Finance Psyche

Two decades ago, Fintech was a concept known to only a few individuals in Nigeria. As of 2019, the value of investments made in fintech companies stood at over $460 million. The growth seems explosive. However, the fintech industry grew at that rate because it addressed the vital problems that banking organizations and the financial services industry had overlooked for a long time. 

Nigerians with active bank accounts often encounter poor user experience, lack of transparency, slow response time to complaints, and a host of other frustrating problems. SME owners face even worse problems as the interest rates on bank loans are so unfavourable that the notion of acquiring loans is seldom among their fund-raising options. 

Fintech companies leverage all these problems to offer customers a cheaper, user-friendly experience and the accessibility that Nigerians with active financial profiles demand from the institutions they bank with.

Fintech did not kick off in Nigeria until 2007 when the Central Bank of Nigeria (CBN) initiated the Payment Service Vision (PSV). CBN engineered this initiative to reduce the cost of producing money bills and facilitate easy transactions of services among Nigerian financial institutions. 

Via this PSV, fintech companies started to come onto the financial services scene. Interswitch (now worth around $1 billion in valuations), Etranzact, and Remitta were the most prominent fintech companies at the time. However, with the rise of the millennial population and the fast-paced development of access to digital devices, fintech companies found a broad market to tap into.

In 2020, McKinsey & Company reported there were over 200 fintech companies in Nigeria. In addition to this, the report shows that fintech companies raised over $600 million between 2014 and 2019. Recently, Flutterwave announced that it had raised about $170 million in investments. These elaborate on how fast the industry is growing and its potential to generate immense profits for investors and revolutionize the financial services sector.

The Best is Yet to Come: Massive Opportunities for Growth

Despite the massive growth that fintech start-ups have had in Nigeria, there are various untapped regions and opportunities. Here’s how future fintech companies and investors can widen their scope and take full advantage of the Nigerian market.

• One of the selling points of Fintech is that it allows individuals with no access to standard financial services (from banks) to enjoy financial services regardless. Currently, 36% of Nigerians do not have an active financial/bank account. Fintech companies can fill this gap by catering to their needs with more efficiency and transparency, all at a cheaper rate.
• According to Future Africa.com, Fintech companies have only impacted Southern Nigeria, and much of the focus lies on Lagos. However, other Southern cities like Benin, Ibadan, Abeokuta have become increasingly developed and are ripe for investment. Northern Nigeria is another vast sub-market for fintech companies to venture into. The competition is quite minor in this region, as only a few fintech companies like Opay have a presence there.
• A lot of Nigerian fintech companies are invested in transaction facilitation and payment services. However, few fintech companies provide lending services, savings services, and investment services to Nigerians. New fintech companies can establish themselves by catering to these other services.

Final Thoughts

Fintech companies in Nigeria have made remarkable progress in the Nigerian market, but, there is still a long way to go. In 2019, Fintech contributed only 1.25% of the proceeds from retail banking in Nigeria. These return rates could be much higher if investors and other potential Fintech CEOs realized that there are opportunities for growth despite the governmental, technical, and infrastructural challenges.