Fintech Money Seems Like the New Oil Money in Nigeria
Some days ago, I stumbled on a Whatsapp group on my phone named “Fintech Money”. When I looked closely, I discovered that a “think tank” group I belonged to had been renamed Fintech Money by the admin. I could read the mind of the admin, so I laughed out loud in the group and subtly asked why the change of name. The answer wasn’t far from what I expected — “Fintech is where the money is now, so we should think Fintech”
In Nigeria, “Oil Money” is a thing. It signifies a level of affluence and financial buoyancy that is beyond the average person. During the oil boom and even until now, getting a job in an oil company could be a dream come through for almost any young Nigerian. Almost everyone in Nigeria can relate to this oil money phenomenon but I’m pretty sure it’s not the same for fintech money. Therefore I ask and attempt to answer the following questions:
- What is Fintech Money?
- Does it really exist?
- If it exists where is it?
- How could it be found?
The questions are not answered in a particular order but you’re going to pick up a lot of interesting answers for yourself after going through this article.
First of all, introduction
Fintech is a short form for “financial technology”. Fintech is “any technology that helps companies in financial services to operate or deliver their products and services, or that helps companies or individuals to manage their financial affairs.” In this space, we have mobile banking, digital lending, investment apps, payroll, insurance, payments, cryptocurrency exchanges and so on.
Fintech includes everything from mobile banking technology to investment apps to cryptocurrency. As one of the most rapidly evolving sectors, fintech has changed significantly since banking technology was first introduced in the 1860s. Since then, the invention of credit cards, e-trade and online banking has quickly progressed the industry, threatening traditional financial institutions and changing the way people manage their finances.
How much is Fintech money?
There is a visible difference in the number of investments going on in the fintech industry when compared with other tech sectors. This is probably where people are getting the notion of “fintech money” from. For instance, out of $258 billion global venture capital investment in 2018, fintech accounted for $128 billion (nearly half). And investment in the sector is expected to grow to $310 billion by 2022. The total transaction value of digital payments grew from $4.1 trillion in 2019 to $5.2 trillion in 2020. The growth in digital payment is considered a key factor driving the development of the fintech sector. I think that is quite simple to understand.
In Africa, the trend is similar and there may be reasons for this. But let’s look at the figures first. The financial technology sector remained the most attractive for investors in 2020. More startups in fintech secured funding than startups in any other sector, and when the total money raised in fintech is combined, it dwarfs the total of any other tech sector. A total of 99 fintech startups raised over $160 million representing about 24.9 per cent of overall investment.
Let’s bring it down to Nigeria. Although the African statistics already show that fintech startups lead tech investment in Africa, the percentage of fintech investment in Nigeria is higher than in any other place in Africa. In 2020, 37 fintech startups raised over $89million (59.4 per cent of the total investment).
My friend was right
The figures above prove that my friend was right. There is money in fintech. Both in terms of volume of transactions processed and volume of investment flowing into the sector, there is money.
It is also fascinating to note that fintech is growing more in developing markets. And this provides opportunities for tech entrepreneurs in these markets. For instance, there is a great percentage of unbanked and financially excluded people in Africa. Granting these people access to affordable financial services will reduce the poverty rate and increase economic development.
Nigerian fintech startups in Y Combinator
Y Combinator the American based and most prominent accelerator has become a standard of sorts for legitimizing startups. Take it or leave it, Y Combinator’s presence in any startup’s life always marks a turning point for the startup. Beyond the $125,000 funding from Y Combinator, the network of investors and mentors within the program is invaluable. This accelerator has overtly favoured fintech over any other tech segment in Nigeria. The likes of Flutterwave, Paystack, Cowrywise, Bamboo, Kudi, Mono and others are all products of Y Combinator. In fact, Nigeria’s Flutterwave is the only African startup on Y Combinator’s list of top companies by valuation.
Finally
There are lots of gaps existing in financial services and payments in Nigeria. It is obvious that the traditional banking systems cannot successfully fill in these gaps and this provides opportunities for innovative digital solutions. Tech entrepreneurs who are able to think outside the box by creating solutions capable of disrupting the traditional payment services would really cash out from the fintech money.
