EVOLUTION OF FINTECH IN NIGERIA

Evolution of FinTech in Nigeria – Being a country populated by personalities with thick resistance to change, it might have been hard to predict a future where a considerable percentage of the population will be willing to make and receive payment by using channels inspired solely by technology. Regardless of the sender and recipient’s level of education, traders/service providers are now willing to take the “risk” and engage FinTech channels for financial transactions. How did FinTech evolve to become an option in the mind of the average Nigerian despite the scepticism surrounding online payments in Nigeria? After the definition of FinTech, we will attempt to answer the question in the subsequent paragraphs.

To put in the simplest of terms, FinTech (Financial Technology) is the generic term used to describe the technology (internet, mobile devices, software app, cloud services and many more) that are used in delivering financial services that were exclusive to traditional financial institutions.

While FinTech firms have been in operation before 2007, we didn’t see widespread adoption until the CBN launched its Payment Service Vision (PSV) in that same year. Before this year, financial transactions (payments, settlement of debt, fundraising and other financial activities) in the were largely executed with physical cash.

Not only do we have to carry physical cash for most of our financial transactions, but we also had to deal with the risk of moving with huge sums of money in that era. In addition to the aforementioned, the CBN was consistently using scarce resources to maintain and print banknotes. To cut the recurrent cost associated with maintaining banknotes, the Federal Government through the CBN made policies that laid the foundation for the growth of the FinTech ecosystem in Nigeria.

These policies changed the landscape for FinTech firms in Nigeria. The first sets of FinTech firms to take advantage of these policies are:

• Interswitch: In 2008, Interswitch became the first FinTech firm with a transaction-switching network. They were the first e-payment firm to have round the clock online connections with all Nigerian banks. In other words, they made banking outside of its wall and timeframe possible.
• Etranzact: while Interswitch was preoccupied with providing quasi-banking services, Etranzact carved its niche as a revenue collection firm for a lot of government agencies and universities.
• Remitta: Remitta was launched in the same era as the aforementioned. However, it didn’t much impact until it won the TSA contract.

The pioneer FinTech firms (especially Interswitch and Etranzact) faced several challenges when they became prominent. Below are two of the major challenges faced by pioneer firms:

• Getting the populace to trust the system: FinTech was growing at a time when cybercrime was becoming prominent in Nigeria. As a result, Nigerian residents (especially those without the basics of FinTech modus operandi) showed high unwillingness to use FinTech’s services. A lot of individuals would rather pay more money or undergo additional stress than use a financial service alien to them.
• Lack of adequate infrastructure: Aside from the well-known infrastructural challenges of Nigeria, the sparse coverage of the internet and its unaffordability discouraged a lot of people from utilizing FinTech channels.

With constant enlightenment and the eventual realization that the model provided by these FinTech firms are not only safe but also faster and easier, the volume of individuals transacting via FinTech channels witnessed a steady increase.

Years later, Nigerian commercial banks rode on the groundwork of the pioneer FinTech firms to launch USSD service, internet banking and mobile apps. We have seen firsthand how the banks’ willingness to embrace technology has improved banking services in the country.

With increased internet coverage and an ever-growing population of smart device users, it is only natural for us to witness the next phase of development in the FinTech industry. As it stands, FinTech firms are no longer limited to the provision of auxiliary banking services; they’ve become financial institutions in themselves.

Virtually all the financial services that hitherto require our physical presence can now be executed from a few taps/clicks on our smart devices. FinTech firms now have the capacity to issue BVN and perform other functions that used to be exclusive to the brick and mortar financial institutions.

From the above, we can deduce that FinTech firms are still undergoing evolution and improving with time. At first, it was introduced to ease the delivery of banking services and improve automation in the financial industry. Later on, it was used to execute quasi-banking services like transfer, withdrawal and payment of bills. Presently, FinTech firms are becoming better alternatives to conventional financial institution. The present growth will eventually change how financial services are being executed and we’ll witness lots of disruptions in the coming future. In the distant future, we won’t be deciding if we want to transact with a brick and mortar financial institution or a purely tech-induced financial firm, we will be choosing between a FinTech firm and another FinTech firm. The present financial firms will either adapt or be swept off by the coming wave.