just give you that cash token, all right, and that cash token also enables their customers, O.K., to win between $15 a week and $100 and $270,000. So the more people we have in the scheme, the better for everybody. Government, for instance, can use that to encourage taxpayers to pay taxes, because every time you pay your taxes, all right, you’re gifted, you know, with a cash token. And that’s the cost of the pool of the number of businesses that have signed on to that initiative. There’s so much money in the pool that enables us to have assets of up to $270,000 a week.
So you’re building loyalty through the transactional use of the bank services?
That’s right. That’s exactly what we’re doing. Because I will tell you, I will give you an example. If a large department store, for instance, or a supermarket is signed on to this initiative, all right, and I decide to send maybe somebody who works with me. You know, a person who works in my house, it could be my gardener, for instance, “Here, you go buy me a can of milk”. He goes there and buys something just worth maybe $20, and the person is gifted with that cash token. He could become a millionaire tomorrow using my own money, you know what I’m saying. That’s exactly why it’s good for everybody. I would encourage everyone, everyone, all businesses in Nigeria to actually come up with that initiative.
Now, in quarter three 2017, the bank commenced a really extensive restructuring process aimed at achieving greater operational efficiency, a process improvement and also the realignment of skills and competencies to areas of best fit at both senior and middle-management levels. Do you have any specific examples of the initiatives that have been launched in order to help you meet those aims?
Very well, very well. I’ll just roll back a little. When we got on board, we met a lot of challenges. The bank had been in the hands of the Asset Management Company of Nigeria for quite some time, for about six years. In the process, the bank had about three different CEOs. So morale was completely down in the bank. Culture was nothing to write home about. There was no business drive. And the bank wasn’t profitable. The balance sheet was declining. So it was a major issue for us. It was almost a total shutdown, you know, by staff in terms of trying to make things happen, you know, for the bank. So I go there, I was CEO on precisely August 15, 2017. The first thing was to go to the bush, I call it the bush. Not the bush precisely; we went on retreats outside the office with the board and management. And there we agreed on the strategies going forward. Communicated, we communicated to ourselves what the strategic direction would be. Why when, back home from that journey, precisely how we’re going to go about it, and, of course, what is in it for the people, where we are able to achieve the agenda that we set for ourselves. So the vision is very, very clear—where we’re going. We’ve embarked on major process reengineering to make things easier for our people, for our customers and all that. To make transactions also faster. To remove the frustrations and bottlenecks in the system. We have an enhanced digital platform, O.K. So very well, life is a lot easier for our customers. We asked ourselves certain questions. We’re a relatively small bank. At that time we were. We were still about growing fast. And the question was, how best do we compete in this, in this market? All right. There are more bigger banks. How do we compete and go head to head with them? It was clear that any bank that does not embed itself in the digital revolution will be playing catch-up in the next five years. Or they won’t be in existence. So that is what we latched onto.
Let’s pick up on the digital issue. With the advent of Keystone’s digital revolution, do you envisage a reduction in the number of the bank’s physical branches in favor of an expansion in branchless banking?
Not at all. Today we have 154 branches across Nigeria. We’ll say that we have effective coverage of the major commercial centers in Nigeria. However, to grow our business in leaps and bounds, what we are using to drive it is the digital aspect, O.K. Our retail business will ride on the platform of the digital aspect of our business to grow in quantums. Now another thing that we have done is to introduce what is called the agency banking. Now what is agency banking about? There is a government first accord with Nigerian Postal Services, all right, which has presence in almost everywhere, every local government in Nigeria and so on. They’ve been in existence for several years. So going into an alliance, O.K., with them such that in those remote locations where there are, where I would say, banking, you have a lot of unbanked and underbanked people, all right. What we’ve done, that alliance will enable us, O.K., to get all those guys on board. How do we do it? We use the staff of Nipost, all right. They carry out transactions, they pay and receive, and so on and so forth, they do everything in the offices using our machinery. You know what I’m saying. And in the process, all these businesses come onto our balance sheet, and we get to do this co-location with Nipost at minimal cost. So today, what it will cost me to establish a brick-and-mortar location for one, all right, I will use that to establish 20 to 25 agency-banking locations. And the business is ticking over every day.
And, in fact, you’re kind of dealing with two very separate kind of customer market segments, aren’t you, through that approach?
Well, yes, the unbanked the underbanked and the complete retail business.
Has that kind of digital strategy made it easier, then, for customers to open an account?
Oh, very well, very well. Today you can open an account in Keystone Bank from any part of the world, all right, using a mobile app, for instance, using a USSD platform and using our rapid-account application platform. It’s so easy. In a few minutes the accounts are opened. So that is really helping us because people have come to realize that Keystone Bank is actually bringing very convenient products for them and that it’s easy to sign on.
Among those products is zero-data banking, which apparently allows customers to transact using the bank’s mobile app, even without data on their phones. That sounds like a particularly exciting innovation. How does it work? Do customers still get the full functionality of the app, even if they don’t have data on their phones?
You see, we’re always thinking, and we try to make banking fun. We try to make life easier for our customers. I mentioned earlier that we now have access to the unbanked and underbanked in rural areas. Some of these people are people who may not necessarily have the wherewithal financially to always buy airtime and stuff like that. So even where, so that helps that segment very, very well. So even where they don’t have data on their phones, they’re still able, at least if you have a smartphone, you are still able to transact, and you know things go well for you.
Now, the other one is the chat-banking platform, Oxygen, which sounds like a groundbreaking vision. Again, this is something that’s targeted at youths and Millennials. How is this specifically done? How have you got around attracting that quite tricky market segment?
You see, a lot of the things we do today, we do with the Millennials and minors, okay. These are people who almost always clip on their phones. My sons, my daughter, any every free time they have, they are on their phones. You want to reach, these are the people of the future. So you must, as you come up with products, you also position it to capture that market, all right. And that is why we came up with that chat-banking theme. It makes life very easy for them. It’s fun. As they do their social media and stuff, you know, it’s just part of it. You know, do chat banking— you want to transfer funds, you want to check your balances, you just chat on this phone for you. It’s such a lovely thing. I enjoy it, too, I enjoy using it myself.
One of the things we always discuss in these interviews is the kind of impact of fintech on the banking sector. Do you expect to maintain or lose market share as you see the fintech sector rising over the coming years?
Well, as a matter of fact, we will gain market share, and it will help us grow our business tremendously. As I said earlier, if you do not embed yourself in the digital space, you’ll be playing catch-up. All we need to do, all we’re doing is we’re going to our alliances, you know, the fintechs and all that to, you know, to grab business. O.K. And once you get it right, the whole idea is for my retail business to capture, to be at least 70 percent of my business tomorrow, all right. My balance sheet I want in the next five years minimum proportion will be 70 percent by the retail segment. So the way to go is digital.
So, being managing director, chief executive officer of Keystone Bank for almost a full year now, during this time what do you consider to be your greatest achievement? And what’s your greatest challenge?
Let me start with the challenge. The first was people, my people. I met a terribly demoralized team on the ground. You had people who had not been promoted between nine and eleven years. Same level for nine and eleven years. Now the bank was at one time bigger than the most profitable bank in Nigeria today. And some of these people were the ones that actually made the bank grow at the time. So the challenge was how to now re-ignite the fire in these people and make them perform the way that they did before. So this was a major challenge for us. But I must say today, I mean the people are making me proud. Things are happening. And they begin to see their rewards, also gain their rewards for hard work. Now in terms of achievements, the bank was making losses for 22 straight months. The deposit base was declining every day. But I’m proud to say, and I’m happy to say with the collective efforts of my team, the management, and everybody, the board—the bank, the deposit bills, for instance, have grown by 50 percent in less than ten months. The liquidity is very, very high. I have no issues with the liquidity. And above all, the bank is back to month-to-month profitability. That is just awesome.
From where you were to today. Yes, that’s a great achievement. What’s the biggest way in which your role at Keystone Bank differs from previous kind of banking leadership roles you’ve held? You were with First Allied Capital Limited and Access Bank Ghana Limited.
O.K., let me rephrase that a little for you. In Access Bank Ghana, I was just a non executive director. I was a group executive director at Access Bank, O.K., I was on the board of Access Bank Ghana. So because I didn’t actually act in an executive capacity, they’re not directly comparable. However, let me talk about my experience at United Bank for Africa Ghana, where I was the Pioneer Group Head, O.K. In Ghana, I obtained the license for the bank. That was in 2005. In December 2004, I commenced operations, in January 2005. I had the opportunity to pick my team. Every person. I had the opportunity to pick every person I wanted, you understand. It was the first Nigerian bank there. And because I picked my team, I was able to shape them in the direction that I wanted. But coming back home, at Keystone Bank, I didn’t pick the team. I met a lot of them on the ground, a lot of people who were highly de-motivated. So I had to do a lot of work in that aspect. Now, with the team in Ghana, things moved so fast for us because we set out to democratize banking, all right. We wanted to take banking to the underbanked and unbanked. A lot of people who used to keep monies under their beds and stuff like that. So the challenge was to attract it into the banking system. In 15 months, the bank got three awards. So it was an awesome experience for me but different from the case of Keystone Bank because I met a team that I needed to work with. Now, for First Allied Capital, when I left Access Bank at the end of 2013, I retired as an executive director. Another colleague retired a few months before then. His name is Ebenezer Olufowose. He was an executive director as well. We hired him back on an entrepreneurial move. So First Allied Capital was set up by us. We had equal stake in the business as an investment-banking boutique. Again, in the case of that outfit, we selected our team. We got the type of investors we wanted, the type of directors we wanted. People with clean money, people with excellent and impeccable character, actually. People, people with established, people who know what governance is. So that again is different from what we’re doing at Keystone Bank today. The business is growing, and Ebenezer is running the company today. The same. We have about four different companies in the group.
Thinking of kind of the leadership qualities you’ve been discussing, if you could identify one key quality that a banking leader should possess in order to achieve success, what would it be?
A leader must be able to articulate his strategic direction, communicate it very well, show how you’re gonna get there and be able to communicate to the people what is in it for them. It is very, very important. And they must also see you lead by example. Walk the talk.
Yes, that visibility.
Yeah, and that’s precisely what we are doing.
Now, as I understand it, there are no immediate plans for expansion into the West African sub-region as a major fallout of the bank’s prolonged bridge-bank status, which was the decision to divest in sub-regions such as Keystone Bank’s Euro Loan and Global Bank in Liberia. What was the reason for taking that decision in the first place?
Well, very clearly we needed to sit back and reset the bank, because of all of the numerous issues we met on ground. And resetting the bank means, you know, putting all the structures in place to make it grow in terms of balance sheet, there were so many things to do. And after doing that, we needed to consolidate. We needed to consolidate. And that’s why we had to just go out of those countries. We can always go back any time we want to, once the bank is firing on all cylinders.
Now, you’ve mentioned the loyalty scheme, you’ve mentioned attracting Millennials, you’ve mentioned the partnership that gives you reach out to people who are kind of doing traditional banking. Where do you see the majority of Keystone’s growth opportunities lying during the coming months and years? Is it retail, MSME or corporate banking? Or perhaps another area?
It’s clearly, it’s got to be retail and MSME for us. The agenda is for us to have 70 percent at least of our total deposit base come from the retail and MSME. That will ensure stability.
Now, I believe one of your biggest aims is to deliver on the mandate for your investors of making Keystone a Tier 1 bank. And in your view, how far off are you from achieving this aim?
When I got on board, I would say the bank was at the bottom of the ladder. But today, after 10 months, in terms of profitability we are a Tier 2 bank. In terms of profitability. In terms of balance sheet, our total assets, we’re not there yet, O.K. So if we could achieve that in 10 months, clearly, clearly in all of our ramifications, we will be a Tier 2 bank within five years in all of our ramifications. If we achieve that, and given all the things we are doing today, which I cannot reveal to my competition, I have no doubt that in 10 years we’ll be a Tier 1 bank.
Great goal to aim for.
Best of luck doing that.
Thank you so much.
Thank you for your time today.
Thank you. You’re most welcome!