On 9 January, we published a report on the fintech industry. In the report, we analysed how technology is disrupting the global financial services industry including Nigeria. Although a cash-based economy, Nigeria’s financial system has been receptive to the new transformations in the financial system, especially the introduction of technology.
Globally, the fintech market is driven primarily by electronic payments following the increasing use of smartphones. Beyond payments, fintech firms are expanding swiftly into providing key financial services, including lending, savings, insurance, banking, and wealth management.
Nigeria’s fintech landscape consists of 210-250 fintech companies, key stakeholders (banks, telecom companies, and the government), enablers and funding partners (i.e., universities and research institutions, investors, incubators, technology, and consumers).
According to Frost and Sullivan, Nigeria’s fintech revenue is expected to reach US$543.3 million in 2022 from US$153.1 million in 2017.
Nigeria’s fintech industry continues to evolve on the back of technological advancement and demographic support as 50% of the population is expected to be less than 25 years of age by the end of 2020. Besides, the prevailing financial exclusion has resulted in low access to complex financial products for the masses.
For instance, insurance penetration in Nigeria is estimated at a mere 0.3%. In Nigeria, transactions are increasingly shifting towards mobile with the growing popularity of mobile technology among the population, especially the unbanked.
[READ MORE: Events that shaped FinTech industry in 2019)
The number of mobile money transactions increased c.14x to 217.8 million as at 9M 2019 from 15.9 million in 2013. Nigeria’s expanding fintech space should be further supported by Nigeria’s remittance market, one of the leading remittance markets in Africa due to the blossoming diaspora in the US, UK, Canada and Europe.
Nigeria’s significantly under-tapped digital payments industry is poised for significant growth over the next 5 years. A myriad of factors across industry fundamentals, positive country demographics and regulatory support have formed the base of expected accelerated growth for the fintech industry in Nigeria.
This expectation has received significant attention from investors which has led to significant investments as existing players look to position for future growth.
Nigeria’s fintech industry saw funding rounds from various global investors in 2019, with Interswitch, a payment platform infrastructure service obtaining equity funds worth US$200 million from Visa and Branch receiving funds of US$170 million from foundation capital and Visa. Overall, Application Program Interface (API) technology-enabled fintech companies control the funding scenario, reflecting investor confidence in the technology.
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