Fintechs are everywhere and it may be challenging to build a new one as category-kings have already emerged. In Nigeria, we already have clear kings like Moniepoint/ OPay/ PalmPay/ Kuda (POS, SME banking), Interswitch (card network), Flutterwave (web payment), PiggyVest (saving), FairMoney (lending), Bitmama/ Changera (cross-border) and TAP (micropayments) controlling their domains. Unless you have a clear new basis of competition, it may be tough going after these companies frontally.
So, if you cannot find another financial service niche to pioneer and dominate, a good playbook could be anchoring a business upon some of these companies. One of Nigeria’s finest agtech startups – Winich Farms – is a very big company which taps into the fintech world, but serving farmers and those in the broad agro-sector. Another is Cinderbuild which focuses on construction while also deploying typical fintech services from partners.
Looking at the state of the market, establishing new companies where we have obvious category-kings without having a way to reshape the competitive equilibrium may not be a smart strategy. If you want to enter these areas where we have clear dominant players, and plan to do exactly what they are doing, you must come with a lot of cash as “quantity is also quality”, because with deeper pockets, you can find ways to win some territories (not recommended though).
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But if you ask for my opinion, I will tell you to go from the flank, and that means going into a sector and within that sector, you offer value to customers, even as you work on ways to embed fintech solutions on your products. My fintechnolization postulation remains that all digital platforms will offer a fintech solution. But it does not mean that you have to start a fintech product that collects online payment in Lagos today.
In December 2020, I introduced the concept of fintechnolization: “a construct that every digital platform must have a maturity state of offering a fintech solution. I had watched all great digital platforms on how they ended up providing fintech solutions even when they began in an unrelated sector.”
Nigeria and indeed Africa are moving to the next phase of fintech evolution as the core operating system has been established. With this OS running, we can unlock opportunities in new sectors like agriculture, retail services, construction, etc across all nexus of financial services. Pursue those latent opportunities and do not waste time building another “fintech” solution.
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Comment 1: I agree with finding another financial service niche to pioneer and dominate. Makes things a lot easier and indeed there are other promising and untapped opportunities and infrastructures that could be set up.
Just like you said, unless there is a clear new basis for competition. It may be tough to challenge;
The good thing is there are gaps and areas where these category kings have failed to fill in.
Well, I always fancy a David vs Goliath Story! ?
Either ways, it’s key to solve problems in a healthy way and to seek partnerships where necessary, even with the category kings.
Comment 2: Excellent and apt insight Prof. Months back a Nigerian fintech hopeful asked me for advice with their fintech payment idea. Although he was highly technical I pointed out to him the plethora of fintech options already available there, and I asked him to tell me what his value proposition was. His answer was he was planning to use a different protocol for small payments. I pointed out to him the number and success of small payment systems already entrenched in Nigeria and going up against established companies with nothing new other than an underlying system wasn’t enough – end users don’t necessarily care “how” transactions are completed, just as long as they are completed.
So I asked him to think more deeply about his target market, existing competition, the costs and time involved in setup, and what his vision for his product was, from infancy to operationally to accelerating, and to really think about if his product was actually new or if it was just doing the same thing already available.
Barriers to entry may seem low initially, knock out some code and away you go. But reality is the backend systems/servers/security is very costly. Unless you have an excellent product and strategy that adds value think twice:think niche.
My Response: A brilliant template for any new founder: ‘end users don’t necessarily care “how” transactions are completed’
My Response on “opportunities are still there” – check Twitter
All have opportunities. My point is that even in the present categories, you need to approach the problems in new ways. Going to do what Flutterwave is doing may not be smart because they have more resources. But you can pioneer new categories in the fintech space and control them. MPESA in Nigeria may not work because what Nigeria has is good enough to care. That it worked in Kenya does not mean it can work in London, Cape Town, Lagos, etc since they have different levels of sector maturities.
You might read people writing that in Nairobi, you can do that with MPESA when it is not available in London. That is not the full story: London’s financial services might have abstracted the very reason MPESA was needed. So, if you bring it, no one cares.
You can click to get the full view of my note. Everything remains in infancy , including what Flutterwave is doing since it is not in Ovim, my village. But I am not sure the new fintech with limited resources has a higher chance, doing exactly the same thing.
Fintechs are everywhere and it may be challenging to build a new one as category-kings have already emerged. In Nigeria, we already have clear kings like Moniepoint/ OPay/ PalmPay/ Kuda (POS, SME banking, etc), Interswitch (card network), Flutterwave (web payment), PiggyVest… pic.twitter.com/rHGEKeuMFN
— Ndubuisi Ekekwe (@ndekekwe) December 19, 2023
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We are bent on over-servicing an economy that is not even producing, so all you get is money moving in circles, without actually growing anything. The ‘financial inclusion’ chorus has remained intractable, even actual access to capital that creates and scales things essentially nonexistent in decent quantity. Where loans are available, the rates can only send a business below the ground, so they are not meant for business growth.
For fintech, there will always be need for options, at least three major ones per category, so we don’t start crying about monopoly or subpar customer experience.
If we stretch this sleeping economy to around $1.5 trillion, then we will know if we actually have a services sector that can support it. All we are doing for now is overmilking a malnourished cow and believing that we are doing some fantastic things out there. Now that we have overdosed ourselves with fintech, we need to create the goods and services in large numbers to be sold.
The problem is that we’re only hearing of the millions and billions Fintech are moving.
Out there, there are lot of opportunities with much more profit too.
I know someday, we shall see the open doors.