Fintechs in Nigeria have been predicted to witness further growth as banking services slow, a PWC report reveals.
The report titled “Growing the Nigerian Technology Ecosystem Through The Capital Markets”, revealed that the Nigerian fintech sub-sector has the biggest share of the number of Nigerian tech start-ups at 36%, with payments and consumer lending being the focus of almost half of the sub-sector.
The report further reveals that insufficient banking services particularly in rural areas, a young population, increasing smartphone usage, and regulatory efforts to increase financial inclusion, have created advantageous openings for fintech. These Fintechs have however not hesitated in seizing the opportunity to provide improved propositions across the value chain to address problems with affordable payments, Flexible savings, investments, quick loans, etc.
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Despite the pandemic’s effect across all sectors of the economy, financial technology has been having a good run with positive results, making Nigeria Africa’s largest country by GDP. With more than 200 fintech companies currently operating in Nigeria which are driving innovation, the fintech ecosystem has witnessed new entrants carrying out four major financial services which include; Credit, Payments, Savings, and wealth management.
An economic intelligence report revealed that Nigerian fintech is branching out from payments into lending, wealth management, micro-investment, peer-to-peer transfers, and insurance. The report stated that payments and remittances are the most developed subsection to date, also stating that Nigeria has continued to see a surge of new and simplified apps to help merchants, businesses, and consumers.
While traditional banks are seeking to adapt to recent changes, fintech is driving more intrinsic innovations, whether by providing digital-first services themselves without any legacy issues, but also without the benefit of heritage customer bases or by providing the technology, platforms, and infrastructure that other service providers utilize.
The Central Bank of Nigeria disclosed that in the last ten years, Nigeria’s payment systems have experienced significant growth, especially with the development of a sound regulatory and supervisory framework, robust payment infrastructure, and the exponential rise in the number of fintech operating in the country.
The pressure from fintechs that is spreading rapidly in the country, has forced Nigerian banks to speed up their digital transformation in an effort to maintain market share. Several mainstream banks, initially slow to react to the digital era, have quickly adapted to offer apps and tools in areas like loans, while non-traditional players such as telecom companies and retailers are entering into the fintech space.
In a bid to ensure that fintechs cover the unbanked in the country, especially in rural areas, the CBN has issued licenses to several startups, allowing them to compete with commercial banks. While the pool of the very biggest commercial banks has changed relatively little over the past few years, the fintech sector is far more reactive, with companies being established, merging, growing quickly, or failing at a far higher speed.
Currently in Nigeria, major banks are going head to head against newcomers, as the growing financial services market is generating growth for all. As digital banks continue to evolve and become more accepted, offering users interesting banking experiences, the pressure has no doubt been mounting on traditional banks. It wouldn’t come as a surprise to see a more even playing field created in the longer term, with companies of various backgrounds providing a wide range of financial services.
This might likely bring about rapid change in the banking sector, forcing traditional banks to either work with current competitors, partner with them, copy their innovative approach, or face being sidelined. Finetchs emergence in Nigeria has no doubt redefined how payments are made, brought about ease of payment, and made banking seamless.