On a warm Wednesday afternoon, I was ushered into the office of REACH somewhere in the heart of Lagos Island. Before getting down to the business of the day, I got talking with Tope (not real name).
REACH, Tope’s employers, helps individuals better understand their finances so her brilliance as she spoke about finance was not surprising.
Interestingly, Tope said in the past she was unable to keep proper track of her finances and couldn’t ask friends for help because she’d been stereotyped as a strong, independent lady.
“They couldn’t bear the thought that I actually got broke quite often,” she noted.
It was a trying period for Tope whose saving and investment plans took a big hit. However, what followed was a complete rebirth, and Tope is now savvy about money.
Having joined her current company a year and some months ago, Tope discovered how to better manage her finances.
People work hard for their money. Some probably do have intentions to save for a secure retirement or meet some investment goals. But like Tope, many working-class people have challenges keeping track of their cash flow.
Considering also that Africa is a region where numerous factors — economic, social, and psychological — hinder financial freedom, real solutions seemed out of sight.
Overcoming the financial freedom challenge
Modern-day society is more complex than ever before with great technological advancements being made. How else can one explain the use of big data and analytics to track people’s spending as REACH, a company founded by JR Kanu, is doing?
REACH has a mission to help people understand their finances through a system called transaction informatics, which easily interprets financial transactions and presents information in a useful manner.
A lot of people spend money on financial consultants or use spreadsheets to compute their expenses. As opposed to costly and time-consuming methods, REACH allows automatic visual breakdown and tracking of income and expenses, real-time insight on where the money goes.
The algorithm relies on the direct transaction notification SMS users receive, with which it categorises monthly expenses in real-time.
Periodically — daily, weekly, monthly or yearly — users can see their net worth from a sustenance score which takes into consideration information such as income size, marital status, number of dependents, and individual lifestyles.
“If two people in the same income bracket have different sustenance scores, then something is wrong with one person’s expenditure,” JR said. While illustrating the importance of REACH, he stated, “Life is too unpredictable not to know where one’s money is going. And financial health and wellbeing are things people should not joke with if they want peace of mind.”
Interestingly, Tope is one of 50,000 people within REACH’s network able to automatically track their income and expenses and multiply their cash.
Surviving as a business
Systems are known to allow for proper management, and it is apparent REACH is promising one that guarantees smarter ways to manage money through big data and analytics. But an underlying fact is that REACH is a for-profit business and, as such, is expected to generate revenue.
Since access to the platform is free, REACH has turned towards partnership with organisations. It has a lending operation that allows individuals to borrow money at a 5% interest rate monthly through Sterling Bank. Over ₦30 million worth of microloans have been disbursed to users of the platform.
“Sterling gave us a pilot amount of ₦10 million, and we have now grown that 3x to over 30M naira,” affirms JR.
Another partnership, with AXA Mansard, enables REACH users to have access to financial instruments that return certain interest rates on money saved.
In both scenarios, REACH earns a stipulated amount as a management fee. The final revenue opportunity comes from conducting market research and surveys for companies.
Blue and red ocean dilemma
Human history has consistently provided one clue as to how countries and individuals can become rich, and that is through savings. This is justification enough for the many platforms promising convenient savings. But REACH is balking at the usual practice with a service-focused mainly on expenditure.
“There are always spaces for people to provide something unique. And REACH’s unique proposition is that people understand what’s going on with their finances, get wisdom from it, and hope the wisdom can help them to know how much to save and how much to borrow,” says JR.
Would this seemingly blue ocean strategy guarantee a clear run? Since REACH began monetising, it has generated at least $100,000 from facilitating over two million transactions. However, in JR’s humble projections, any shot at profitability would take another 18 months by which time the startup hopes to have expanded into francophone Africa countries. Already, the startup has made a bold expansion into Ghana and Kenya, as JR is optimistic about the potential of REACH in these markets.
“When I moved back to Nigeria after completing MBA in the US, the idea of savings came to me at first and we even launched a beta version of it. But having seen what’s on the ground, I’ve been asking myself, ‘Where is the money?’ Because of this, we did a pivot to help people track their expenses and invariably understand where their money is going,” JR explains.
REACH ran on JR’s for six months before receiving an angel round from friends and family members that made it run for another 21 months. JR admits though that he’s had support from outside Nigeria.
“The money we’ve raised has come through people who knew us from outside the country. I am aware of how lucky I am to have a network outside Nigeria. Ours would have become a case of a good product not being created because there wasn’t a clear money-making line of sight at the beginning.”
Although REACH is exploring other types of revenue opportunities, it is still considering fundraising to help in the journey across more cities in Africa (especially francophone) and improve its ability to enable people to get financial services either through more credit, insurance, or savings products.
As a Pan-African company, REACH believes in the promise of Africa and what can be done when more people break the chains of financial confusion.