”Our software helps banks achieve full automation of their trade operations” – Onyebuchi
Chuks Onyebuchi, CEO – Union Systems Ltd, in this BusinessDay interview, speaks about the company’s recent trajectory and innovations.
Last year, Union Systems won the award for “Trade Finance Software Solutions Provider of the Year” beating several global IT firms operating in Nigeria at the prestigious BusinessDay Banks’ & Other Financial Institutions (BAFI) Awards. How did your team accomplish this feat?
We have been in the industry for over 25 years implementing banking solutions. In 2008, we decided to focus more on international trade finance by implementing international trade finance applications from an international partner software company. During that time, we went beyond selling their software to banks to implementing and supporting our bank clients. Through that experience, we came to master all the nooks and cranny of international trade in the region and understood the gaps that were yet to be filled due to the peculiarities of regulation in Nigeria. It was based on this understanding and the realization that international software companies were never going to fix the local issues that we developed Trade-X. Trade-X was our first attempt to build an application that was tailored to automate all the local regulatory requirements in the market. Since the launch of Trade-X, we have launched other trade finance software products and can confidently say that we have achieved full end-to-end automation of International trade in Nigeria. It is the culmination of all these products we built that helps banks achieve full automation of their trade operations that put us ahead and qualified us for this award.
Union Systems has built a strong reputation offering software solutions to the financial services sector. What was the strategy behind your company’s decision to focus on that sector as against diversifying to oil & gas, government finances, and others?
The background of the founding directors of the company is steeped in offering software solutions to the financial services sector and because of our understanding of that sector, we decided to specialize there. We did not want to be a jack of all trade, we wanted to specialize in the financial sector and proffer software solutions that will serve that sector.
Another aspect of our decision to specialize was because at the time of the company’s formation the only active sector that was willing and able to pay for software was financial services. There were 81 banks at that time and these banks needed to be served and there was a dearth of skill set in financial software for banks so we decided to fill that gap. We saw the market as an untapped market and decided to serve that market.
You recently launched Optimus which is the first multibank trade finance corporate portal in Nigeria. What inspired this product and what does it mean for the market?
Optimus was created as an answer to the issues that corporates have raised and clamored for over the years. For some time now, corporates involved in international trade especially the large corporates have always clamoured for a portal where they can initiate and manage all their trade transactions with all the stakeholders in their value chain – Banks, suppliers, logistics, etc. They wanted to have a consolidated view of all their trade transactions with all their banks and other stakeholders at a glance from anywhere in the world. Optimus was built to finally give them the control they have been asking for. With Optimus, corporates do not need to log in to different bank portals to have insight into their transactions. It is a very robust portal that is also highly configurable for the corporate to mirror its operational structure within the application.
To your question about what it means for the market, this is a groundbreaking product for the region because this is the first of its kind built with the latest technology. The Multibank portal concept is a rising movement which we are seeing in different continents and we are happy to be leading the movement in Africa.
Let’s talk about Trade-X, a trade finance software developed by Union Systems. What client problems were you trying to solve, and what has been the market response?
Most international trade finance systems offer generic international trade-based solutions. These foreign systems do not meet up to 40% of the bank’s requirements because of their lack of automation of the local trade process requirements. Nigeria has unique requirements as a result of our regulatory policies. CBN forms for instance are unique to Nigeria and are not captured in any foreign trade finance software.
At the time we developed Trade-X there was no out-of-box automation for the local regulatory trade finance processes. Trade-X came to automate all the local trade finance processes and address all regulatory requirements. The banks reacted positively to the launch of Trade-X because it was a core need for them. Most of them thought it was too good to be true.
Despite the solid skillbase and rich experience of indigenous technology firms like Union Systems, each year Nigerian companies and government agencies still spend billions in international licensing fees and paying foreign developers to create solutions for them. Why does this persist?
To some extent, the assertion is true however, we are seeing a rise in the adoption of indigenous software. Local companies are beginning to change, they are beginning to see reasons why they should buy indigenous applications. Some of these reasons include dedicated support that indigenous IT companies provide, highly skilled talent, etc. Nigerian developers are among the best globally which explains the skill migration our industry has been witnessing.
Having said that, I also understand that our industry still has some hurdles to cross professionally which impacts some people’s preference for foreign systems. Some Indigenous companies still need to step up professionally with how they present themselves and their products. These little branding issues matter a lot. Do they have standards in the way they develop their products and deliver their service, can they benchmark against international standards? these are things local companies look for that foreign companies give to them. So local companies that meet these standards can compete on the same level as international companies.
A number of Nigerian fintech companies, especially in the payments processing space, have attracted international attention and funding. In fact, many aspiring fintech founders consider it a source of pride and validation. Yet, very few of these companies are likely to seek capital from the Nigerian Stock Exchange unlike in the past when a listing on the bourse was the ultimate badge of success. Can you explain why this change in attitude has happened, and what it portends for Nigeria?
There are several reasons for the preference for foreign investors and top on that list is risk appetite. Foreign investors have more risk appetite and a better grasp of the workings of the software industry, unlike local investors who are quite skeptical and expect immediate returns. Foreign investors offer better investments and understand how to properly value a software company.
I will also attribute the change in attitude like you rightly mentioned to the rise of new industries and companies. Some years ago, fintech was not even a word that was globally acknowledged and so with technological advancement and the need for automation in financial services, there is a level playing field that has been presented. If a payment company is doing as well as its counterpart in Silicon Valley, there is no reason why they should notattract the same level of funding. People’s taste for success has changed. Being praised in Nigeria is no longer enough, being able to build a company from the ground up and be recognized internationally enough to attract credible funding is a cloak of pride that our industry is wearing boldly.
The implication of these positive funding stories is two prongs. On one end, we are putting Nigeria on the map and elevating the software industry but on the other hand, we run the risk of capital and skill flight. If a Nigerian investor puts 1million dollars in a startup we are sure the money will remain in our economy vs the same amount being put in by a foreign investor.
But there is also the problem of economic and political instability in Nigeria which pushes founders to seek out foreign investments instead of listing on our stock exchange.
In recent years, there has been a growing call for more female participation in tech from coding expertise to senior managerial positions. Internally, how is Union Systems putting these aspirations into practice among its workforce?
We have been more intentional in our recruitment of more women across departments and levels in the organization to improve our team dynamics. We have women in both senior and middle-level management at Union Systems. One of our recruitment focus is to add more female developers to our development team.
Big Data, and blockchain are big issues of the day with many promised benefits for businesses and governments in Africa. However, unlike mobile payments and phones, the benefits are not immediately clear to the man on the street or most executives and government functionaries for that matter. What is your assessment of the opportunity and what role would Union Systems play in helping clients seize it?
Big data and blockchain are very strategic technologies which like you said may seem vague to an average man on the street. Big data refers to data that is too large, complex, and grows exponentially that the traditional relational database management systems cannot process. Social media data is a relatable example of big data. Blockchain on the other hand is a distributed ledger that is highly decentralized with heavy-duty encryption and used for the exchange of value like money, securities, intellectual property, etc. I love this description by MIT Technology Review, “The whole point of using a blockchain is to let people, in particular, people who don’t trust one another share valuable data in a secure, tamperproof way.” This does not imply that asides from blockchain there are no other ways people can do business securely, however, blockchain presents a new world order.
Like any innovative technology, there are lots of benefits to big data and blockchain. With big data, companies can analyze consumer patterns and make inferences which helps them improve customer service, efficiency and make better decisions. The use case for Blockchain especially in International trade which is where we operate is evident. Blockchain can be applied in enterprise applications such as Supply chain finance, international trade finance, FX settlement, KYC to mention a few. Blockchain is being positioned to be the new frontier for the facilitation of trade finance among trade stakeholders promoting transparency, paperless trade, and fraud mitigation and we are aligning ourselves as a company to lead this movement in Africa.
As we enter the second quarter of 2021 with a barely-there recovery from the country’s second recession in 4 years and the second COVID-19 wave, is there room for optimism? What is your outlook for the rest of the year?
There is room for optimism especially in our industry which has been recording growth because more companies have begun to prioritize automation. We also hope that the strides being recorded with the vaccines will ease the burden of the pandemic globally.
For us as a company, this is an exciting year because we have mind-blowing products we will be releasing during the year. We are also actively hiring and expanding our staff strength as we anticipate growth this year.
This interview was originally publish on BusinessDay on Apr 20, 2021