By Adetokunbo Abiola
Last week, Payday, a Pan-African financial technology solution, raised one million dollars to build out what they believe will be the “PayPal” for Africa.
Nigeria’s Favour Ori, CEO of Payday, founded the solution in May 2021 and kicked off its beta test in June 2021 with a cold launch in July. Within three weeks of launch, Payday successfully processed lots of money in transactions. .
Banking in Nigeria remains an attractive sector, with over $9 billion in value pools, but despite high levels of competition, the vast majority of Nigerians are underserved. Many customers lack access to services, especially in rural areas, confront issues of affordability and poor user experience, all contributing to the frustration they experience right across the customer spectrum.
This created an opening that fintechs have been quick to take advantage of, with many stepping up to develop propositions across the value chain to address pain points in affordable payments, quick loans, and flexible savings and investments, among others.
According to a Frost and Sullivan report on the Nigerian Fintech operation, ‘Nigeria’s fintech revenue is expected to reach US$543.3 million in 2022.’
Founded in 2016, Flutterwave operates as a payment start-up. It completes payment services from more than 68 online payment gateways in Nigeria. Since inception Flutterwave claims to have processed lots of money in payments and millions of transactions across over 33 African countries where it currently operates.
Flutterwave recently entered the unicorn league after attracting significant investment from experienced FinTech investors. The set up provides technology, infrastructure and services to allow Africans acknowledge and process payments on different channels.
A youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments combine to create the perfect recipe for groups striking for affordable payments, quick loans, an flexible savings in a bid to attract underserved Nigerians. Nigeria is now home to over 200 fintech standalones, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million.
The founder/chairman of Zenith Bank Plc, Mr. Jim Ovia, said: “with the saturation of the mobile phone market in Nigeria and the advent of Financial Technology startups (Fintech) in the financial services industry, the Nigerian polity has witnessed higher financial inclusion amongst the underbanked and unbanked.”
PayStack is among the top four FinTech set ups in Nigeria, founded in 2015 by Shola Akinlade and Ezra Olubi. Paystack positions itself as a growth engine for innovative financial solutions, facilitating affordable payments and flexible savings.
FinTech companies stepped into the country at the same time that the internet also began to gain steady prominence. Before 2005, banks monopolised the financial sector, focusing on profit maximization in delivering their financial services, with no one really deeply caring about underserved Nigerians. Banking was rigorous and rigid, but efficient. But the situation differs with Fintech institutions, which are widely accepted because of the solutions to facilitate payments, collections, transfers, cash withdrawals, lending, and so on. FinTech set ups in Nigeria are set to be on a constant roll, bringing banking closer to the grassroots and making financial services accessible to the unbanked.
Piggyvest initially launched as an online savings platform in Nigeria. The platform empowers savers to put away funds that they would prefer not to withdraw effectively. Flex Dollar, another feature of Piggyvest, enables you to save in dollars, earn interest and transfer dollar to any other user on PiggyVest. Interswitch, headquartered in Lagos, integrates digital payments. It was founded in 2002 by Mitchell Elegbe. Visa in November 2019 invested $200 million and will recoup 20% stake from the company which is valued at no less than $1 billion. Paga was founded in 2009 by Tayo Oviosu but launched in 2011. It acts as a mobile wallet where customers perform transactions on their mobile devices.
Interswitch founder, Mr Mitchell Elegbe, said the Fintech sector is booming because everybody wants to be connected and they are using digital technology to solve problems, adding that, this growth will continue beyond the pandemic.
Still challenges exist for Fintech companies. Under the Guidelines for Mobile Money Services in Nigeria, anyone applying for a mobile money license from the CBN must provide evidence of having a minimum of two billion naira as its shareholders’ funds, or roughly seven million dollars and serves as a huge discouragement to FinTech startups from applying for a mobile money license.
In addition, the CBN Guidelines for Mobile Money Services in Nigeria stipulate that mobile money services can either be bank-led or non-bank Led.. Although the guideline permits the integration, the CBN requires all financial solution providers to be licensed. The CBN often fines the licensed mobile money operators for integrating its platform with an unlicensed financial solutions provider.
Despite the innovative products offered by FinTech st ups, customers prefer to conduct financial transactions with Nigerian banks for cock-sure payments, loans, and savings.
The challenges symbolize problems typical of what e-commerce merchants and FinTech companies alike go through in doing business on a daily basis. Still, the ecosystem provides a unique opportunity to promote financial inclusion in the country, whilst enabling the CBN reach its goal of reducing the percentage of unbanked persons from 46% to 20% by 2020.
To achieve this, experts say it is important for the CBN to realize that in playing its role of regulating the space, it must continuously review it policies towards enabling the ecosystem blossom. Law enforcement agencies, particularly the Police, also need a thorough understanding of how FinTech and e-commerce work in order to enable them conduct investigations properly and not stifle business in case of disputes.