Fintech And Financial Development In Nigeria
FinTech is the combination of Financial and Technology. It is the creative use of technology in the design and delivery of financial services. It helps in faster, more user-friendly, and cheaper financial services for people around the world. The use of FinTech results in development of new business models, and processes with a concurrent impact on financial markets and institutions.
The financial industry is gradually growing and improving in Nigeria, and is improving on customer satisfaction. According to Bank Verification Number statistics, less than 50 million of Nigeria’s population has active and functioning bank accounts. And as a result of this, businesses and entrepreneurs are moving to fintech to develop new financial inventions, and disrupt traditional financial services. There is an increase in the financial inclusion level, as more customers have access to financial services through fintech. Customers also have higher levels of customer satisfaction in banking operations.
Fintech companies have been in operations for a long time in Nigeria, but there was no extensive use of it. However, in 2007, CBN launched its Payment Service Vision, which increased the awareness of Fintech companies. Before the arrival of fintech, payments of bills, settlement of debts, and other financial operations are mainly performed by physical cash. And as a result, CBN had to be using their limited resources to print more banknotes and maintain them.
The federal government of Nigeria has employed the use of Fintech for cost minimization, and this has increased the development of fintech in Nigwria, and is still on the increase. The first sets of fintech companies to benefit from fintwch are Interswitch in 2008, Remitta in 2011, and Etranzact in 2011 also. They were the ones that set the stage for Nigerian banks to ride on over the years. And since then, commercial banks have launched supplementary service data, mobile apps, and internet banking, all through the use of Fintech.
The general operation of fintech splits into other sectors like asset management, advisory services, artificial intelligence, crowd computing, digital payments, biometrics, among others. However, not all of these sectors are in full operations in Nigeria. Some of those not in operation are crowd computing, big data, insurance, business solutions, and the likes.
Benefits of Fintech in Nigeria
- Income generation
Fintech companies in Nigeria have raised over $114 million as at 2018, of which global fintech enterprises account for 75% of the amount. This implies that both foreign and local investors have become so interested in investing in the fintech sector of Nigeria, due to it’s great potential, and the fact that it is still new and hence, a fertile ground to invest in. Fintech has proven to generate a lot of income through its operations in Nigeria over the years. It has led to the development and growth of both small and large businesses in the service industry.
- Business solutions
Hackathons are idea invention challenges that bring tech talents together to compete and work together on solving business problems with technology. They have played and still playing an amazing impact in Nigeria’s fintech operations. Some financial institutions are buying into this idea to outsource their businesses’ ideas and solutions that will aid creative innovations in the financial services world. Fintech brings solutions to both small and large businesses, and this has led to the increase of the use of fintech in Nogeria.
- Huge market size
Nigeria has a number of businesses that need financial services, most of which are millennials (young adults that are internet-savvy and technology-driven). Millennials make up about 30% of Nigeria’s population, and they are the ones who use internet the most. There is a large potential for financial inclusion among the youth, and the youth market is a sure pointer of fintech opening in Nigeria.
Areas of impact of Fintech in Nigeria
Nigerians are gradually getting used to the use of online platforms for payments and other financial services. From checking the prices of goods, to paying for goods, to mobile banking, and others, it has become more convenient for Nigerians than before. The following sector uses Fintech more in Nigeria;
With Fintech, the cost of accepting and making online payments is zero, unlike few years back, when it was expensive. This has made more businesses switch to the use of online payments for their products. Fintech has made payments so easy that you don’t have to be physically present in a shop to make payments, as this can easily be dome online. Online platforms like Paystack and Flutterwave play a major role in making it easy and convenient for businesses and individuals to receive payments online. All you need is your card details and you’re good to go. With only the click of a button, you can conveniently make payments from the comfort of your home.
Fintech has increased the growth of lenders who offer higher, faster, and cheaper yields to investors. It has made loans more convenient for borrowers, unlike traditional banks. Platforms like QuickCheck, Lidya, and PayLater are gaining grounds in the lending space in Nigeria, making it easier for anyone to get quick loans with little payback interests. The issue of loans in Nigeria does not have to be with stress anymore, with the increase in fintech operations.
This is the major sector that uses fintech operations in Nigeria. They have made banking easy, in that you don’t have to step into the bank to perform banking operations. With the instances of 737 for GTBank, and ALAT for Wema Bank, banking is now done on mobile devices from anywhere. The major advantage of fintwch is to use technology to solve any financial issues with just the use of a mobile phone. The aim is to make things more convenient for people. Fintech also helps people who do not have a bank account but wishes to buy or sell online, they can now have access to cheap and quick banking operations from the comfort of their homes.
- Financial management
Fintech startups are generating ways to organize and trace your finances better. They are helping us with ways to manage our money better. You do not have to use pen and paper or a spreadsheet to do this anymore fontwch has taken care of that with digital financial solutions. Examples of the start ups that uses fintech in Nogeria are PiggyBank for saving, Kliqr for expense management, and Invoice NG for Invoicing.
How Nigeria can improve it’s financial sector with fintech
- CBN licensing administration says there has to be a N5 billion funds payment to get a license. This is not welcoming for most businesses, as most fintech companies are startups and can not meet the funds requirement. This policy should be amended to allow for small fintech businesses have access to its full operation.
- There should be tax income relief and government incentives for local and foreign investors. For instance, there should be corporate tax reliefs for the first three to five years of operation of new fintech companies. This will serve as an incentive to fimtech companies and will lead to more financial inventions.
The increase in fintech operations in Nigeria has opened up a number of possibilities for small businesses, as they can now offer more services than before at a lower cost than it was before. There will be more accuracy in other technologies like artificial intelligence, data management, and machine learning, with the use of financial technology.
Becoming aware of the latest fintsch operations and development will help improve any business and make them up for competition in the market. It will also help to make daily living easier for all individuals.
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