Olufemi Balogun, Co-founder PayVantage Ltd, Addresses Surge in Nigeria’s Financial System

The CEO of Payvantage claims that the fintech industry has helped to increase financial inclusion in Nigeria. Due to the establishment of over 20 million new bank accounts by traditional banks and fintech startups since 2020, the percentage of Nigerians having bank accounts rose to 63%, advancing the CBN’s financial inclusion aim by 20%.

“Undoubtedly, it is intriguing to observe how Fintech has developed and is formulating plans to increase financial inclusion in Nigeria. Looking at the Nigerian banking system, it is clear that the conventional local banks, which are often savings, commercial, or community microfinance institutions, are the preferred method of banking. The tide has changed during the last ten years, though” he says.

Mr. Balogun also noted that the Central Bank’s cashless policy, which was implemented in 2012 with the goal of reducing the quantity of cash in circulation while promoting the use of electronic payments, has historically been the driving force behind the recent boom in fintech, Nigeria. Furthermore, the covid-19 pandemic has compelled many firms to develop virtual channels of communication with their clients. Thus, the only practical way to deal with transactions by proxy now is through technology and digital means. Because of this, local banking systems were forced to adopt and use fintech-cashless methods to service their operations with consumers while maintaining the traditional banking process in order to survive and remain profitable.

Fintechs startups have jumped at the chance to provide improved propositions across the value chain to address problems with affordable payments, quick loans, and flexible savings and investments, among others. This has created an opening that fintechs have been quick to take advantage of.

He continued by saying that a variety of factors, such as the increasing use of agents—individuals or small businesses hired by financial institutions or mobile network operators and ready to provide basic financial services in local communities are boosting public trust in fintech. Due to the fact that fintech startups are meeting SMEs’ needs for seamless and economical payments, SMEs’ payments have grown at a compound annual growth rate of 28% over the preceding three years.

According to a survey by ACI Worldwide and Global Data, Nigeria is one of the nations where real-time payments offer the most potential for economic growth. Businesses and consumers saved an estimated $296 million as a result of its transactions in 2021. This led to an increase in economic output of $3.2 billion.
However, the industry is still relatively new, though Nigeria offers significant opportunities for fintechs across the consumer spectrum, particularly within the small and medium-sized enterprise (SME), affluent segments, and, increasingly, in the mass-market segment. Nigeria is Africa’s largest economy, with a population of 200 million—40% of whom are financially excluded.

The rate of adoption of fintech among middle-class and affluent customers is highest in Lagos. This is caused by the fact that the majority of residents in the city and those demographic groups have higher levels of education, access to more dependable digital infrastructure, and greater economic clout. However, fintech use is also accelerating in the south, where people are increasingly using USSD, agents, and cards; in this region, 38% of mass-market and young fintech users use savings products. While fintech adoption is still in its infancy in the north, growing usage and the expansion of agent banking sites may be signs that the tide is turning.
With the growth of the Nigerian fintech market, business models for financial services have grown increasingly data-driven, and data is an important component along the value chain. The ability to leverage personal data to acquire insights is what has had such a huge impact on fintech. Businesses can therefore precisely target their customers and control the client relationship. The ability to gather and mine unconventional data to create new scoring and evaluation algorithms will be the key to unlocking the next wave of innovation in Nigeria, where credit history and other conventional data sources are lacking.

This will facilitate risk management, which, as seen in more developed markets, is a key requirement in the development of new products, especially in lending and insurance tech—both relatively untapped growth pockets in Nigerian fintech This would make risk management easier, which is important for the development of new products, especially in the loan and insurance tech sectors—both largely untapped growth areas in Nigerian fintech, as seen in more developed countries.
Fintech has also improved the security and credibility of blockchain and cryptocurrency trading in Nigeria, despite the fact that these markets are still relatively new and have difficulty obtaining CBN approval. This is so that customers can trust blockchain transactions because fintech has made it possible to audit and cost-effectively retroactively validate transactions.

Moreover, the usage of digital wallets or e-wallets by fintech gadgets has revolutionized the way customers’ information is safely saved when they make payments without worrying about their passwords being stolen. Due to the fact that e-wallets don’t often require a bank account, this has made it easier for clients in rural areas to receive payments for free. At the moment, 48% of people have bank accounts. More people now have access to finance, regardless of whether they have bank accounts, thanks to fintech. Therefore, as long as there is network access in those locations, fintech contributions have been able to reach a sizable number of people even in rural areas.
Finally, “Fintech has paved the way for more accessible business possibilities, education, and health care outreach, allowing residents of rural areas to invest in whatever company they choose.

By enabling access to economic empowerment through the expansion of enterprises, Fintech has impacted the economic landscape in Nigeria and has thus helped to strengthen the country. The consequence is that, in the big picture, there will be national growth in terms of economic stability and security” he said.