Major Takeaways from Mastercard’s EIU Research on FinTech in Nigeria
The Nigerian fintech sector is booming, both in the area of developing solutions and raising of investments. This was the general consensus during the soft launch of an Economist Intelligence Unit (EIU) Research on Fintech in Nigeria with the support of Mastercard and MTN.
The webinar was a forerunner to the main event which was supposed to hold March 26, in Lagos but was postponed due to a coronavirus pandemic.
According to Irene Mia, Global Editorial Director, Thought Leadership, the report combines extensive desk research and insights from interviews with regulators like CBN’s Director of Payment System Management, Musa Jimoh, industry experts and CEO of fintech firms like Ham Serunjogi, co-founder and CEO, Chipper Cash.
FinTech in Nigeria, giving an introduction into the research, Melanie Noronha, Senior Editor of Thought Leadership, EMEA highlighted the significant impact digital innovation has on the finance industry and the range of opportunities it creates for both people and businesses.
“Digital innovation is disrupting the finance industry in the world, in an unprecedented way and pace. Mobile money, Online lending platforms, Cryptocurrency and blockchain a new range of products and players are creating a range an opportunities to better sell to consumers and enable SMEs and Forums to operate better”
Melanie Noronha, Senior Editor, Thought Leadership, EMEA
She also noted the major role fintech can play in driving financial inclusion among the 66% of the unbanked population on the continent. She referenced the impact Mobile money – Mpesa had in driving Kenya’s financial inclusion from 27% in 2007 to its current 82%.
Shedding light on the fintech sector in Nigeria, Melanie explained that the country’s large population together with its increasing mobile and internet access makes opportunities for fintech endless.
On her part, Irene Mia revealed that there is a strong forecast for fintech revenue in the country as it is expected to reach an estimated $543m by 2022.
This represents a significant increase from the $153m recorded in 2017.
On financial Inclusion, the largely unbanked population in Nigeria is about 40 million. According to surveys conducted, the percentage of financially excluded adults in Nigeria has actually reduced from above 42% in 2016 to about 37% in 2018.
Speaking on financial inclusion, Irene pegged infrastructure deficits like
insufficient bank branches, ATMs and difficulties with securing biometric verification numbers and high service fees as some of the major problems.
Irene, however, added that anecdotal evidence from one of the CEOs interviewed shows that fintech was making good progress in driving financial inclusion in Nigeria
“So one CEO that we interviewed which offers agent banking and payment services actually told us that they have created accounts for over 750,000 adults who were previously unbanked and their target over the next few years is to reach about 3 million more people,” Irene said
More men than women are banked in Nigeria. According to the World Bank data which Irene shared, just over a quarter of women have a bank account compared to more than half of men who have.
Talking about Smart Regulation & the possible challenges in the sector, Melanie expressed that regulation is always catching up with innovation, which always causes disruption. Therefore it’s important to develop the right regulatory ecosystem.
However, she said there is a risk associated with data privacy and ownership. She also pointed out that there is a risk when fintech and financial inclusion doesn’t go hand-in-hand with financial literacy and education.
Local Investors also play a small role in Fintech. Nigeria’s fintech sector has seen very impressive growth in terms of investment activity. However, most of the investments have come from foreign investors.
Irene, however, highlighted that there are some emerging signs that indicate some change in the approach of investors. Nigerian Stock Exchange recently launched a fintech growth fund.
Global Investment activity in fintech which includes Venture capital, private equity, merger and acquisition reached $ 120 billion in 2018 up from $51 billion 2017
Skills gap in Business Management, Marketing and Corporate governance
As the fintech ecosystem expands core skill gaps are emerging from outside of programming and product development. According to Irene, skill gaps in areas like marketing, communications, corporate governance and business development have been created following the growth and expansion of fintech in Nigeria.
Speaking on the efforts Mastercard has made towards helping fintech grow in Nigeria, Ebehijie Momoh, Senior Vice President, General Manager West Africa, noted that with many countries across the globe still under lockdown, there is a dire need to strengthen financial institutions and develop robust payment systems now more than ever.
He applauded the fact that Nigerian fintechs are expanding their businesses from payments into lending, micro-investment, wealth management, peer-to-peer transfers and insurance etc. He acknowledged the role of the regulators in balancing innovation and customer protection while insisting they must continually evolve to respond to market dynamics.
While venture capital investment is forthcoming, the majority comes from abroad with Nigerian investors currently playing a small role. As the sector matures, skills gaps are emerging outside of product development in areas such as business management and marketing. Given the challenges that fintechs in all markets are facing in terms of profitability, expertise in business management and corporate governance is needed.
Concluding, Irene noted that if challenges discovered in the Nigerian fintech sector were overcome it would help set up the next wave of growth. She added that domestic success stories created will only inspire a new wave of fintech ideas in Nigeria and hopefully move the needle on financial inclusion.
