It is not all gloom for the nation’s economy. Despite the pandemic’s toll across all sectors of the economy, the financial technology (fintech) has been having a good run with positive results, making Nigeria, Africa’s largest country by GDP and population, the sector’s leader with a lively crop of start-ups and a growing suite of digital offerings from mainstream banks.
The COVID-19 pandemic, with its twin forces of disruption and acceleration, has pushed both foreign and domestic players to develop opportunities in the fintech space, thereby emerging as one of the top gainers.
Fintech revenues, driven by increasing smartphone penetration of hitherto unbanked population, are forecast to reach an estimated $543 million by 2022. Mckinsey said Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio.
Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 per cent ($122 million) of the $491.6 million raised by African tech startups in 2019, second only to Kenya, which attracted $149 million.
A Nigerian and U.S.-based payments company launched in 2016, Flutterwave recently raised $170 million and is now valued at over $1 billion, while Bankly, a 2018 Nigerian fintech startup digitizing cash for the unbanked, the informal thrift collections system known in local parlance as esusu or ajo, just closed a $2 million seed round. This is on the heels of the purchase of another Nigerian payments company Paystack, by global fintech giant, Stripe for $200 million.
Another Nigerian tech start-up, Newwaves Ecosystems, is pitching for a major stake in the multi-billion-dollar global online meeting market with the launch of its virtual conferencing platform, Konn3ct. This is also another windfall from the pandemic that has substituted physical meeting for virtual assembly.
Chinese company, Zoom Video Communications in 2020, emerged as the global leader in the virtual conferencing business, controlling 14.73 percent of a market that has more than 140 other competitors.
Market research firm, Research and Markets projects the world’s Global Web Conferencing Market, to reach a valuation of more than $78 billion by 2030, up from $2.1 billion at the end of 2020.
The current global crisis due largely to COVID-19 has compelled companies to come up with innovative solutions that will allow employees to work without being afraid of contracting the virus. Attributed to this, several businesses have now adopted the work-from-home model, thereby allowing people to avoid unnecessary travel. It has further been found that employees who work remotely can work for an additional 1.4 days per month, as compared to normal working situation. This means that employees are able to contribute an additional 17 workdays annually, thereby increasing productivity.
In Nigeria, where commercial cities like Lagos and Port Harcourt witness chaotic traffic that cost workers many hours on grinding road logjams daily as they commute to work, developments in online meetings ecosystem is saving employers additional time while also relieving the health challenges associated with road traffic stress.
Konn3ct, The Guardian gathered, is entering the market with more than 40 differentiating propositions carefully infused into the platform for enhanced user experience and quick adoption and which could place it in firm stead to compete with Zoom and a host of other players that include; Huawei Technologies, Adobe Systems Inc., Cisco Systems, Inc. and Microsoft Corporation.
An analysis of Konn3ct reveals that it is the only product in the market with capacity to enable a break-out session during a large conference. As explained by Femi Williams, CEO, Newwaves Ecosystems, this feature enables conveners of large virtual conferences to create up to eight rooms within the same meeting room for participants break out into smaller groups for private sessions.
Konn3ct has a video-sharing feature, which Williams, who founded the company after spending years as lead solution provider for Chams Nigeria, explained enables participants, especially those leading presentations to stream YouTube, Vimeo, Twitch and other forms of audiovisual material during sessions. The feature, the Newwaves CEO highlighted, also has voice-over capability that allows audible conversation even while the video plays.
An Economist Intelligence report revealed that Nigerian fintechs are branching out from payments into lending, micro-investment, wealth management, peer-to-peer transfers and insurance.
The report said payments and remittances are the most developed subsector to date. It stressed that the country has seen a surge of new and simplified apps to help merchants, businesses and consumers.
It revealed that mainstream banks, initially slow to react to the digital era, have quickly adapted to offer apps and tools in areas like loans, while non-traditional players—including telecoms companies and retailers such as supermarkets—are entering the finance space.
Speaking on the development of Fintech in Nigeria, the Managing Partner, eMaginations, a technology-based communications entity, Rarzack Olaegbe, said Fintech in Nigeria is in a state of continuous growth.
For instance, Olaegbe said the country just witnessed another fintech firm that has attained the unicorn status. He explained that unicorn is a fintech startup whose valuation is $1 billion or more. According to him, the first unicorn in Nigeria is Interswitch, which reached that status after Visa acquired a 20 per cent stake in the company in 2019.
Olaegbe revealed that the most recent unicorn is Flutterwave, whose valuation was aided by its third round fund raising. Flutterwave raised $170 million. He said Avenir Growth Capital and Tiger Global are the two firms backing AFrica fintech firms, which made it happen for Flutterwave.
He added that there are different fintech firms that are innovating in the areas of wallets, remittances, processing, merchant service providers, lending, infrastructure, wealth management and savings. “Judging by the rate of growth in the fintech ecosystem, we are likely to witness another unicorn this year,” he stated.
Rating fintechs in Nigeria among others on the continent, Olaegbe, while making reference to a study by the Digital Frontier Institute, said Kenya is ahead in terms of growth and innovation, Nigeria is second while Tanzania is third and South Africa is fourth.
According to him, fintech firms have redefined how payments are performed in the system. “They have brought ease of making payment. They have absolute convenience. They have made banking seamless. But primarily, aside that fact, fintech activity in Nigeria started in payments. That is why we have more payment solutions and this will continue to grow.
“Outside of this, we have consumer lending, agriculture and asset management. Fintech firms have not covered insurance. Healthcare also is an area that is yet to be covered. According to a 2020 report by Mckinsey & Company on harnessing Nigeria’s fintech potential, the percentage of the coverage for consumer lending is 30 per cent,” he stated.
On challenges confronting the sub-sector, the Managing Partner, eMaginations, pointed at lack of infrastructure to innovate. He said this has manifested in unstable power supply, which has led many fintech firms to operate on diesel.
According to him, another is poor Internet connectivity, which has forced many fintech firms to subscribe to six or more networks.
He said high cost of real estate is depressing for many fintech startups that have to pay rent on their offices.
“But in spite of these challenges, the fintech firms have been able to raise their game and attract the attention of global equity firm in the USA, Europe and Asia,” he stated.
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