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Private Banking Syndicate Sidelines Zemen



Leikun Berhanu
Awash Bank
Berhanu Getaneh
United Bank
Amerga Kassa
NIB Bank
Ermyas Amelga
 Zemen Bank, sidelined.

Three private commercial banks - Awash, United and Nib - have sidelined the new kid on the bloc, Zemen Bank, from a consortium they have formed to start an integrated multi-channel banking system. They claim that including Zemen Bank would put them at a serious disadvantage, knowledgeable sources disclosed.

The three banks signed a memorandum of understanding (MoU) last Thursday, February 19, 2009, at Intercontinental Hotel to work on an integrated electronic banking system after having informed Zemen the previous night that it had been excluded from the business partnership, the sources said.

"It is a sad decision that we have to go our own separate ways," Ermyas Amelga, chief executive officer (CEO) of the single branch Zemen Bank, told Fortune, declining to comment further.

After more than two months of negotiations involving Awash, United, Nib and Zemen, the four banks initially agreed to sign the MoU on February 11, 2009. They later postponed it to last Wednesday. Their discussion on Tuesday night as to whether or not to embrace Zemen into their fold, that has a combined branch network of over 137 that would put all banks on an equal footing, culminated in the decision to exclude the new bank from the initial step to start an integrated system. The system includes a card payment system using a single switch.

But the signatories say the signing of the MoU was transferred to Thursday because Leikun Brehanu, president of Awash International Bank, was out of town.

Though surprised by its sudden drop from the consortium, Zemen is likely to start its own similar banking system months ahead of its sideliners.

"We will start the multi-channel banking system in about six to eight weeks," Ermyas told Fortune.   

With a preliminary estimated cost of 40 million Br, the three banks will install over 140 Automated Teller Machines (ATMs) and more than 340 points of sale (POSs) across the country in about six months time. When the integrated system goes operational, customers with payment cards from any of the banks can make transactions from any of these facilities. For instance, an account holder at any of the banks can withdraw cash from any of the integrated ATMs, regardless of which bank owns the particular vending machine.


That actually is the core point that made the three banks wary of including Zemen, sources said. With Zemen Bank having a single branch in Addis Abeba, and the three banks running theirs across the country, the former would be in an advantageous position to be accessed by a large number of service seekers sourcing from the three banks, but very distant from Zemen, the latter argues.

But the explanation given by the consultant firm in the integration process, eVentive LLC, a management consultant company headquartered in Chicago, Illinois, is different while Awash and Nib say that Zemen was not officially part of the deal right from the beginning.

"Based on the business model each bank applies and their current status in developing the multi-channel banking system, it would be fair for both parties if both Zemen and the consortium go their own ways," Yemiru Chanyalew, CEO and founder of eVentive, told Fortune.

The kind of customers Zemen and the other banks have is also another point considered in the process. The amount of deposit Zemen and the other banks require for a customer to open an account is also different. The five Birr minimum deposit required to open an account at Awash, for instance, jumps up to 25,000 Br at Zemen; this policy won the new bank a name as an elitist bank.

Nevertheless, the presidents of Nib and Awash have a different view.

"The consultant might have contacted Zemen," Amerga Kassa, president of Nib International Bank, told Fortune. "But it was only the three of us who have been discussing the integration."

Neither does Awash International Bank agree that Zemen was excluded because it is in a highly advantageous position.

"Since we came to the consortium, Zemen has not been part of the discussion," Leikun, president of Awash, told Fortune, also indicating that his bank joined the group late.

But these claims are strongly contested by managers at Zemen Bank.


"The consortium is something we had supported from the inception," Ermyas said in a press release Zemen Bank sent Fortune last Friday. "As a one branch bank strategy, our pace to build our customer touch point channels is a lot more aggressive and it is best for us to integrate and join the consortium once they are operational."

Yemiru supports his claim.

"eVentive has initiated the concept of integrating the banks' card payment system," Yemiru told Fortune. "Zemen was the first to accept the idea followed by Nib and United."

Last year, Zemen Bank entered into an agreement with eVentive for the procurement and installation of its IT system, and Harland Financial Solutions for the provision of Credit and Risk Management System software.

eVentive is a consulting firm exclusively focused on optimizing its clients' front office people by deploying and operating the Customer Relations Management (CRM) system. In partnership with United Systems Integrators (USI), it formed Offshoring 2.0 Technology Services Plc two years ago, with an initial capital of 20 million Br. Offshoring, which has opened the first software outsourcing facility in Addis Abeba, is 80pc owned by eVentive.

With its multi-channel banking services expected to start in weeks, Zemen claims it will provide a range of remote banking services, including ATMs, internet and telephone banking. These facilities enable clients to conduct transactions from their home, office, business premises, or other preferred locations without physically going to the bank.

Under the guidance of this technology company, the three banks will install their multi-channel banking system, which they branded Fettan ATM, to provide services to their combined 1.1 million customers. The three banks have already installed the infrastructure - core banking systems - to start card based payment system, according to Yemiru.

The ATMs to be installed will be branded under the respective names of the banks in the consortium, but will have a personalization engine to identify which bank the customer making the transaction on them is from. Whenever a customer inserts the card in to a 'Y' Bank branded ATM, the personalization engine displays a message that reads "Welcome to 'X' Bank", referring to the customer's own bank, according to Yemiru.

The three banks are, however, pioneered by Dashen Bank, one of the few earliest private commercial banks in Ethiopia, in starting the payment system, which it still dominates alone. Though the state-owned Commercial Bank of Ethiopia (CBE) was the second to initiate the technology and install ATMs in some areas, Wegagen Bank, another early private bank, has ensured that it is one step ahead of the giant CBE as it has been working on introducing the technology.

As the CBE continues to move at a snail's pace in its turnkey solution for Card Based Payment System, Wegagen Bank, on December 30, 2008, signed an agreement with Technology Associates (TA), a Kenyan based IT firm, through its local partner, Oratech Consulting, an Ethiopian technology company which is also partner to the US based Oracle, for the development of the solutions for the payment system and installation of a network of ATMs.

However, Dashen remains so far the sole player in the field of electronic banking since 2006. In the last Ethiopian fiscal year, Dashen generated close to 31 million dollars through its partnership with VISA, a little over a quarter of what the country earned from the export of flowers during the same period.

Established a little over a decade ago, with an initial capital of 50 million Br, Dashen Bank has achieved remarkable advances in its application of technology. Deploying close to 40 ATMs, the bank provides its clients with access to many of its 47 branches and four foreign exchange bureaus, including Awassa, Adama (Nazareth), Bahir Dar and Mekelle branches.

Dashen, a bank worth less than 10pc of CBE's capital, leads the industry in terms of harnessing this advanced banking system. This manoeuvre on the technological front enabled it to effectively snatch the pioneering role the CBE had maintained for over half a century, beginning in 1942.





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