The saying “Good people, great nation” truly captures the essence of Nigeria- also known as the land of hope and opportunity. It is a nation that promotes healthy business growth with vibrant people with friendly energy expressed through diverse creative expressions. The development of the fintech industry in the past few years has been a shining star in the Nigerian economy, with the potential to shine brighter—even through the hurdles posed by the ongoing COVID-19 crisis. The sector has been gaining momentum, as blooming innovative start-ups take advantage of increased technology penetration and unmet demands by the traditional banking sector to seize market share.
Here is a detailed analysis of the Nigerian fintech market:
In the past three years, fintech investments in Nigeria grew by 197%. Between 2014- 2019, Nigeria’s sprawling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech start-ups in 2019 alone—second only to Kenya, which attracted $149 million. But since last year the declining dollar exchange rate for foreign investors from 307 nairas to 361 nairas between March and May has had a ripple effect for Nigerian fintech funding. Globally, fintech funding is drying up as investors shift to safer investments.
Population and other economic factors:
It is home to 200 million inhabitants, with the largest youth population and the 6th largest population in the world. The youth are feeding the increasing smartphone penetration, increase in online channel purchases, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to create the perfect recipe for a thriving fintech sector. On the other hand, 60 million people are without a bank account i.e., Approx. 40 % of the population is financially excluded.
People’s preferences and adoption:
In Nigeria, research suggests that access and convenience are the highest contributors to the adoption of fintech. As, 57 % of people who responded to the survey are prioritizing access and convenience over price and value.
The region has focused primarily on payments and consumer lending amongst all financial services for years. Payment solutions currently represent around 15 % of banking revenue streams in the country and continue to grow.
The role of referrals is also key in driving adoption to 55 percent of customers first heard about a fintech product through a friend—and that number rises for women.
Next – Actions to be considered for further growth in fintech in Nigeria:
Improve digital infrastructure:
The government could help improve and support digital infrastructure to enable fintech growth. This could include things like addressing the cost and quality of data and data access, promoting digital identity., etc.
The government has a pivotal role to play in the adoption of seamless and easy registration for digital IDs, which will make it simple for people receiving government relief payments. According to research from the McKinsey Global Institute, countries implementing digital ID could unlock value equivalent to 3 to 13 percent of GDP by 2030. A “good” digital ID can unlock access to a safe and secure digital world in the economic, social, and political realms. Good digital ID provides verification and authentication to a high degree of assurance, uniqueness, individual consent, protection of user privacy, and control over personal data. This can be a boon for individuals and societies as a whole if implemented correctly. The cost of customer onboarding reduces by 90% with the help of Digital Identity.
Accelerate financial inclusion:
Regulators could continue to roll out agent banking to boost financial services penetration across all parts of the country, increase efforts towards building financial literacy, and communicate the benefits of digital solutions. As 40% of the population is unbanked and a large chunk of the total population is credit invisible. All the financial institutions must leverage the alternate data for all the people with no credit history for lending purposes.
COVID-19 has accelerated changes in consumer behavior, with fintech positioned to fill the gap left by traditional banks and create new products and services that add value to consumers and support them during these testing times. A combination of the regulatory environment, and supportive infrastructure to push fintech forward will be necessary in making the necessary adjustments so that the sector can take advantage of tailwinds and fully realize the value at stake.
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Ayesha Kapoor is currently working with IDcentral (A Subex Company) as a growth Marketer. She is a post graduate in management from Symbiosis Institute of Digital and Telecom management with marketing as her majors. She is creative head who loves to read and explore different avenues in the field of Marketing, Branding and Advertising.