Digital banks: ALAT, Kuda, Rubies, Eyowo, V by VFD, and Sparkle compared

Daniel Iyanda -

After 75-year-old Wema bank launched ALAT in 2017, we have witnessed the launch of a digital bank every year since then.

This year alone two digital banks have been launched. Sparkle launched last week. Three months ago, VFD Microfinance Bank announced the launch of its digital banking app, V by VFD.

In 2019, QuCoon—a fintech and consulting firm—launched Rubies Digital Bank. Eyowo, which had been a mobile money service for two years, was also re-launched as a digital bank.

Similarly, an online savings and lending platform—Kudimoney—morphed into Kuda Bank in 2018. And because it was launched with no affiliations to a brick-and-mortar bank or an existing company, many tech enthusiasts argue that Kuda Bank is indeed Nigeria’s first digital bank. But Wema Bank earned the bragging rights of launching the first fully-digital bank in Nigeria and Africa with ALAT.

ALAT's launch was a tectonic shift in the Nigerian banking industry, which regards fintechs as roaches nibbling away its young customers. Wema Bank was 72 years old when it launched ALAT.

Methodology

In putting together this report, I compared six digital banks across three categories. The six digital banks are ALAT, Kuda, Rubies, Eyowo, V by VFD, and Sparkle. And the three categories are leadership, features, and user reviews or ratings.

But first, some housekeeping. Many people often confuse digital banks and digital banking with mobile banking and internet/online banking. So, let me make some distinction for the purpose of this report.

Digital banking is different from online/internet and mobile banking

A digital bank is a bank with no physical infrastructure. It neither has a banking hall nor a bank branch. Yet, it offers similar services to brick-and-mortar banks. Digital banks are also known as neobanks or internet-only banks.

The kind of banking provided by the neobanks is called digital banking. The entire banking process is online.

Whereas, online or internet banking is offered as a complementary solution by traditional banks. It is akin to mobile banking. Both internet and mobile banking allow customers to perform certain transactions remotely. Transactions such as payment of bills and interbank transfer.

The difference between internet and mobile banking is that while the former requires an internet connection, the latter doesn't. With USSD (Unstructured Supplementary Service Data) codes, customers can use mobile banking, offline.

Now, to the comparison of the six digital banks.

Leadership

Who are the people leading these digital banks?

About 300 people were asked who is more likely to succeed at building a digital bank. More than 70% of them said banking executives are more likely to succeed than tech executives.

Edem Kumodzi, the former Technology Director of Africa Foresight Group, commented on the poll. "You need a mix of both [groups]. I’m yet to see a digital bank with only one of the groups succeed", he said.

"[The] tech executive focuses on user experience, product development, and engineering management. [While the] banking executive focuses on the non-sexy but important parts because a digital bank is still a bank".

Some of the "non-sexy" parts are compliance, licensing, auditing, and anti-money laundering policies. Edem now works with Microsoft as a program manager.

"Leadership can not be just one person", Edem continued. "The CEO could be a tech executive or a former bank executive and they'll have a co-founder that complements them. [But if I must choose,] I’ll pick tech executive-led companies over banking executive-led companies".

The founders and CEOs of the six neobanks show that both tech and banking executives are driving digital banking in Nigeria.

ALAT and V were launched by banks. Sparkle was launched by a former bank CEO. Eyowo and Rubies were launched by tech companies. And Kuda Bank has two co-founders; one from the public sector and the other from the tech division of a bank.

Wema Bank, now 75-year-old, launched the first digital bank in Nigeria and Africa. Segun Oloketuyi, the MD/CEO whose focus on the use of technology culminated in the launch of ALAT, retired in September 2018. The new sheriff is Ademola Adebise, who served alongside Mr Oloketuyi as the Deputy MD. Mr Adebise has four years of experience in consulting and over 26 years of experience in banking.

Babs Ogundeyi (CEO) and Musty Mustapha (CTO) are the co-founders of Kuda Bank. Before Kuda, Babs was the Special Adviser on Finance to the former governor of Oyo state, Abiola Ajimobi. And Musty was a Senior Software Engineer at Stanbic IBTC Bank. As the only digital bank without connections to either an existing bank or company, Kuda Bank raised $1.6 million pre-seed funding in June 2019. That raise, by the way, is one of the highest pre-seed round funding received by a Nigerian fintech company. The next one that comes close to it is the $1 million pre-seed raise of Okra (which is not a digital bank). Now, back to the story.

The CEO of Rubies Digital Bank is Tope Olakunle. Before his current position, he was the CTO of QuCoon, the parent company of Rubies. Tope had also served as a tech executive at Ecobank and Citibank.

Similarly, Eyowo is led by a tech executive. Before becoming the CEO of Eyowo, Tomi Amao served as the Chief Technology and Innovation Officer of Softcom, Eyowo’s parent company.

V is the digital banking app for VFD Microfinance Bank, a six-year-old financial institution. The Managing Director of VFD Microfinance Bank is Azubike Emodi. He has over 10 years of experience in banking.

The CEO of Sparkle, Uzoma Dozie, is a classic banking executive, too. He served as the CEO of Diamond Bank until it was acquired by Access Bank.

Features

What is the USP of Sparkle, V by VFD, Rubies, Eyowo, Kuda, & ALAT?

The hallmarks of digital banks are simplicity, reliability, convenience, and personalisation. As challenger banks, neobanks provide a customisable banking experience.

All the digital banks in Nigeria tell customers that they will "be free" and "gain control of their finances", if they bank with them. The same features that make digital banks challengers to traditional banks are making it difficult for them to have product differentiation.

To most customers, all digital banks are the same.

Commenting on the launch of Sparkle after downloading the app, some users concluded that there is nothing new about the recently-launched digital bank. "I love the user interface and the animations, but there’s nothing new at all", Kareem said.

I poked the features of ALAT, Kuda, Eyowo, Rubies, V by VFD, and Sparkle to find their unique selling points (USP). The interactive table below reveals how they compare across 16 features.

Reviews and Ratings

Are digital banks' customers happy?

Eyowo's interface is the easiest to navigate, with most of its features within a thumb reach. The dark mode on Kuda is a winner too, and Rubies has the best animation.

The only peeve is that Rubies and Kuda can't be navigated with one hand on a smartphone that has 20:9 aspect ratio. For instance, "send money", "buy airtime" and "pay a bill" buttons are in the top half of the Kuda app. Out of the reach of a thumb.  (I fix it with by putting the phone in one-handed mode). Nonetheless, navigating Eyowo, Rubies and Kuda apps is bliss and breeze.

But I can't say the same thing about my experience with ALAT, Sparkle, and VFD digital banking app.

While it is easy to navigate, V's user interface is unpleasant. The app has no colour. Its term of use is not only incomplete but also riddled with errors. In short, it seems the app was hastily released.

There is nothing to see on Sparkle at the moment. Most of its features are "coming soon".

Surprisingly, the oldest digital bank in Nigeria is the dullest. ALAT is simply bloated and clumsy.

Of the six digital banks, ALAT is the most downloaded according to Google Play Store data. But they all have good reviews and rating on the Play Store and Apple App Store.

The ratings suggest customers are happy with the services they get from these challenger banks. But I recognize that reviews and ratings can be doctored. Companies can recruit brand ambassadors and solicit for good reviews from employees. So I scour for the bad and ugly reports from real users

I spoke with some Kuda, ALAT, Eyowo, Rubies, and V by VFD's users. Their peeve is that: Kuda's debit cards rarely work, ALAT is prone to failed transactions, and V's cashless withdrawal is hit-and-miss. The users of Rubies and Eyowo had little to complain about.

The Verdict

Which of the six digital banks is the best?

It is hard to say which of the six digital banks is the best. None of them has a complete suite of features. Although Eyowo and Rubies' users say they have a near-perfect experience, they are missing out on some features like free transfers and budgeting (Kuda and V by VFD). But in the scheme of things, ALAT does not seem to be a contender.