The rise of fintech in Nigeria and it’s benefit to the economy

The term “fintech” refers to new technology that aims to improve and automate the delivery and usage of financial services. Fintech, at its most basic level, is used to help organizations, company owners, and individuals better manage their financial operations, procedures, and lives through the use of specialized software and algorithms that run on computers and, increasingly, smartphones.

Fintech also encompasses the creation and use of digital currencies like bitcoin. While that sector of fintech gets the most attention, the major money is still in the traditional global banking business, which has a multi-trillion-dollar market cap.

Traditional financial services have undergone a significant transformation as a result of innovation and technology. In 2015, the FinTech industry saw the creation of over 12,000 startups and a global investment of USD 19 billion. These pioneers are using cutting-edge technology to provide smooth and creative financial services to both banked and unbanked people. For investors seeking the next wave of disruptive innovation, the fintech sector is one of the most enticing. Digital “neo-banks” are growing in popularity, particularly among younger customers, while customized apps and platforms are bringing elite financial services like a stock market investment into the mainstream.

According to Partech, WeeTracker, a study that displays, select investment rounds for fintech businesses in Nigeria (2018-2019), Africa can lay claim to having built the foundations of fintech with Kenya’s mobile money revolution in 2007. It is still at the forefront of financial innovation today: Between 2009 and 2019, the number of fintech businesses in Africa increased at a rate of 24% each year, with Nigeria, Kenya, and South Africa leading the way.

FinTech is seen as a potential solution to Nigeria’s long-standing financial sector problems. The government’s use of internet-enabled mobile technology, Unstructured Supplementary Service Data (USSD), Near Field Communication technology, and other innovations is a game-changer in achieving the societal aim of delivering financial services to all citizens. Paga, Etranzact, Mkudi, Teasypay, and other early Fintech companies focused on C2C money transfer services, dubbed “Mobile Money”. The goods were inspired by Safaricom’s popular “MPESA” service in Kenya.

Chipper Cash (which joined the Nigerian market in September 2019) co-founder and CEO Ham Serunjogi describes the country as “one of the more advanced fintech and digital industries in Africa.” It has undoubtedly been a forerunner and a leader on many fronts, with a plethora of outstanding businesses. I am impressed with how they have progressed and the difficulties they have solved. Fintech income is expected to rise from US$153 million in 2017 to US$543 million in 2022, owing to growing payment services, the e-commerce market, and rising smartphone usage.

Nigeria is Africa’s most populated country, with the continent’s highest GDP. It also has a thriving Fintech industry and is a leader on the continent, with numerous startups and mainstream bank digital products. Fintech revenues are expected to reach an estimated US$543 million by 2022, driven by increased smartphone penetration and the country’s unbanked population.

Impact Of FinTech On Business Growth In Nigeria

1.  Banking:Fintech has revolutionized the way traditional banks operate. It is for this reason that most banks are altering their business models.

Fintech allows people to get top-notch financial services without having to go to a bank. This is because it makes greater use of technology to make people feel more at ease in the modern age. FinTech enables consumers who are “unbanked” who want to purchase or sell online to have access to rapid and economical financial services by simply using their phones.

Most significantly, businesses now have a variety of payment choices to offer their customers. This allows them to focus on a larger area and run their business.

2.  Payment:Payments for goods and services sold by businesses can be handled more efficiently. It is easier to integrate payments into your web platform today than it was in the past when payments were handled traditionally. Furthermore, technology like Flutterwave and Paystack have boosted card payments in Nigeria. Because of their technology, businesses can accept online payments with the click of a mouse.

3.  Lending:FinTech has fueled the emergence of alternative lenders, which give investors higher rates and borrowers faster, cheaper, and more convenient loans than traditional banks.

4. Finance Management: FinTech is revolutionizing the way we manage our money. Simple solutions to handle and track your accounts are being introduced by FinTech businesses.

Fintechs like Lenco are designed to assist businesses in achieving their objectives by allowing them to bank more effectively to meet their financial objectives.

Economic Benefit Of Fintech In Nigeria

With around 250 companies in the system, Nigeria’s financial technology sector has become a competitive subsector of the economy. Here are some of the economic benefits it has for Nigeria:

1.  Income Generation: Due to its enormous potential, foreign and local investors are increasingly interested in investing in Nigeria’s fintech sector. As of 2018, Nigerian fintech startups had raised over $114 million, with global fintech investments accounting for 75% of the total amount raised by tech companies. 16 Nigeria’s fintech industry received around $86 million in financing in 2018. 17 Fintech has aided in the establishment and management of various enterprises in the service sector, which accounts for 55.80% of GDP.

2. The Creation Of Jobs: In Sub-Saharan Africa, the mobile ICT sector supports approximately 4 million employment and generates over $100 billion in revenue. Jobs are being created by the booming fintech industry, which offers new products such as mobile wallets and creative financing platforms. FinTech’s catalytic effects and potential to usher in a new era of competition, innovation, and job-creating productivity in our economy are incalculable at this moment, and deserving of support.

3.  Efficient and Effective Financial Solution:FinTech can deliver efficient and effective solutions at a lower scale, which will assist small firms and give them more access to a wider range of finance possibilities. FinTech products that are more innovative can be better adapted to the demands of small enterprises. Marketplace (peer-to-peer) financing, merchant and e-commerce finance, invoice finance, online supply chain finance, and online trade finance are only a few examples.

Innovative financial solutions can help small firms greatly by improving cash flow, working capital management, and delivering more stable or secure funding.

4.  Access to financial services: Small enterprises and startups are critical to economic progress. Traditional banks are unable to provide the financing that SMEs require to expand and create new jobs, whether due to a lack of branches in rural areas or the inclination of business owners to avoid paying comparatively high financing rates. Fintech, with its low micro-credit options and peer-to-peer lending, offers a viable funding option for promoting local business growth and employment creation.

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