Nigeria is experiencing a fintech revolution, as more people embrace digital payment methods and mobile banking services. The country, which has a vibrant culture and entrepreneurial spirit, is witnessing a surge in innovation and growth in the fintech sector, which is creating new opportunities and challenges for the economy.
The Rise of Cashless Transactions
One of the main drivers of the fintech boom in Nigeria is the increasing adoption of cashless transactions, especially after the Central Bank of Nigeria launched new banknotes and capped withdrawal of the new banknotes at the end of 2022. The rollout of the currency change was chaotic, leading to a scarcity of cash and a crisis for many Nigerians.
As a result, many Nigerians sought alternative ways to pay for goods and services using digital alternatives, such as point of sale (PoS) machines. Between 2017 and 2022, the number of PoS terminals in Nigeria grew significantly, from around 155,000 to roughly 1.1 million. PoS transactions also increased by 40.69% year-on-year in January 2023, reaching N807.16 billion (US$1.75 billion).
Cashless transactions have several benefits for the Nigerian economy, such as reducing the cost of printing and handling cash, enhancing financial inclusion and access, improving transparency and accountability, and facilitating trade and commerce.
The Emergence of Mobile Banking Services
Another key factor that is fueling the fintech revolution in Nigeria is the emergence of mobile banking services, which allow people to access, manage, and transfer money using their mobile phones. Mobile banking services are offered by both traditional banks and payment service banks, which are technology-driven companies licensed by the Central Bank of Nigeria to engage in banking activities.
Some of the leading payment service banks in Nigeria are Hope and MoneyMaster, which offer a range of services such as savings, loans, bill payments, remittances, and airtime purchases. These services are especially popular among the unbanked and underbanked population, who lack access to formal financial institutions and rely on informal channels such as cash agents and money lenders.
Mobile banking services have a huge potential to boost financial inclusion and literacy in Nigeria, as they provide convenient, affordable, and secure ways for people to save, borrow, and invest money. According to the World Bank, only 39.7% of adults in Nigeria had an account at a financial institution or with a mobile money provider in 2017, compared to the global average of 68.5%.
The Innovation of Fintech Solutions
The third major factor that is contributing to the fintech revolution in Nigeria is the innovation of fintech solutions, which are apps, software, or technology that enable people or businesses to digitally access, manage, or gain insights into their finances or make financial transactions. Nigeria has a vibrant and diverse fintech ecosystem, with over 200 fintech startups operating in various segments such as payments, lending, savings, insurance, wealth management, and remittances.
Some of the notable fintech startups in Nigeria are Flutterwave, Piggyvest, OPay, Interswitch, Kuda, and Remita, which have raised millions of dollars in funding and expanded their operations across Africa and beyond. These startups are leveraging cutting-edge technologies such as artificial intelligence, blockchain, and biometrics to create innovative and user-friendly solutions that address the pain points and needs of the Nigerian market.
Fintech solutions have a significant impact on the Nigerian economy, as they create new jobs, generate revenue, attract foreign investment, enhance competition, and improve efficiency and productivity. Fintech solutions also enable the development of other sectors such as e-commerce, agriculture, health, education, and entertainment, which rely on digital payment platforms and financial services.
The Future of Fintech in Nigeria
Nigeria’s fintech sector is transforming the economy, but it also faces some challenges and risks that need to be addressed. Some of the challenges include the lack of adequate infrastructure, such as power and internet connectivity, the regulatory uncertainty and inconsistency, the cybersecurity threats and fraud, the low consumer trust and awareness, and the high operational costs and taxes.
To overcome these challenges and harness the full potential of fintech in Nigeria, there is a need for more collaboration and coordination among the stakeholders, such as the government, the regulators, the industry players, the investors, the academia, and the consumers. There is also a need for more innovation and investment in the fintech sector, as well as more education and empowerment of the fintech users.
Fintech in Nigeria has a bright future, as the country has a large and young population, a high mobile penetration rate, a growing middle class, and a strong entrepreneurial culture. Fintech in Nigeria can also serve as a model and inspiration for other African countries, as well as a gateway and partner for the global fintech community.
