Wise entrepreneurs are usually not carried away by the glamour and achievements of others, rather they are more interested in seeking to know how those successful brands started. They are careful to trace their stories to know how they started, the challenges they had and the possible lessons they could pick from those stories to help them on their journey before going ahead to celebrate or criticize those successes. In today’s blog post I want to share with you the inspiring story of HOW INTERSWITCH STARTED as a mere idea in the mind of a young engineering graduate to the multi-million dollar business it is today.
HOW INTERSWITCH STARTED – THE BACKGROUND
There are many people who believe that some degree of luck is essential to be successful in life. There are others, who hold the views that, rather than solely depend on luck, success can only be achieved when ideas are backed with hard work and adequate preparations; that is why someone said “the harder you work the luckier you become”. Many believe the popular mantra that ideas rule the world, but very few ever actualize their ideas and make a difference. And the question is, “is your own idea ruling your world?” Mr. Mitchell Elegbe, the founder and pioneer Managing Director of InterSwitch Limited is one of such people whose idea is ruling his world.
NO UNFAIR ADVANTAGE
Mitchell is an electrical engineering graduate from University of Benin. He cut his teeth in business as a student when he loaned money from a friend to begin a cassette recording business. He’d go to Onitsha, buy high quality audio tapes and then go back to a recording studio, record on them and sell in school. Not too long after wards, other students began doing the same thing. Unfortunately others were recording on tapes of lower quality. This totally wiped out Mitchell’s profit and business. Then he switched over to selling shirts. This is how he learnt how to read a market and time management; lessons that have become invaluable to him today.
Though, Mitchell was not born with the proverbial silver spoon in his mouth, to a large extent, he learnt a lot of family values from his foster father, his uncle. The last child in his family, he was raised by his uncle, his father having passed on when his mother was pregnant with him. It was from his uncle, who now played the role of a father in his life that he learnt family values.
Hear him,
“If you are looking at wealth in terms of material wealth, I won’t say I came from a rich home but if you are looking at wealth in terms of values, yes! While having wealthy folks can help one to succeed in life, it is not a determining factor-I know of people who came from very poor homes who have made it and others from rich homes who lost focus, so I think it boils down to the individual, yes! Money helps, but money not being there is not an excuse for failure”.
A man of possibilities, Mitchell believes the colour of one’s skin is not a factor in the quest to succeed. “I just came back from a trip to Bahamas and found out that most people on the Island are black; one question I kept asking myself is what makes these people different from us? People say there is something wrong with the black man but I disagree. Here is Bahamas not too far from the US, and they are making things happen. So it has nothing to do with the colour of our skin. My motivation comes from the challenges from the environment. There are problems here, and these problems need to be solved. That is what motivates me.” He remarked.
BUILDING A CAREER
When Mitchell graduated from Electrical Engineering department of the University Of Benin, he started his career with Computer Systems Associates, Lagos, straight from NYSC camp, as part of a team that implemented software solutions that enabled Nigerian Banks connect to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Mitchell was so outstanding in his contribution to that project that everyone in the team took particular note of him. Six months later, in 1997 he joined Telnet; one of the then leading ISPs in the country and was responsible for Business Development, Corporate Sales, Solution Selling, Customer & Supplier Relationship Management, as well as the conceptualization and implementation of new products in the ITECO subsidiary of the company. It was a very demanding job as Mitchell spent all his days and sometimes nights thinking of the next idea that can be implemented in the business world.
His Exploits was Noised Abroad
He had barely settled in Telnet when Schlumberger Wire line & Testing (Scotland) having heard of his exploits came calling, he was recruited as a Field Engineer, but he barely spent a year in Scotland. Then he returned to Nigeria and was immediately re-absorbed into the Telnet group as head Group Marketing and Business Solutions.
Mitchell had always been a man of great ideas and in this ‘second missionary journey’ in Telnet, along with many other fantastic ideas in 2001 he was able to conceive the idea of building a nationwide switching company of world class standard. Working with Accenture and Nine leading banks in Nigeria, Mitchell managed the project from design, proving of the concept, to the eventual setup of the company responsible for managing the shared infrastructure.
The Role of Mentors
While in Telnet Mitchell learnt a lot from his mentors-the co-founders of Telnet; Dr. Carew and Dr. Denloye. He recalls one of his encounters with each of them.
“One day I went to Dr. Carew, and told him I had got this idea about security cameras that I would like to do. He looked at me and told me ‘Mitchell that is strange, our office is in Victoria Island, all our engineers are graduates, trained and certified, so we need to pay a lot of money to keep them. Mitchell, do you want to compete with people with offices in Igbosere who don’t pay a lot of people and who can afford to use artisans for the same job? This technology you are talking about is so basic that we should not be thinking about it, if you want to do security, do security at a level that ‘those guys’ can’t even imagine’.
I realized that what he was telling me was ‘who are the people that will compete with you when you stand, can you sustain competition with them?’ The answer was an obvious No! That was mentoring at its best. All he was saying was ‘up your game Mitchell’. If he had just told me ‘up your game’ it wouldn’t have made sense to me. The lesson I picked from that is that by virtue of who you are, there are certain things that are beneath you, leave it for others.”
Denloye
For Dr. Denloye, I went to her and said, “‘Dr. I am tired, I am afraid that one day I might just run out of ideas’. I said this because my job at Telnet was to come up with new business ideas and the difficult aspect of it was that I had profit targets like everyone else and since to come up with a new product takes years, I plan many years ahead, so I know I must have a new project launched every two years…And just when the idea is getting sweet, someone else is given the job to manage, while I have to create a new one. She told me that a man never runs out of ideas. Getting ideas is a process, an attitude and a culture.
Immediately she said this, do you know what came to my head? Nokia! Yes, Nokia did not start with making phones, I said to myself. This statement affected me; creativity is about your personality, the culture you have, your approach to issues, those things will stay with you till you die. You may not have youth and energy, but you will still have ideas and they will keep getting better and better with the passage of time. The kind of ideas I think of now, the potential impact I can make for the shareholders and the society is so much higher than what I could do then.”
FROM TELNET TO HOW INTERSWITCH STARTED- IT I ALL ABOUT IDEAS
Mitchell was ‘consumed’ by the idea of how to modernize Nigeria’s payment system while still in Telnet. That idea would later grow into what is today known as InterSwitch, which makes life easier for Nigerians of all economic backgrounds even as it fosters the process, attitude and culture that support indigenous innovation and talent development. When Mitchell envisioned InterSwitch at the turn of the century, the cash that dominated Nigeria’s economy had become a source of crime, fraud and corruption.
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A particular example he recalls very vividly is that in those days, banks close on Friday afternoons, so most Nigerians withdrew cash to last the entire weekend to avoid being stranded on Saturdays or Sundays and of course, there was really a lot to do with cash over the weekend.
Criminals knew that on a Friday night or Saturday, there’s a high likelihood that there will be a lot of cash stocked in peoples’ homes, therefore, there is a direct correlation between armed robbery and the way that Nigerians use cash. Most business men will also travel from Onitsha or Aba to Lagos to buy goods with large sums of money, in some cases, running into millions of naira and this gave more opportunities for robbers to rob luxurious buses that made those journeys.
A Solution is Possible
Mitchell thought to himself that there must be a way out of such a mess. There must be a better way of transacting to minimize crime and save lives. It should be possible for people to access the money they have in the bank without necessarily having to visit the bank. It should be possible for people to withdraw and make payment at the spot where transaction is made rather than travel several kilometers with huge cash.
Mitchell, however, knew that developing electronic payment in Nigeria required overcoming a strong cultural bias toward cash. “You have to look at the cultural beliefs of a country to know how to innovate,” Mitchell says. “Nigerians give cash as gifts at weddings, at burials, at naming ceremonies, and other occasions. You and I know that culture change cannot be achieved overnight. So the approach is not to eliminate cash but to preach a message that there is a more efficient way to use it” he said.
Hurdles to Cross
Launching InterSwitch also required overcoming skepticism even among the new company’s shareholders. He was often asked, ‘How do you run a 24/7 business in a country where power is a major issue? In a country where telecom is still very unreliable? When the people you target are predominantly in love with their cash? How do you get the human resources needed for an entirely new area like electronic payment?’ These are the kind of issues Mitchell faced. So he was certain that if this is going to work that there is so much more to think about than just conceiving the idea.
Today, InterSwitch is demonstrating how electronic payment can work in Nigeria. Nigerians once had to travel to a branch or office and wait in long queues to receive their salary, deposit money, or pay bills. Now they can do all these instantly from the comfort of their cell phones. They can do that at ATM points, or through a wide network of merchants. They reap the benefits not only in security and ease, but also productivity. The Nigerian government, which is now promoting a cashless economy, estimates that the direct cost of handling, processing, and managing cash exceeds $1.2 billion in 2012. What an avoidable waste!
Ceding Ownership for Success
Mitchell knew that electronic payment could be appealing to banks as well as the Nigerian people. Of course, transactions are a significant source of banking revenues. He partnered with Accenture to develop a business case and a business plan. After that he took a step that many entrepreneurs are not willing to do. He decided to give up the ownership of the business.
“Though InterSwitch was my idea, I gave up ownership to the banks, he says. It was more important to see the vision come to fruition than owning the organization. So ownership was given to institutions that we believed would be needed from a corporate governance point of view to assist in growing the business. The banks owned about 85 percent of the company. With this we had a board comprising CEOs of banks in Nigeria, as well as one or two IT companies. All of these combined to ensure that proper corporate governance was followed.” he said. Four banks raised the 200 million naira which was the amount Mitchell had worked out as needed to start InterSwitch.
It Paid Off
This close partnership with key players in finance and IT has helped InterSwitch stay ahead of the competition, Mitchell believes. It has also helped InterSwitch to avoid some of the pitfalls of sole proprietorship. “A lot of businesses fail because of the ‘one man business’ syndrome. The man that owns the business would typically think that all decisions should be weighed from his point of view. He would be like ‘I am using my life savings to run this business’. That mode can cause you to make bad decisions. For example, you don’t pay for quality personnel because you think it’s your money going away. You face problems because the governing structure was wrong from the outset.”
Currently, Nigeria’s economy is dominated by the informal sector, Mitchell explains. Money that goes to the banks moves out rapidly, as individuals in the cities send money to their families in the countryside. Electronic payment facilitated by widespread use of cell phones in the countryside-promises to keep more money in the banking system, and banks are a major source of funds used for the country’s development. InterSwitch also contributes to the country’s development by working with microfinance banks. All of Nigeria’s microfinance banks are now part of the InterSwitch network.
HOW INTERSWITCH STARTED – BUILDING MANPOWER
Mitchell was well mentored by some of the people he worked with at Telnet and other places. So for sure he knew the importance of mentorship in an organization. Similarly, he will never take any of his staff for granted. He creates an environment where everyone is at liberty to air their opinion. And every opinion is given favourable consideration, irrespective of who it is coming from. Telnet encourages innovation and Mitchell was ready to do same in InterSwitch.
Mitchell said you just need to create that environment where people are free to do what they believe is right. He encourages employees to air their views and to pursue ideas and passions not directly tied to their job description. The company also sponsors a Hackathon in which its engineers work on a project for 72 hours and showcase it to a panel of judges. These are some of the reasons that have endeared InterSwitch to the heart of young enterprising graduates seeking to build a career in the world of ICT.
HOW INTERSWITCH STARTED – POSITIONED FOR CASHLESS
The coming of InterSwitch was borne out of the desire to change the way of payment system in Nigeria. When Mitchell was convinced of the idea he started by going to the key players in the banking industry. He explained how the concept will work. He encourage them to adopt it and show them how it could benefit them. Of course, at first, key players were not forthcoming and that is understandable. But he assured them that it would be built using international best-practices to be localized to the expectations of Nigerians. The name InterSwitch, he said, comes from the words, international, interconnect and interactive.
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The genesis of the story was the creation of the switch. This is how it works, for instance, a few years ago, transferring money from one bank to the other was a painstaking and time consuming process but by creating the switch, InterSwitch created an online real time electronic payment system to support other modes of customers’ transactions across several payment channels, such as Automated Teller Machine (ATM), Point of Sale (POS) terminal, web, mobile and voice. With such an amazing success story, with the adoption of InterSwitch Pay Direct, little wonder that over 70 per cent of the state governments, about 90 per cent of major telecommunication companies and numerous organizations across oil and gas, manufacturing and educational sector now rely on solutions from InterSwitch to drive their revenue collections and payments as part of the business.
Crucial Role
Besides being the brain behind InterSwitch brand, Mitchell, in many ways, largely contributed to the evolution of transforming InterSwitch Limited from an e-payment switching company to a Pan-African integrated transaction and payment processing company.
In 2012, under the leadership of Sanusi Lamido Sanusi, the Central Bank of Nigeria came up with the policy of cashless economy. This placed several restrictions on the amount of cash Nigerians are allowed to withdraw from the counter or through ATM. Expectedly, Mitchell believes so much in such a policy. And this is quite understandable as InterSwitch was already well positioned for cashless economy. Ever since InterSwitch has continued to roll out initiatives to support the cashless policy project. This is because Mitchell believes that the full implementation would grow the electronic payment landscape.
Mitchell said Nigeria still lags behind many nations in bank accounts, ATM and PoS deployments. This, despite over 30 million cards of various makes from debit, credit, e-purse and loyalty schemes are in circulation. These allows consumers and enterprises pay and collect bills and taxes via many channels like ATMs, banks, PoS, online, etc.
Electronic Products
InterSwitch released electronic payment products to complement and support the apex bank’s Cashless policy and e-payments. These products are aimed at encouraging electronic- based transactions and reducing the amount of physical cash in circulation.
The products include e-payment solutions from Interswitch such as Paydirect, Autopay, Direct Debit, Verve Card, Quickteller, Webpay and Smartgov and cards such as MasterCard, Visa, Genesis and Freedom Cards, issued by the banks. He said these solutions are in tune with the policy and direction of the CBN. They would assist individuals, corporate organizations, government agencies, manufacturers and suppliers meet their electronic payment needs under the Cashless Scheme.
HOW INTERSWITCH STARTED – GOING GLOBAL
InterSwitch has kept expanding its scope. In 2014, InterSwitch acquired 60 percent stake in Uganda’s only company of the kind amid plans for more African acquisitions. The company has offered to commit the ₦26 billion ($170 million) injected into it by Helios Investment Partners for expansion on the continent, in a strategy which Mitchell noted is targeted at acquisitions in other countries, and “where we can’t acquire, we will partner with the owners.”
The growth plans continues for InterSwitch, which also runs a network of 10,000 automated-teller machines and 11,000 point-of sale terminals as at 2016, as the Nigerian central bank seeks to encourage more non-cash transactions in Africa’s biggest economy.
InterSwitch Divisions
Today, for smooth operation and efficiency, InterSwitch is divided into various divisions. Some of the divisions are managed and headed by competent young Nigerians and they include, Touchpoint, Infratrust, Oneview, Transpro, as well as Imagineering, which is further divided into various sections.
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The Touchpoint Division
This focuses on managing customer payments at various points, like locations where Point of sales terminals are placed; the Touchpoint devices accept multiple cards including Verve, MasterCard etc. Touchpoint not only helps to manage these locations, it also provides terminals to banks, merchants and scheme owners. Touchpoint also provides acquiring services, and inventory management systems and solutions that can help manage payment collections across multiple outlets or multiple distributors, whilst providing 24 hour global monitoring capabilities.
Brainworks
This is InterSwitch’s learning and development academy. The focus of Brainworks is to develop and sustain knowledge, skills and abilities needed within the organisation. Brainworks is also charged with the responsibility of creating external recognition for InterSwitch within the industry and beyond by becoming a leading world class learning academy.
Techquest
it is primarily responsible for research and development of new products and services. They are responsible for providing innovative, easy to use, consistent payment solutions and value-added services across multiple consumer touch-points and devices. Techquest also monitors new trends in software technologies and electronic payment processing.
Verve Business
This is responsible for managing “Verve” across Africa. It is a branded payment card (previously referred to as InterSwitch Debit card or ATM Card) enhanced with numerous security features including chip and pin security, money guard, customer rewards and access to value added services like Quick teller. It also provides consulting services to organizations, governments, and financial institutions looking to issue the Verve Card. The Verve card is the new InterSwitch debit card now with the Chip and PIN. Verve is the new name of the more secure and convenient Interswitch card which with the introduction of chip and PIN makes transactions safer and with Quick teller services, adds convenience to everyday life.
MySmartCityCard
This enables state governments automate processes around revenue collections. They also use it for salary payment for civil servants, contractor payment and more. This automatically makes government’s activities both transparent and efficient. It combines identification and payment technology to eliminate leakages and improve accountability in revenue collection. This applies in healthcare, education, transportation, social benefit transfer and other government services. It is a Verve payment card with bio-metric based identity on the chip. This is sure the future of interactions between Smart Governments and their citizens.
Paydirect
This is a secure web based InterSwitch solution that enables corporate and government organizations receive payments made by their distributors, agents and customers into their accounts from all of the banks in Nigeria. It also allows distributors, agents and customers to make payments into your accounts from not only bank branches, but, from ATMs, Point of Sales (PoS), Web, Mobile Phones and Kiosks. Paydirect also allows you to know who paid, which bank it was paid into. It even details the amount paid online and in real time too.
HOW INTERSWITCH STARTED AND WHERE THEY ARE NOW
Since its inception, and under Mitchell’s leadership (he is the pioneer Managing Director and still holds that position to date), InterSwitch has been Nigeria’s market leader and has a growing presence in West and East Africa. The company:
- Processes over half a billion transactions a month as at May 2019
- Has a payment infrastructure connected to all of Nigeria’s major banks and synonymous with reliability
- boasts a blue-chip client list of government institutions (Federal & State), telecoms operators, utility companies, oil and gas producers and airlines
- Has over 20 million subscribers to its pan-African chip & PIN retail card, branded ‘Verve’
- The company is 2019 became the second Nigerian VC-backed startup to attain a unicorn valuation.
- As part of their own way of giving back to the society they sponsor the InterswitchSPAK National Science competition. The programme is an annual pan-African contest aired on different national televisions and aimed at re-igniting and incentivizing the study of STEM (Science, Technology, Engineering and Mathematics) subjects among secondary school students. The star price for the first position in this is about 7.5 million naira.
Scope of Verve
In addition to its switching and processing services, InterSwitch owns Verve. Verve is the largest domestic debit card scheme in Africa. It has more than 19 million cards activated on its network as at May 2019. The business also operates Quickteller, a leading multichannel consumer payments platform. This drives financial inclusion across Nigeria with over 270,000 access points, as at 2018. From these points, consumers can initiate peer-to-peer transfers. They can also complete bill payments, airtime purchases, and other e-commerce transactions. It processes over 42 million transactions monthly as at 31 July 2019. This is equivalent to over NGN560 billion (US$1.5 billion) through direct, indirect and Paypoint channels. InterSwitch’s unique market capabilities and strong consumer proposition, has enabled it to deliver consecutive years of sustainable profitable growth.
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The company has also expanded to East Africa with moves into Uganda and The Gambia. They have customers across different other African markets. Precisely as at today, the company sells its products in 23 African countries. And Mitchell explains that they are presently looking into expanding further.
ADVICE TO UPCOMING ENTREPRENEURS
For growing business leaders Mitchell said. “You may not have the luxury of knowing all the facts you need to take a decision. So you need to cultivate a system that does not make it difficult to make a decision even as you keep searching for more facts. Also, don’t be a slave to your position or opinion. Be brave enough to go to your people and say, ‘Based on these new facts, I think we should move this in a new direction.”
LESSONS FROM HOW INTERSWITCH STARTED
- Neither your background nor the colour of your skin has the power to limit you
- Partnership can help your startup scale much faster
- There are many good ideas but you must consider cultural bias in your implemetation per location
- You can never rule out the importance of mentorship. A mentor will help you avoid the mistake of a lifetime
Share with me the lesson you have learnt from how InterSwitch started.
Culled from the book HOW THEY STARTED by Kachi Ogbonna