Nigerian fintechs: all about hype?

At the ongoing Seamless Payments Africa summit 2018, holding in Cape Town South Africa, the point was made that Nigerian financial technology (Fintech) start-ups received $300 million in 2017. It is a point that has been made severally by experts in a bid to highlight the pace of growth in the space.

There is little doubt that Fintech start-ups in Nigeria are some of the most popular on the African continent. In fact, in 2017, Disrupt Africa fintech report showed that a Nigerian start-up secured the most funding in a series of any startup in Africa.

Their growth has been made possible by the huge gaps in the banking system and the reluctance of many of the traditional players to adopt new technology. Fintech forerunners like Interswitch which has in less than 15 years become Africa’s largest payment provider, were set up to bridge some of these gaps.

Lack of infrastructures, millions of unbanked Nigerians, and low customer expectations have since morphed into opportunities for new players like Paga, Flutterwave, Paystack and many others. Traditional financial service institutions like commercial banks, microfinance banks and insurance firms are progressively embracing new technologies to stay relevant and ahead of the competition.

Apart from breeding successful local entrepreneurs, the space has increasingly attracted the attention of foreign investors and funders.

Big technology companies in the world are increasingly seeking opportunities to tap the market in Nigeria. Google, Facebook and Opera have well established interest in the market. Recently, Mastercard partnered Facebook Messenger to pilot its Masterpass QR in the country.

But many have asked how real the hype is?

According to Ericsson’s report titled, ‘Financial services for everyone’, 66 percent of the 1.2 billion people in Africa are unbanked and 46.1 of the 186 million people in Nigeria are unbanked with no access to formal financial services.

How far reaching has the fintech revolution been, particularly in “banking” the millions of unbanked Nigerians? In an interview in 2017, Tayo Ovioso, founder of Paga, said the core objective of his fintech firm was to capture the more than 70 million unbanked Nigerians. The company currently accounts for 60 percent of the payments market share with its more than 5 million customers. However, the same cannot be said about the rest of the firms.

There are challenges in the space ranging from designing a coherent regulatory framework that accommodates young players to lack of talent, business strategy, technology infrastructure and access to funding.

There is demand and there are original innovations but it will take more than individual efforts to build the space in Nigeria. There must be collaboration among stakeholders and government buy-in in the space.