The Emergence and Rise of Fintechs in Nigeria
All About Fintech
Financial Technology, popularly known as ‘Fintech’, is the technological innovation brought about in the field of traditional financial services and the manner in which they are being delivered to the end customers. In recent years, fintech has penetrated most industries, changing the way people buy their food to how they manage personal finances and business transactions. In 2018 the fintech market worldwide stood at $127.66 billion, which has been estimated to grow to a staggering $309.98 billion in the year 2022.
Nigeria Fintech Market
In 2018, according to a report by Twinpine Networks, Nigeria was the most mobilized country in the world, with a penetration rate of 81%. To add to this, 55% of Nigeria’s population is estimated to be less than the age of 35 by the end of the year 2020. These factors have certainly provided a boost to the Nigerian fintech market. The current demographic is more receptive to the advancements in technology and the implementation of the same in their daily financial transactions.
Fintech in Nigeria is still learning and growing at a steady pace. There are roughly around 250 companies in Nigeria, offering these services. The Nigerian fintech market was valued at $153.1 million in the year 2017, and it is expected to grow to $543.3 million in the year 2022, according to Frost and Sullivan. Though the key players in the current market are big names in the government, banking, and telecom sector, this technological disruption has enabled the growth of fintech startups all across Nigeria.
Major Sectors of the Nigeria Fintech Landscape
- Payment sector
The Nigerian economy is primarily cash-based. The EDC (Enterprise Development Centre) of Pan African University, in the year 2013, stated 99.6% of the total financial transactions for goods and services were cash-based. This number has dropped to 95.3% in the year 2018.
Though the percentage of cashless transaction is significantly less, this should be looked at as an opportunity to scale the fintech market. With improving technology and service offerings, albeit slow, there is a shift being made towards cashless transactions.
Paystack, Flutterwave, GT Pay, Interswitch Webpay are some of the leading names in the Nigerian payment sector.
Traditional banks in Nigeria have started offering their services digitally, trying to woo customers to manage their savings and investments digitally. But, they are facing fierce competition from digital-only banks.
Kuda Bank, established in the year 2019, is a bank that exists solely on the digital platform. Carbon is another digital bank that has performed well in the Nigerian market.
Kuda, the only company to receive the banking license from the Nigerian Central Bank, raised $1.6 million in its pre-seed funding round. The payment platform Interswitch was valued at $1 billion after a minority stake was taken over by the finance giant Visa. OPay and PalmPay, two emerging fintech startups, have received $220 million by Chinese investors.
These examples go on to show the confidence of worldwide investors in the growing Nigeria Fintech market. It has also opened up a world of possibilities for small entrepreneurs, helping them take their business to the masses and keep growing with the help of technology.