ISPON Urges Nigerian Banks to Invest in Tech Startups

 
The Institute of Software Practitioners of Nigeria (ISPON), an umbrella body for indigenous software companies in the country, has recommended that Nigerian banks should emulate their foreign counterparts by investing in technology startups.

As technology startups increasingly penetrate traditional banking segments, including payments, wealth management and billing, major global banking giants are not sitting on the sidelines. Six major American banks - Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo - have made strategic investments in 30 technology companies since 2009, according to CB Insights data.

In a statement issued by ISPON and signed by Pius Okigbo, its president, the institute commended Nigerians banks for their foresights in funding various tech startups in the 1990s and 2000s such as Interswitch, ValuCard (Unified Payments Limited), ATMC, NIBSS, Credit Registry and CRC Credit Bureau, all financed by various consortia of Nigerian banks.

ISPON suggested that a second wave of investments in tech startups would require the establishment of Special Purpose Vehicles [SPVs] following global precedents, as was the case with Citi Bank that incorporated Citigroup Venture Capital business  through which it invested in i-Flex Solutions Limited,  driving the "FLEXCUBE' suite of products to adoption by more than 100 financial institutions in over 40 countries.

Okigbo noted the six major American banks have invested in 30 tech companies since 2009, according to CB Insights data.

Out of the six banks, he added, Citigroup has been the most active primarily through its Citi Ventures, which has invested in fintech startups ranging from Betterment, Jumio and Square.

Goldman Sachs has already ventured into fintech startup with thematic investments across payments technology and big data finance.

Therefore, ISPON urged the banks to study how Deutsche Bank is building a strong ecosystem for innovations and take a lesson from it. Deutsche Bank would open three innovation laboratories in Berlin, London and Silicon Valley, as part of a EUR1 billion spend on digital initiatives over the next five years.

According to him, the giant German bank would help the organisation to develop new products and services from three global tech hubs, strengthening its ability to innovate and deepening relationships with smart tech startups.

“Nigerian banks should take advantage of the huge innovation awakening that is sweeping across Africa and particularly Nigeria to refocus their plans and place their bets on fintech startups. It is particularly sad that no bank is participating in DEMO Africa, a flagship launch pad for emerging technology and trend hosted in Lagos in 2014.  Many venture capitalists from around the world were present”, he said.

Meanwhile, Okigbo informed that DEMO Africa has already released a list of 30 technology start-ups from across Africa that will pitch at the 2015 edition of the event.

Topping the list of the technology startups with eight representatives is Nigeria and followed by Kenya with six. South Africa is third with three representatives while Ghana, Egypt, Cameroon and Zimbabwe each have two. Uganda, Tanzania and newcomer, Ivory Coast has one start-up each.

The presence of Ivory Coast on the list of giants is “a strong signal that more African nations are warming up” to the ability of the continent to craft own solutions to various needs.

The highest represented category on the 2015 list is finance and banking with eight products. Other categories are education, transport and logistics, retail, communication and media and entertainment.

He noted that, “We expect Nigerian banks at the Demo Africa 2015. There is no better opportunity for the banks to cherry pick the nascent tech startups they can place their bets,”