Mapping Fintech in Nigeria (2019).

A map of the Nigerian fintech space as at 2019.

It is 2019 and there're over 123 million internet users in Nigeria. From 200,000  internet users in 2000. A 59,653% increase, that has created immense opportunities. Especially in the country's financial sector. In the same vein four million bank accounts were opened by Nigerians in 2019 alone. This in part is why there is a strong fintech race in Nigeria.

Brief Market Overview

Prior to 2000, cash was the undisputed king in the country. However, in the early 2000s,  that stronghold began to ebb away as Nigeria began to experience the emergence of digital banking. The country became rife with funds transfer solutions like Western union money transfer, money gram and Vigo express during this period. Meanwhile, there weren't any online real-time electronic payment systems at the time.

This changed in 2011 when NIP(NIBBS instant payments), a central(National) switch was created by NIBSS – Nigeria Inter-Bank Settlement System. Becoming the backbone for the development of digital banking solutions we see today in Nigeria. This central switch is the Nigerian financial industry’s preferred funds transfer platform. That guarantees instant value to the beneficiary. Having only started with two commercial banks participating. All the commercial banks, Micro-Finance banks (MFBs), and Mobile Money Operators (MMOs) now use NIP.

The number of fintechs in the continent also continues to increase by the quarter as more players enter the industry.

Investment in Fintech in Nigeria (Africa?)

In the month of November (2019) alone, $360 million has been invested in Nigerian fintechs. One-third of all the startup capital raised in Africa in 2018.

FinTech investment in Africa increased significantly from $198 million in 2014 to $800 million in 2016, as investors became increasingly attracted to the industry’s potential to tap into Africa’s huge unserved/underserved population. 

A total of $204.3 million worth of FinTech investments was secured in disclosed deals between 2010 and 2018 by 16 companies in Nigeria. By 2018, Fintech companies reportedly received 75% of the $114million raised by tech companies in Nigeria.

By Businessday

Classifying Fintech

A value proposition of fintech is an unbundled financial service. Where it takes on a single financial service that is usually included in a bank bundle and drill into it in the effort to produce it better. However, the landscape for fintechs is changing as some of its incumbents are adding more financial services to their initial service. The major and pioneer fintechs in Nigeria have reached a point where they have to rebundle financial services on their platforms. Not just because of the need to optimize value. But for the mere necessity to gain an edge, in an industry now filled with over 210-250 Fintech companies.

When a customer uses several different apps that overlap in their functions. The customer experience can become fragmented.

Fintechs can be grouped into two. Core fintechs and enabling fintechs.

Core fintechs provide delivery of financial solutions and services to both individuals and businesses while enabling fintechs are those that enable other businesses to provide financial services through a variety of different channels. 

Next, we take a look at the different segments Nigerian fintechs companies play in.

Payments

Payments can be divided into two categories. Offline and online payments.

For online payments. Consider companies like Paystack, Flutterwave, Payant, Payu and Quickteller (owned by Interswitch), and Remita. Also, consider Amplify for recurring payments and wallets, they were recently acquired by Carbon(Paylater).

For offline payments, consider Paga and Cellulant. Paystack also has some foothold in this space.

Banking

The banking sector has formidable fintechs in its space currently operating a banking as a service (Baas) model. These participating digital banks are Kudabank (Kudimoney), Dot, Eyowo, Alat( Bank-owned) and Piggyvest(Piggybank).

Lending

This is a very saturated space, where the bulk of Nigerian fintech players operate. For loans, the fintechs to consider are Carbon, Kwikmoney (now Migo), Lidya, Aella credit, Quick check. Also, consider Fint, Fair money, Palmcredit and Okash (Opay). Shecluded, a credit inclusion company for women is also a niche-player in this space.

WEALTH MANAGEMENT AND INVESTMENT

Piggyvest (Piggybank) was the pioneer fintech in this space. Started out as a digital savings company and morphed into a sort of digital bank. However soon enough Cowrywise joined in. Also, consider Investnow, I-invest, Rise (formerly Cashestate). Other interesting fintechs in the space are Trove, Chaka and Bamboo which play in the foreign stocks and investment options space. Fint is also in the dugout as a peer to peer lending marketplace.

CRYPTO

Crypto fintech is still a lowkey space in Nigeria. The companies playing in the space are Buycoins and Busha. Also consider Patricia, a gift card and bitcoin trading company. That just added a bank account number system feature to their platform. Allowing anyone with a Patricia account have a bank account that can be used for sending and receiving money.

Enabling Processes and Technology

A good example of an enabling fintech is Appzone, a financial technology solutions provider for financial institutions. Other companies that enable the provision of financial services are Teamapt and Onepipe.

CONCLUSION

While there seems to be a rebundling process ongoing in the fintech sector in Nigeria, the initial value proposition that fintechs were based on, won't go away. Because future fintechs will always kickoff as an unbundled service if they are to cause any kind of disruption.

With all the disruption in the Nigerian fintech scene, some limitations still exist. One of such limitations is the low focus on corporate governance instead, there is an extreme focus on innovation. There needs to be more attention given to the management aspect of running a successful company. Other limitations are intellectual property law complications and the difficulty in forming strategic partnerships, especially by early-stage fintechs.

I foresee more adoption of USSD by Nigeria fintechs as it has shown how efficient it can be in increasing user usage and growing financial inclusion. It will also be interesting to see what a true bundled fintech platform will be like.