Fintechs in Nigeria where the main source of revenue is transaction fees will fade within 3 years. We will move towards a perfect digital market where marginal cost is absolute zero. The new phase of opportunity will be monetizing data for lending, wealth management, etc and not “taxing” citizens with fees.
Paytech startups built on transaction fee-based revenue will struggle as new business models evolve where transactions can be efficiently processed at absolute zero transaction cost and distribution cost. My state of Nigerian fintech shows a shift in the equilibrium on the points where startups make money from users. This will simply become the new normal.
Consider the possibility that OPay has bank accounts in all banks in Nigeria. If a customer ( paying for DStv) pays through it, it will simply receive money from the customer to the specific corresponding bank account it maintains in the customer originating bank. At the same time, it will pay the merchant to the merchant’s bank account using its (OPay) funds in the same bank as the merchant’s. Because wallet-to-wallet transfer in Nigeria does not attract a fee, this two-sided intra-bank transaction (inflow and outflow) does not cost OPay and its customers any transaction fee.OPay, relying on bank APIs, automates this protocol. This is Option 1. There are other options on how to execute this including having a holding quasi-entity.
Do not be confused on this – we will leapfrog London and New York in this domain. The architecture of our banking system makes this possible. I do not expect it to be changed!