If you have been keeping tabs on the Fintech space in Nigeria, you will notice that there is a massive influx of Fintech startups in the country’s tech ecosystem. Nigeria is currently home to over 200 fintechs, which has placed the country among Africa’s Fintech leaders with a lively crop of startups and a growing suite of digital offerings.

One would naturally think that since there is a significant influx of Fintech startups in the country, the percentage of Financial inclusion will be at an all-time high. Unfortunately, the reverse is the case, as a recent publication on Tekedia disclosed that “only 35% of the Nigerian population have access to Fintech” which is not even above the average number of the country’s population.

No wonder, despite the influx of Fintechs in the country, tech experts continue to state that the Fintech sector has only scratched the surface. A tech expert Mr. Brian Manuwike recently disclosed that the nation’s smartphone penetration is at 35 percent, which implies that financial technology companies can only serve about 35 percent of Nigeria’s population.

Access to digital payment drives the adoption of digital financial services, however, once customers use the service for the first time and have a good experience, they will always resort to convenience, which is a common human trait. The problem with financial inclusion in Nigeria is not necessarily a lack of infrastructure, but a relatively low smartphone penetration in the country which is at 35 percent.

Nigeria’s mobile penetration rate has been described to be lower than that of developed markets, although it is estimated to rise to 130 million or about 60-65% of the total population by 2025. Although mobile Internet penetration is growing fast in the country, there are several barriers to access in Nigeria.

Affordability is one major barrier for a large percentage of people in the country. Another barrier is the high cost of internet data subscriptions. Despite the fact that there are some people using smartphones in rural areas, there is a significant rural-urban divide. Approximately 61% of Nigerians in rural areas are unconnected, compared to 40% in urban areas.

Looking at these constraints that have contributed to the low financial inclusion in the country, this is a more ideal reason why Fintech startups need to invest more in offline transaction infrastructure, where consumers can access financial products/services with cash and without necessarily needing a smartphone. This offline distribution will drastically drive the rate of financial inclusion in the country.

Using Safaricom’s M-Pesa As A Case Study

To further buttress my point on the need for Fintechs in Nigeria to include an offline transaction feature, I will use Safaricom’s M-Pesa as a case study.

M-Pesa (M for mobile, Pesa is Swahili for money) is a mobile phone-based money transfer service payments and micro-financing service. M-Pesa allows its users to deposit, transfer money, access credit, and savings, and pay for goods and services all with a mobile phone.

An interesting feature of the new M-Pesa super app is the “offline mode” which allows customers to use it and complete transactions even without data bundles or when totally offline. In general, the app is also zero-rated and does not consume any additional data when customers use it, which is something very important most especially for Nigerian users.

M-Pesa allows users to deposit money into an account stored on their cell phones. Despite having an app where transactions can take place, to achieve large financial inclusion, M-Pesa rolled out a USSD shortcode service.

This feature made it accessible for people who do not have smartphones to use the service simply by just dialing a code on any mobile device. The fintech platform now has over 25 million customers in Kenya who rely on it for day to day purchases and payments. M-Pesa is also specifically designed to benefit customers who have no access to banks.

Conclusion

A large percentage of Nigerians are reported to be financially excluded. This means they do not use any financial products and services, both formal or informal.

However, in order to deepen financial inclusion in the country, Fintech startups needs to roll out more features, most especially the offline mode of transaction.   This feature will ensure that those who do not own a smartphone and also those who have difficulty purchasing data will be financially included.

Financial inclusion is seen as a major yardstick for economic development and individual well-being, the increase in financial inclusion is aimed to create capital accumulation which positively impacts a nation’s economy.

It strengthens the availability of economic resources and builds the concept of savings among the poor. Therefore, the development of offline distribution will drastically drive financial inclusion.