Ending Ethiopia’s cash commerce

Moges Geleta, CEO of PSS
Moges Geleta, CEO of PSS

PSS is a consortium owned by six private banks: Awash, Nib, United, Berhan, Addis, and the Cooperative Bank of Oromia. One of the major visions of the institution is to move Ethiopia from a cash based economy to more people utilizing an electronic payment system, this has involved a lot of investment in technology to make this happen.

Capital’s Muluken Yewondwossen spoke to Moges Geleta, PSS CEO about the company’s performance and its plan in the IT sector

Capital: How was this company established?

Moges Geleta: PSS was first established by three private banks: Awash International Bank, United Bank and Nib International Bank. The idea when it was first established was it would be better for the three banks to invest in just one set of infrastructure to manage ATM machines instead of three separate systems.

In 2010, a single payment system was established. It took a lot of work,  the business license, permission from of the National Bank of  Ethiopia, the right technology, evaluations and so on, it took a bit of time, that’s is why the company actually went fully operational in 2012, two years after its establishment.

During the operational years, we added three banks to the group which are Berhan International Bank, Addis International Bank and the Cooperative Bank of Oromia. So currently, six banks use our infrastructure to provide ATM and POS services to customers.

Capital: How is the company divided between the three banks?

Moges: The three establishing banks all have equal share, the other three banks were given some amount of share from the founding banks that is how they joined in. But the founding banks still hold majority share.

To join PSS there are two options; one is to become a shareholder and the other is to just buy the service and use it. The three banks that joined the company later on, what they did was bought small shares and used the service.

Capital: Looking at it from a cost cutting perspective, how effective has it been to create a joint investment instead of individual investment?

Moges: From a cost cutting point of view, the banks save a lot of money, even beyond that it also makes the operational cost minimal for the banks.

Capital: What was the initial capital and the current capital of the company?

Moges: It was established with 30 million birr and now that has grown to 160 million, out of this its paid-up capital is over 149 million birr.

Capital: As an IT company, do you build your own software?

Moges: Yes, as an IT company we want to get involved in other related sectors as well. During last year’s General Assembly, we decided to work on additional IT services and we have been working to get the required license, this year we will start working on new projects.

Capital: What kind of products are you planning to work on? The government is focusing on investment in IT Parks; do you have any plans to get involved in that?

Moges: When we say that we want to be a big tech company it means we want to provide many different tech services. We have already requested the allocation of land in the ICT Park so that we can build our own facility there. If we do get the land, we expect to be one of the major IT companies within the ICT Park.

Our plan is not just to work in Ethiopia, but also outsource to other countries in East Africa and beyond. Another thing we are doing has to do with network system development, currently we can only connect ATM and POS machines but we can’t import them and sell them here. That is another area we want to get involved in.

We are also trying to get into cheque printing and personalizing; we have already done the feasibility study on this and hope to start work.

Capital: Currently the global market trend is more related with IT. Do you plan on getting involved in not just capital transactions but also item transactions?

Moges: The IT sector is very wide. When we say we want to expand our range of products, there will be the focus on banks as a third party payment processer; we are certified by Visa, MasterCard and Union Pay.

There is also such a thing as Payment Card Industry Data Security Standard (PCIDSS), it is a standard that a payment processer has to meet, we have that certification, and we are the only one to have gotten this certification in the country.

Like I mentioned before, besides our plan to penetrate other markets in East Africa and beyond we also want to grow our range of innovative and problem solving products for the country and outside market.

Capital: Do you have plans to partner up with foreign investors?

Moges: With regards to payment processing, as a financial institution which PSS is, we cannot work with foreign companies as per the country’s law.

Capital: There is another institution as well called Eth-Switch, do you both provide similar services and products and what does the market share look like?

Moges: The fact that Eth-Switch has come to the market has been really good for us. Our income comes from transactions, so the more transactions go up, the more income we get. Because of Eth-Switch we are getting customers using our networks so the transaction has gone up. Previously we could only get customers from six banks which are the members of PSS but now we get customers from 17 other banks as well. This has been a big opportunity for us.

Capital: Are there banks or even individuals that want to join PSS currently?

Moges: That is something that needs to be decided by the shareholders during the General Assembly.

Capital: What does your current performance look like in general?

Moges: Our performance is really good. Our business is a volume business, whenever terminals and transactions increase, we generate more income.

Looking at last year’s transactions and comparing them to the year before, there is a 93 percent increase. This means that people are using more ATMs and POS services and Eth-Switch has also contributed the growth. In the next two to three years the volume is expected to grow in 100 and 200 percent.

Looking at the transaction volume in the year 2015/2016, it has grown by over 50 percent.

Capital: What about your profits?

Moges: When PSS was first established, it was not for profit but as a business entity, it shouldn’t be consuming its own capital and it should grow and get its own profit. So we do get profit; last year it was over three million birr and this year the profit is less than 3 million. The reason it went down has nothing to do with our performance but we have lowered our service fees to member banks because we don’t want to put pressure on them, we just want to work on service efficiency. So in some instances, we have decreased the fees up to 80 percent.

Capital: Currently how many machines do you have?

Moges: We have over 400 ATMs and over 800 POS across the country.

Capital: How many employees do you have and how many of those are IT professionals?

Moges: In the beginning you can say it was only one person, I was the only one. And then during the establishment we became a team of seven. Currently we have 34 employees. Out of this over 50 percent are IT professionals, some work in operations and others finance and administration.