DENIS KAREMA Fighting Fraud Through Innovation

Twenty eight-year-old Denis Karema, director and co-founder of Usalama Innovative Systems, is a zealous entrepreneur who is passionate about business and information technology. He speaks with EDNA GICOVI about his business plans and his revolutionary software that curbs ATM fraud – a first of it’s kind in Kenya.

Denis Karema says he started his first business at the age of 10. In a bid to motivate him and his brother to perform well in school, their mother promised a reward of Ksh100 to whoever brought home most improved grades at the end of term. Denis was an average performer but the carrot their mother hang was enough to motivate him to work hard. He came top in his class and his mother kept her promise. With one hundred bob in his pocket, his entrepreneurial spirit was born. He used the cash to buy wrestling stickers, which he sold to his classmates for five shillings each, making a handsome profit.

“I learnt that early age that money could easily be multiplied if one identified opportunities. I went out looking for different wrestling stickers, which my classmates could not resist buying. They used their pocket money to ‘enrich me’. Business was good. And of course I didn’t tell my mum that part of my time in school was being spent doing business,” says Denis.

He grew out of the wrestling sticker business, but his passion for entrepreneurship and turning passion into profit remained. He moved to become an IT professional and co-founded of Usalama Innovative Systems, a firm that develops innovative fraud reduction tools for use in commercial banks and financial institutions. He holds a Bachelor of Science degree in Computer Science from Kenyatta University and has previously worked at Bamburi Cement Limited as an IT engineer. He relinquished this position after two years to start a website and software development business.

After a few months into the business he got an offer to teach IT to postgraduate students at Makerere University in Uganda, an opportunity he grabbed with both hands. Working at the institution was a great experience for him. He loved working with his students and developing new ideas. He encouraged them to become innovators and start their own businesses once they left school, instead of waiting for employment opportunities. His first class graduated in June 2011 and despite the good package the institution was offering him; he decided to quit the job as his heart was in business. He returned back home and resumed his much-loved entrepreneurial path.

 Security through Usalama…

Dennis recalls overhearing a conversation in a coffee house that ignited in him a great business idea. He was seated close to a group of people who were discussing a funeral they had just attended of their friend who was carjacked and kidnapped by thugs who later murdered him after withdrawing all the money in his account using his ATM card. This conversation set Dennis thinking about rising crime rates in the country, especially those involving electronic money transfers and withdrawals. He wondered if there could be an IT solution to counter such crime. He set out to use his knowledge in IT to find a solution.

He did a lot of research on fraud, examined worldwide trends and read stories of great innovators who were trying to curb fraud in various ways. According to a Price Water Coopers (PwC) global economic crime survey, some countries including Kenya reported an increase of 40 per cent in fraud cases in 2011. Another report released by Deloitte Kenya the same year stated that commercial banks in Kenya were losing more than Ksh3 billion a year, a large percentage of these loses coming from ATM withdrawals.

This information gave Dennis the impetus to start working on a software solution to help curb ATM frauds. He saw a tool like that not only helping banks to cut their loses, but also giving people a sense of freedom and security while using ATM cards. He shared this idea with his college friend, Tolbert Omini, who had worked as a software developer for a bank for several years. He knew he could use his knowledge on banking systems to come up with a solution.

Tolbert saw great potential in the business idea and they together started Usalama Innovative Systems Limited in 2011. They immediately embarked on developing software that would enable banks limit the amount of money one could access through the ATM at any one time and any one day. This would reduce the exposure of ATM users to huge losses through crime and fraud.

This software provides the user with Usalama personal identification number (PIN), which is different from the original card PIN. Unlike the card PIN, which will shows your actual account balance, Usalama PIN shows a small balance, which is the only money you can withdraw. Customers are advised to use the Usalama PIN in case they become robbery victims. This product gives people confidence of carrying their ATM cards and not losing everything should they become robbery victims. It also helps banks curb loses through fraud.

The software also generates reports showing where and when the funds were withdrawn and this enables banks to detect fraud in real time and gives law enforcement authorities accurate information to respond to. The software also easily integrates into the core banking software without affecting the normal running of other banking applications. A bank can subscribe to the software and have clients pay a minimal annual fee. This software increases client security in the long run, as most commercial banks don’t compensate customers for funds lost through fraud.

Building the enterprise…

The software prototype was completed in October last year, patented and copyrighted. It was rolled out in January this year and is available for sale to commercial banks. Usalama Innovative Systems was ranked fifth by CIO East Africa, a business technology magazine, for excellence in innovation in 2011.

Denis and Tolbert have been engaged in extensive market research and have developed more products and formed partnerships with leading financial institutions. They were lucky to become part of Sinapis Group early this year, an international early stage accelerator for start-ups. This partnership has provided them with world-class leadership skills on managing their enterprise as well as given them access to seed capital to grow and expand their operations.

“Other products we have developed include those that reduce tax scheming and mobile money transfer fraud,” says Denis, adding that they are working on more. His vision for the company is to make it an industry leader in anti-fraud solutions. He hopes this will eventually lead to Kenya becoming a hub for anti-fraud solutions in Africa. The company has a staff of three and is looking to hire more people as it grows.

“Having a successful enterprise requires diligence, faith and a passion for what you do. As the co-founder and director of Usalama, I look for ways to steer the company to greater heights. Kenya is one of the highly ranked countries in bank fraud and this can only change when enterprises like ours devote resources to creating solutions that will consequently encourage spending and enable businesses to grow,” says Denis.

He has a strong desire to impact the market place and looks forward to Usalama going public in about five to 10 years, in addition to setting up his brand in the US and Europe. Denis was featured in the November 2012 issue of TIME magazine discussing the future of entrepreneurship in Kenya.

He attends Mavuno Church in Nairobi and proudly regards himself as a fearless influencer of society whose calling is to share the gospel in the market place. He strives to offer excellence in his company so that it becomes a statement of God’s amazing work through a willing vessel. He says that his family has also played an important role in enabling him take up the risky journey of being an entrepreneur.

“My mother and brother have been part of my entrepreneurship journey from the first day. They have invested in me in money and kind to enable me realise my dream,” he says. Denis is about to complete his Masters programme in International Business Management at the University of Nairobi.

Away from IT, he writes poetry and published an anthology of poetry in January this year titled: Stories, Poems and Words. This is available for purchase on amazon.com as an e-book. He looks forward to publishing an anthology every year and is already working on volume two. He is also part of a group of friends who run a feeding programme in Ruiru that provides lunch for 40 needy primary school children everyday and also mentors them.

“I’m not the centre of my life. I’m accountable to God in every aspect of my life,” says Denis in conclusion.