Across the continent, Africa-focused financial technology startups are the tech rave. These fintech startups are sealing huge ‘ravines’ that exist in local financial service industries and these include mobile money, investing, online payment processing, insurance, Cryptocurrency and lending.
According to research by the world bank, as many as 66% of sub-Saharan Africans are listed as “unbanked”. Nigeria still faces a significant financial-inclusion challenge, with more than 40% of the country’s population of around 200 million people without a bank account. This gives the emerging fintech industry a huge opportunity to drive financial inclusion outside of traditional banking systems. And that is where the likes of Kenya’s M-Pesa, Nigeria’s Flutterwave and Ghana’s MTN Momo has gotten measurable success. These services have so much impacted local access to financial products and services.
Fintechs have led with innovation that offers useful, convenient and affordable financial products and services to millions. In the process, they have created a multiplier effect across the economy, unlocking new business models beyond financial services, fueling the growth of e-commerce, increasing the STEM talent pipeline, and moving the needle on progress towards the Africa development goals.
This again demonstrates how Africans are willing to embrace and adopt new offerings so long as entrepreneurs develop solutions. In Nigeria, these fintech services have been a runaway success by allowing users to pay bills, transfer funds or do International transactions through mobile phones or an agent network, especially in the rural and urban areas where proximity is a barrier to access services and products from incumbent banks.
According to the African Fintech Report 2020 released by MEDICI, SouthAfrica has 190 active Fintech startups, and Nigeria with141 active startups, have the largest FinTech ecosystem in Africa, followed by Kenya. Egypt, Ghana, Uganda, and Rwanda are also centres of innovation in financial technology in the continent. Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million.
Even the traditional banks like Access, UBA, GTB and Firstbank are being compelled to innovate to guarantee their survival in the thick of the onslaught of fintech startups or digital banks. The fintech space in Nigeria has literally become survival of the fittest, and it is only going to get more competitive. This is why investors and venture funds are pouring a lot of dollars in fintech. Stripe acquisition of Paystack for over $200 million in October 2020 and VISA paying $200 million for a 20% stake in InterSwitch in November 2019 are among many wins the future holds for the Nigeria Fintech Ecosystem.
Though with the ravaging second-wave of COVID-19 pandemic and another imminent national lockdown, a number of macroeconomic reactions could impact the Nigerian FinTech landscape. Currency devaluation which poses a huge loss to investors, disruption to employment and income of some users of fintech solutions and a potential increase in rivalry among fintech players due to increased digital adoption.
Irrespective of the seemingly daunting challenge Covid 19 may pose, the opportunity for Nigeria is truly unprecedented. Fintech is still an emerging technology where barriers to entry and adoption are lower than in previous technological revolutions in industry and commerce.