Over 200 Nigerian financial technology (FinTech) companies are expected to generate no less than $1.6 billion in the next three years, LEADERSHIP findings have revealed.
Experts expect that the ongoing global fintech revolution will rub-off positively on Nigeria, as they see these start-ups absorbing about 23.3 million unemployed youths, thus creating jobs, wealth and eradicating poverty.
The emergence of Covid-19 pandemic, though, a health crisis having a negative impact on the economy, is becoming a money spinner for the Information Technology Communication (ICT) sector as fintech startups continue to create applications that contribute to facilitating banking and financial services, making lending without commercial banks’ intermediation possible.
The limit on physical interaction occassioned by the pandemic has shifted most business engagement and transactions online, while financial institutions have equally sped up the plan of limiting human interaction in financial service delivery.
Experts are also optimistic that the ongoing effort to include those excluded from the financial system leveraging on fintech would see them become major revenue earners for the country.
According to Frost and Sullivan report on the Nigerian Fintech operation, ‘Nigeria’s fintech revenue is expected to reach US$543.3 million in 2022.’
In the next three years, however, findings show that this would translate to about $1.63 billion revenue generation to the economy.
In Naira term, it depicts that the country would generate about N270 billion from the fintech subsector of the ICT industry annually, and about N800 billion over a 3-year period, using 500/$ currency exchange rate.
In the past three years, fintech investments in Nigeria grew by 197 per cent, with the majority of investment coming from outside the country.
Fintechs have led with innovation in product development, designing useful, convenient and affordable financial products and services for millions of Nigerians. 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 and increasing the STEM talent pipeline.
At the same time, a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to give brighter hope for an already thriving fintech sector.
Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio.
The founder/chairman of Zenith Bank Plc, Mr. Jim Ovia, said: “with the saturation of the mobile phone market in Nigeria and the advent of Financial Technology startups (Fintech) in the financial services industry, the Nigerian polity has witnessed higher financial inclusion amongst the underbanked and unbanked.”
Ovia stated that, with an operational fintech system in place, there would be more inclusiveness of all and sundry in the economy; transactions and payments will be done efficiently and transparently; one may not necessarily need a banking license to establish how payment systems are done – a rare opportunity to digitise the economy.
He explained that, contrary to popular assumptions, Fintech is not a threat to the banking institutions but rather a strategic partnership to better serve the needs of customers.
Similarly, the Financial Inclusion Summit report revealed that the use of digital finance could boost annual GDP by $3.7 trillion in 2025 in emerging economies like Nigeria, adding that, this avenue presents the opportunity to add 10 per cent to 12 per cent to the country’s GDP.
According to Briter Bridges and Catalyst Fund, companies, mostly those in the payments and financial infrastructure space, leverage transaction fees as their primary revenue source.
The other revenue source mentioned was commissions frequently used by credit and insurance startups. Startups such as Paystack, Flutterwave, and Kuda make money from a combination of transaction fees and commissions on payments.
Moreover, a report by Mckinsey & Company tittled ‘Harnessing Nigeria’s fintech potential’ said, a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to create the perfect recipe for a thriving fintech sector.
“Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 per cent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone, second only to Kenya, which attracted $149 million,” it stated.
The report, however, noted that, the sector is still relatively young. As Africa’s largest economy and with a population of 200 million, 40 per cent of which is financially excluded. Nigeria offers significant opportunities for fintechs across the consumer spectrum, notably within the small and medium-sized enterprise (SME) and affluent segments and, increasingly in the mass-market segment.
With the high rate of youth unemployment in Nigeria, stakeholders who spoke to LEADERSHIP , at the weekend have called on the Nigerian youths to key into the fintech space, which offers opportunities especially within the SMEs sector.
As Africa’s largest economy and with a population of 200 million of which 40 per cent is financially excluded, these stakeholders said, the Nigerian youths need to be innovative to be able to key into the fintech space.
Founder, MainOne, Funke Opeke, said industries like cloud computing is estimated to increase by 22.45 per cent, cyber security by 13 per cent, digital payment by 10 per cent, mobile internet penetration by 17 per cent, e-commerce by 23 per cent and remote job by 12 per cent, post COVID-19.
Opeke said the youths need to key into this space, adding that, enterprises or businesses that earlier adopted online/digital platforms thrived during the pandemic, while traditional enterprises that relied on person-person engagement found it difficult to adapt to digital disruption by competition.
In the same vein, founder, Interswitch Limited, Mr Mitchell Elegbe said the Fintech sector is booming because everybody wants to be connected and they are using digital technology to solve problems, adding that, this growth will continue beyond the pandemic.
Chief transformation officer, MTN, Bayo Adekanmbi said Nigeria is moving digitally. “We have seen growth in broadband penetration. Every business can key into digital, social and cloud tools to deliver value. For instance, a farmer can use the internet to showcase his farm produce, sell and get paid almost instantly with the help of fintech,” he added.
Chief executive, General Data Engineering Services, Revd. Sunday Folayan, urged youths to prepare and take full advantage of every opportunity that will prepare them for the new digital economy.
Folayan told LEADERSHIP that Fintech is a knowledge economy and requires a lot of skills and preparation, discipline, maximum attention and innovation, hence the reason for youths to prepare for it.
Meanwhile , the immediate-past Senate President, Dr. Abubakar Bukola Saraki and the patron of GNC Stakeholders canvassed the use of utilising the FinTech sector in creating opportunities, good jobs and great wealth in Nigeria.
According to him, the economic potentials for FinTech in Nigeria are huge. The prospect for growth in the industry is promising, notwithstanding the challenges posed by the COVID-19 pandemic. Interestingly, beyond facilitating core financial transactions and increasing financial inclusion amongst the underbanked and unbanked, FinTech is fast devolving into agriculture, transportation, healthcare, education, insurance, asset acquisition, and other basic consumer needs.
Saraki, said that “With over 33.3 per cent or 23 million of Nigeria’s working-age population out of work, we must begin to look into how we can create more job opportunities for more young Nigerians using FinTech.”
He added, “We must discuss the strategic interventions that the government and the private sector can embark on to enable financial technologies expansion across the country.”
According to Saraki, as we do so, we must learn what other countries are doing. We must look at how Fintech companies in Asia-Pacific pulled in $2.35 billion in investment during the first three months of this year alone, more than the total amount raised in the first half of 2020.
Tola Onayemi, Investment Lawyer at Nigeria’s Office of Trade Negotiation said that said that “The government needs to do less of throwing money on issues and look more at underwriting risks.
“Rather than throw a billion into the tech space, the government can underwrite risks at the same amount so tech companies can compete in a more favourable environment.
He noted that the reason why credit is expensive and financial tools cannot get to places in Nigeria is because of the risk involved, saying a robust insurance system in Nigeria means that tech companies would be encouraged and the cost of products and service in the country will reduce greatly.
Also, the CEO of Risevest, Eke Urum stated that the sector will create an opportunities to address unemployment among the youths, saying that the youth can play in this sector.
He noted that “The world definitely sees Nigeria as an investment destination. Despite all the economic challenges, Nigerian still commands the largest investment in Africa.”
Founder of Verdant AgriTech, Nasir Yammama, said that FinTech is the most relevant infrastructure in the digital age, saying that it has transformed the way we do things especially in the financial sector.
According to him, FinTech has unleashed the talents of young Nigerians. However, there exist huge untapped opportunities in the FinTech space.