Nigeria’s fintech companies raised more than $600 million in funding over a five-year period (between 2014 and 2019), a new report published earlier this month by McKinsey shows.
The country’s “bustling fintech scene” attracted 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million, the consultant said.
Abuja’s fintech landscape has grown over the years to become one of the foremost in Africa, including a diversified mix of basic financial services (savings and lending) provision, real-time payment processing, recurring payments and remittances as well as foreign exchange transactions players.
Companies such as Flutterwave enable merchants and vendors to accept payments from different parts of the world, while savings and investment platforms like PiggyVest and Cowrywise have made it simpler for Nigerians to save and utilize investment options on mobile phones. Vesicash and Nvoicia both seek to bring trust into transactions and enable vendors to convert unpaid invoices into cash with their respective escrow and invoicing solutions.
As a whole, Africa’s largest economy is home to over 200 fintech standalone companies, in addition to a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio, according to the report titled Harnessing Nigeria’s Fintech Potential.
Growth in Nigeria’s fintech industry has been powered by sufficient investor backing – startups in 2019 saw funding rounds from various global investors, with Interswitch securing $200 million equity funding from Visa while Branch got $170 million from Foundation Capital and Visa. In 2018, fintech companies attracted the bulk of startup funding in Nigeria.
That, coupled with the combination of a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, create a conducive and thriving enabler for the fintech firms in Nigeria to grow, the report says.
More so, access, convenience, and trust have also played key roles in the increasing use of fintech products – up to 54 percent of consumers surveyed reported increased usage of their fintech products in the last six months, McKinsey said.
But drawbacks exist, however. For instance, there are a number of feedback against fintech companies in Nigeria: poor user experience, underwhelming value added from using some of the financial products, low returns on savings, and limited access to investment opportunities.
