Some weeks back I decided to get food from a food court, while there I saw a coursemate and we got talking, he complained to me about how he tried making payment for an online course but his bank wasn’t processing the payment. I suggested he use an app produced by a FinTech startup in Nigeria to make the payment. I had used one earlier so I suggested he use the same, he told me he’d try it out and we went our separate ways.
Fast-forward two weeks later, we see ourselves at the same food court and I asked if he found a way to make the payment, he said yes. He used the app I suggested to him. I was glad for him although annoyed I forgot to give him my referral code (I wanted the benefits of referral).
I got thinking,” wow imagine if such an app wasn’t available in Nigeria, he’d have been stuck there”. Thank God for FinTech in Nigeria.
FinTech (Financial technology) has been making strides in Nigeria, with Nigeria being home to over 100 FinTech startups and companies with more coming up. It’s considered the new oil in this digital age by some people. This has seen many people take the opportunity to build a FinTech startup to solve an existing problem they can identify and make profits while doing so because gbogbo wa le je breakfast (all of us can eat breakfast)
What is FinTech?
Financial Technology (FinTech) refers to the use of technology to provide creative solutions to problems in financial services. The main goal of FinTech is to automate and improve financial services especially where traditional banking systems are lacking.
Some of the services FinTech has provided include Investment & Savings services like Piggyvest, Lending services like Indicina, Payment services like Paystack, Insurance services like AutoGenius, Blockchain and Cryptocurrency services like BuyCoins, and Banking services.
FinTech startups that develop APIs (API is a system that provides an avenue or interface between two software to communicate and exchange information with each other) for other FinTech startups and financial institutions have also emerged, this can be seen in the case of Mono founded by Abdulhamid Hassan and Prakhar Singh who recently acquired $500,000 pre-seed funding after being launched in August of 2020.
FinTech solutions aren’t synonymous with any particular group, they can be developed for use by anyone. They can be used by individuals, small businesses, students, workers, large organizations, etc. Nowadays FinTech startups have incorporated cryptocurrencies and their users into their problem statement seeking to provide solutions to financial services in that area. A good example is BuyCoins a cryptocurrency exchange platform founded by Timi Ajiboye, Ire Aderinokun, and Tomiwa Lasebikan
Start of FinTech in Nigeria
FinTech in Nigeria didn’t exactly take off till 2007 although it can be traced as far back as 1997 when a group of banks came together and decided to develop a shared infrastructure to allow electronic payments to be made through plastic cards. This shared electronic payment infrastructure was called Valuecard (now Unified Payment). These banks used technology to allow for E-payment through cards rather than carrying hard cash to banks to make payments, this was a big deal then.
In 2007, the CBN launched a policy called the Payment Systems Vision (PSV3.0 2020). This policy gave rise to companies like Interswitch, founded in 2002 and now a unicorn company (a company valued at over $1,000,000,000), and Etranzact which took advantage of it and provided tech solutions to financial processes in Nigeria.
Interswitch became the first FinTech firm with a transaction-switching network (the system that allows us to transfer money from one account and have it reflect in the account it was transferred to) with round-the-clock connections to all Nigerian banks while Etranzact built its niche around revenue collection for government organizations and universities (takes me back to the time when my dad stopped depositing huge sums of money into an account to pay for my brother’s university education and did it comfortably from our house through Etranzact)
As time moved forward technology improved, more Nigerians had access to smart mobile phones, and better internet service (although it still has a long way to go) and the amount of banked Nigerians increased. The groundwork for the improvement of FinTech solutions was being put in place
FinTech in Nigeria now
FinTech has gone a long way from the initial introduction of Valuecard in Nigeria and CBN’s introduction of a policy to promote a cashless society to what it is now, “the new oil”. With many startups emerging and trying to get a piece of the pie with the likes of Paga, Paystack, Flutterwave even USSD banking by our traditional banks (USSD banking is a FinTech product).
In 2012, Paga founded by Tayo Oviosu and Jay Alabraba launched an online payment service focused on accepting payments for businesses and SMEs. This service did exactly what FinTech is meant to do. It made receiving payments by businesses simpler, faster, and smarter.
Payment could be received online and remotely now. Businesses that sold their products online no longer needed to have customers in their physical location before receiving payments.
Paystack a FinTech payment startup founded by two graduates of Babcock University Shola Akinade and Ezra Olubi, was the first Nigerian startup to get into Y combinator’s accelerator program (in fact this is their entire Y combinator application) where they raised $1.3 million in seed funding which isn’t a small feat
They explained their idea to Y combinator about how businesses in Nigeria still had issues receiving payments and other issues like having to fill lots of paperwork before being able to receive payments, lack of data and tools to help grow their business, and helping businesses get paid by making the transaction easier with their platform, they were so confident in their payment platform that they can be quoted saying “Right now, we’re so confident that if a customer’s card doesn’t work on Paystack, it’s never going to work anywhere else.”. Since then Paystack has grown from facilitating payment for merchants to providing a platform for payment of bills, airtime purchase, transfers, and many more. It has grown immensely since it’.
Most FinTech startups have focused on payment services even though there are other services with potential for improvement, one such is the savings & wealth management service and Piggyvest founded by Odunayo Eweniyi, Somto Ifezue decided to tackle this.
Piggyvest (originally piggybank.ng) is the first online “savings & investment” app in West Africa, the idea came about from a viral tweet about a woman who broke her “kolo” to reveal the #1000 she saved daily for a year. They saw the tweet and thought to digitize and automate this process making it easier for people to save. 3 years after the initial product of digitizing the “kolo”, they added new services to their platform to give Nigerians using their platform an opportunity to invest their savings and also earn while saving with them, something not easily accessible to everyday Nigerians. Through their FinTech product, they digitized the saving culture and brought the options of investment closer to everyday Nigerians
Since 2016 many more FinTech startups have risen and for FinTech to continue growing in Nigeria, first and foremost they need support from the government with policies put in place not to kill but nurture their growth and they also need to follow these regulations while innovating. At the same time, FinTech startups will need to understand their market and have a plan for getting their product in the hands of the market, and know how to convey this plan to investors who are willing to see their vision and take a bet on them.
The future of FinTech in Nigeria is bright although rough, with products like Risevest, Flux, Mono, Evolve credit and so many more rising, how they will transform the financial sector is something everyone is looking forward to.