The Nigerian Fintech Disruption – What’s in it for You?
By Our Reporters
First of all, who or what is fintech?
It sounds like one of those words that suddenly get on everyone’s lips, you never know when and where they sneaked into the vocabulary, but you just join everyone else and start using them.
Fintech is one such a word.
In this case there’s even a cue to decipher it. A combination of two things: finance and technology, actually financial technology. In other words, it’s an attempt to describe some of the developments that have emerged from the convergence of digital technology and the management of finance and financial products.
In reality, it’s a broad range of activities essentially underlined by how they use digital technology as the backbone to provide services including payments, money transfers, mobile banking, mobile money, insurance, transport and logistics, asset and wealth management, among others.
The Central Bank of Nigeria has set guidelines for the operation of these companies as part of its push to expand financial inclusion by bringing in the mass of unbanked Nigerians into the financial system. The ubiquity of phone networks have enabled even more flexibility and mobility to old brick-and-mortar approaches to financial transactions. Those that are licensed then get access to the Nigerian Interbank Settlement System, the main switching infrastructure for the settlement of digital payments in the country.
Pioneers in this segment include companies like Interswitch, which operates the Quickteller online-payments platform and also issues the Verve cards. In recent years Interswitch has extended its services to providing short-term loans to subscribers. Another early starter in this area is Etranzact, which offers card-payment services in collaboration with some banks. They have now been joined by newcomers including Flutterwave and Paystacks.
After the initial trickle of companies, more have streamed in, with a Nigerian terrain that is now considerably diversified in terms of the services offered. In addition to the early companies that merely provided gateways for payments, there are now mobile-money and digital-banking services, brokerages aiding people to buy international securities, micro-insurance providers, wealth management and ride-hailing services.
Even the traditional banks have not been left out, as most have introduced agent banking, a system which relies on the near ubiquity of mobile-phone networks, to decentralized basic banking services to vendors who operate with point-of-sale machines. Nor have the telecommunications companies been left out, with MTN, for instance introducing its mobile-money service, Mo-mo and Airtel recently acquiring the licence to run a payments service..
This report takes a look at the leading fintech companies in Nigeria, identifying the important areas where they’ve made an impact. The trends that have emerged include those that provide payment and money transfer services, and those that offer digital banking, wealth management and brokerage services, and other financial products that would traditionally be offered by brick and mortar banks and insurance companies. Some of the fintech companies have also veered into other sectors, including the provision of transport and logistic services.
It’s in the provision of payment solutions that fintech first emerged in Nigeria, with Interswitch (Quickteller) among the pioneers. Concurrently a number of banks did attempt to deploy digital technology in payments, teaming up with services such as Western Union and MoneyGram to serve as platforms for diaspora remittances. The payment cards issued by Interswitch, including the Verve cards, went on to dominate digital payments in Nigeria for years.
While Etranzact provided mild competition to Interswitch for years, there has been a surge of new startups in recent years playing similar roles, including companies such as Paga, Flutterwave, Paystack and Opay.
Efforts to reach more people with insurance services have seen the establishment of a company such as Top Check Africa, which provides the consumer the ability to assess various insurance services right from their applications.Those operating in this segment have concentrated on providing micro-insurance in order to reach those that normally wouldn’t invest in traditional insurance.
Another set of fintech companies offer loans and credit to customers tailored so that they address the needs of low income owners that wouldn’t get a hearing with the traditional banks. These include Renmoney, Funall, Carbon, Zedvance, Pay Connects, Branch and Page Financials, among others.
Some fintech companies have chosen to function more as wealth management firms, helping in capital mobilization by providing opportunities for savings and investment to their customers. Prominent operators in this segment are PiggyVest and CowryWise. Some operators in the credit space also offer fund management and investment services, namely Fundall and Zedvance.
A number of Nigerian fintech companies offer brokerage services, such as helping people buy stocks and make other investments in tradable financial instruments. Some have gone to provide the added service of giving their customers the opportunity to invest in international stock exchanges. The best known examples include Chaka and Bamboo.
Click here for the list of top fintech companies in Nigeria.