The rise and rise of FinTech firms on Nigeria’s financial landscape
Deploying technology to improve activities in finance and making financial services more accessible to the general public has changed how brand owners market their goods and services to consumers. And financial services, much like publishing, are made of information rather than concrete goods. Almost everybody knows how to download an app by which they can pay for goods and services directly from their smartphones and skip the whole checkout process.
It then follows that the financial industry is one of the most vulnerable to disruption by technology anywhere in the world. Like other countries, Nigeria has been adopting and deploying rapid advances in Financial Technology, FinTech. And more Nigerians have been relying on FinTech companies for speedy transactions. A sizable demographic use these companies to pay their bills, transfer cash, make various online dealings and even borrow money.
With the rapid advancement in internet technology and the proliferation of smartphones, FinTech companies consisting of both startups and established financial institutions have also been on the rise. A few examples of such startups are Paystack, Cowrywise, Piggybank.ng, Paga, KongaPay etc.
Marketing Edge findings reveal that the quality of companies and founders in the FinTech ecosystem projects a massive ROI potential and industry expansion if accorded the right marketing push and innovation.
Across the African continent, over $560million was reportedly invested in tech companies in 2017. Of the $114million reportedly raised by tech companies in Nigeria, 75% of it went to FinTechs in 2018. With the huge investment pumped into the sector and a great number of electronic transactions and FinTech startups springing up swiftly, the marketing geography looks quite auspicious.
However, enforcement of the Bank Secrecy Act and money transmission regulations represents an ongoing threat to FinTech companies. In response, the International Monetary Fund, IMF, and the World Bank jointly presented Bali Fintech Agenda on October 11, 2018 which consists of 12 policy elements acting as guidelines for various governments and central banking institutions to adopt and deploy ‘rapid advances in financial technology’.
The new Payment Service Provider, PSP, and Payment Service Bank, PSB, guidelines recently released by the Central Bank of Nigeria, CBN, as some of the regulatory requirements to operate in FinTech are in line with the World Bank and IMF Agenda.
Until the newly proposed PSP licensing structure, the Payment Solution Service Providers, PSSPs, along-side the Switching license has been the go-to license for players in the fintech space. And the players in this category typically have direct integration into the card schemes (Visa, Mastercard & Verve) and a deeper relationship with banks. A recent report claimed that only 7 companies have been granted this license in Nigeria. And Interswitch was named as one of them.
Nigeria’s FinTech landscape, however, is being revolutionalised by a new breed of digital disrupters. In 2018, some FinTech companies disclosed amazing corporate deals involving millions of dollars. Paystack, for instance, was able to attract both foreign and local investments to the tune of $8 million. Paystack is less than three years old, and already it has become one of the leading FinTech companies in Nigeria. Insider information hinted that the company was going to come up with a mobile app as 2019 continues to unfold. Founded in 2016, Paystack offers payment services to more than 17,000 businesses and is said to be responsible for more than 15% of all online payments that happen in Nigeria today, according to information made available in its website.
Cowrywise is another FinTech founded in 2017, which positions itself as a savings company. Between the time of its incorporation and the first half of 2018, the company claimed that it had processed more than $1.5 million worth of savings. It has launched an IOS mobile app into the digital space.
Reports also have it that Piggybank.ng had secured some $1.1 million worth of seed funding from a group of homegrown investors in the early part of 2018. It was founded in 2016, and positions as a mobile savings platform which targets young people both within and outside Nigeria.
Paga, whose business model entails money transfer, is the last of the three Nigerian FinTech companies that were ranked among the world’s fastest growing startups in 2018 by CB Insights. It was founded in early 2009.
Meanwhile, KongaPay remains one of the oldest companies in Nigeria. It is useful for payment of goods and services online. It can be used for shopping both locally and internationally as it is affiliated with major banks in Nigeria. Payments on KongaPay are made via Master card, Verve Card and Visa Card. KongaPay and Paga are some of the licensed and active mobile money operators among many others.
But does 2019 really promise to be a good year for stakeholders and potential players in the FinTech universe? The CBN was quoted to have said in a report that it still stands by its commitment to ensuring that more Nigerians are financially included as it recognises the significant role already being played by FinTechs in this regard. To this effect, the apex bank has backtracked on an earlier stringent regulatory rule which required FinTechs to have costly minimum capital bases.
The report also said that PSB license would allow non-bank institutions such as telcos, retailers, super agents, and other similar stakeholders to offer basic financial services such as acceptance of deposit, payment and remittance, operate electronic wallets, issue debit and prepaid cards amongst other services.
In 2018, MTN Nigeria and Airtel had announced plans to delve into mobile money services with the former expressing hopes that it would get the CBN’s approval and launch in the second quarter of 2019. The PSB license will, however, not allow the telcos offer lending services and participate in the foreign exchange market.
In the report, the tier one lender said the capacity of FinTech companies to gain a significant market share would be limited in the absence of collaborations.
However, a recent report by a group of leading banks said the decision of the CBN to license telcos for payment services was a threat to banks operating in the country. In its report, Nigeria Macro-Economic and Banking Sector Themes for 2019, the banks said the payment service banks, PSBs, would compete with commercial banks for earnings. On the other hand, describing the move as a positive for customers, the report said it would improve customer service and digitalisation of banking services while enhancing financial inclusion.
The first fully digital bank in Nigeria (Alat) was launched earlier this year by a Nigerian Bank. It is expected that many of these companies have plans to become a fully digital bank as they grow. And the key Players are Alat and Kudimoney.
Having X-rayed Nigeria’s FinTec ecosystem, Marketing Edge forecasts a vibrant growth in the sector. For example, if a leading telco such as MTN, which was recently listed on NSE, implements its plan to obtain the PSB license and launches its mobile money service before the end of Q2 2019, which is about a month away, the FinTech space will not be the same again. Meanwhile, despite the promise the sector holds, no significant success will be sustained without constant invention and innovation in brand marketing and positioning.
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