In 2019, the Nigeria fintech industry recorded a significant stride in the financial space with innovative solutions that further disrupted and redefined the ecosystem.
The industry recorded massive growth in terms of investment, innovations and improved in financial services.
Their operations have continued to redefine banking operations beyond the brick and mortar and deepened national financial inclusion which aimed at bringing the excluded and the underserved and unbanked into the financial net.
Fintech startups have grown exponentially with varying digital innovation to provide banking solutions, all of which created huge market for the sector in 2019. According to the Central Bank of Nigeria, the fintech industry received over $400 million as an investment in 2019.
The CBN Governor, Godwin Emefiele, explained that the investment attracted was part of the initiatives to drive financial inclusion in the banking sector.
He said, “In an effort to build a more inclusive financial system and to improve the efficacy of monetary policy tools, we have provided super-agent licenses, as well as Payment Service Bank licenses to telecommunications and fintech companies.
“These measures are aiding in the development of robust payment infrastructure and an expansion of agent locations across the country. As a result of our policy measures, in 2019, over $400 million have been invested in fintech companies focused on supporting improved payment services in Nigeria.”
Nigerian fintech startups in the first half of 2019 have received $185m as the ecosystem continues to show its relevance.
The funding rounds, which ranged from pre-seed, seed stage, Series A to C funding, debt financing, grants to angel investment, were used by most of the start-ups to expand their operations to other markets and, in some cases, develop new products.
In February, TeamApt, a financial technology company that provides digital solutions and payment infrastructure to financial institutions received $5.5m Series A fund from a number of investors led by a Nigerian venture capital the company, Quantum Capital Partners.
In April, leading lendtech firm, Branch International raised $170 million, one of the largest Series C funding rounds ever raised by an Africa-focused startup.
EazyChange, a transport payment solution start-up, got $10,000 at a Wema Bank-sponsored hackathons in March while Carbon a lending platform that offers loans to Nigerians in March 2019 got $5m debt facility.
In June, fintech firms, Asusu, Fint, Trove, Tsaron and Ogaranya received a total of N18m ($50,072) from ARM Labs in Nigeria.
The second half of 2019 witnessed more investment than the first half with the fintech industry receiving about $360 million dollars in November 2019 alone.
Visa Invest $1billion in Interswitch
In November, Visa, a global payment platform invested $200 million dollars in Nigerian digital payments firm, Interswitch, which made the e-payment firm reached a unicorn status with over $1 billion valuations.
Visa will join Helios Investment Partners, TA Associates and IFC as the primary shareholders in Interswitch. Founded in 2002 by Nigerian entrepreneur Mitchell Elegbe, Interswitch also owns Verve – the largest domestic debit card scheme in Africa – and Quickteller, a consumer payments platform that enables money transfers, bill payments and mobile and internet air time purchases.
Elgebe has said expanding outside Nigeria to elsewhere in sub-Saharan Africa is the main aim.
Quickteller one of Interswitch payment platform, processed over 42 million transactions monthly as of 31 July – the equivalent of more than 560 billion naira ($1.82 billion).
Opay Chinese Investment
In November 2019, OPay announced it has raised $120 million Series B funding from a group of Chinese investors. The company earlier raised $50 million in July.
Originally founded and incubated by Opera, OPay has grown from a payments company to becoming a super app.
In addition to its wallets and payment services, the company operates a bike hailing service (ORide), a food delivery service (OFood) and wealth management solution (OWealth). In Nigeria, it operates Opera’s lending service, OKash.
PalmPay, a consumer-oriented payments product went live in November with a $40 million seed round led by Africa’s biggest mobile-phone seller, China’s Transsion.
The startup was upfront about its ambitions, stating in a company release, its goals to become “Africa’s largest financial services platform.”
To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno in Africa, for an estimated reach of 20 million phones.
Opay recently told Fintech Africa that it presently has over 200, 000 Agents based in the agency banking as at December 2019 and has expanded to 21 states in Nigeria.
2020 Challenges and Prospects
Despite the significant impact that fintech recorded in 2019, the prevailing financial exclusion still results in low access to complex financial products for the masses.
According to industry watchers, Nigeria’s significantly under-tapped digital payments industry is poised for significant growth over the next five years which more fintech firms can explore for opportunities and closing of the huge financial gap.
A myriad of factors across industry fundamentals, positive country demographics and regulatory support have formed the base of expected accelerated growth for the fintech industry in Nigeria.
This expectation has received significant attention from investors which have led to significant investments as existing players look to position for future growth.
The central point in Nigeria’s financial innovations is the fact that ‘’fintech cannot do without banks and banks cannot do without fintech’’. Strategic partnership opens collaborative opportunities that can maintain and sustain business growth.
According to Tunde Kehinde, Lidya co-founder, fintech startups and traditional micro-lenders need to collaborate more in order to deliver superior service to consumers.
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In 2020, fintech and banks need a strategic partnership for customer acquisition and retention.
One other issue facing fintech is ‘’trust’’ as a consumer only engage platforms that are safe, secure, and transparent.
In order to build a long-lasting trust, fintech companies should collaborate with established aggregators or players to effectively build customer trust and customer base and attract more investment.
For the fintech industry to optimally increase their base and acceptability there’s need for the stakeholders including the regulator, fintechs, banks and other major players to come together for the right policy and regulation that will help to scale fintech businesses and build a strong financial system that will bring more underbanked and the unbanked into the financial net.