Payments, lending major drivers of Nigeria’s fintech market — McKinsey

Saviour Adugba

• Quickteller, Paga, Opay, others competing well with banks’ apps, USSD

A new Mckinsey report focusing on Nigeria’s fintech ecosystem has identified payment activities and lending as major drivers of Nigeria’s fintech advancement The study noted that growths have been experienced in the payments segment due in part to the Central Bank of Nigeria’s drive for financial inclusion as well as favourable policies instituted by the financial regulatory bodies.

The report identified fintech solutions providers such as Quickteller, Paga, Opay and others as well positioned to compete with major banks’ applications and their unstructured supplementary service data (USSD) services for payments, including the sending and receiving of money as well as bill payments.

The insight also quoted research showing that lending activity in the fintech sector has swelled considerably, spurred by the ability of fintech companies to use technology and data to assess borrowers’ creditworthiness as well as their ability to utilise smartphones as a lending distribution channel.

Also worthy of mention is the fact that a number of fintech solutions providers are stepping up to the plate in the area of SME lending and financing. As McKinsey notes, “A few fintechs, such as Migo,have also stepped up to offer unsecured working-capital loans to SMEs with minimal documentation.” A number of banking fintech solutions have followed suit in this direction with solutions providers like Quick Credit (by GTBank) and Quickbucks (by Access Bank) also dabbling into SME loans.

The savings and investment segment is another that fintech activity is expanding into the McKinsey report stated. According to the research and insight firm, fintechs are helping to provide consumers with different ways to invest and earn attractive interests as more people are looking for easier ways to invest and make good returns both locally and internationally.

Organisations like PiggyVest, Cowrywise and I-invest have taken advantage of the gap that hitherto existed in the market by targeting young professionals and millennials with their services. These platforms usually offer their services on an easyto-use app as well as better rates than what traditional banks offer.

Another service that makes these solutions stand out is that they offer their customers a financial management tool, giving them the ability to oversee their expenditure, track their savings, set up saving goals as well as information on available micro-investment opportunities.

McKinsey also says that there has been a growth in the number of asset management fintechs in the market. They say, “More recently, the market has seen an influx of asset management fintechs such as RiseVest, Chaka, and Bamboo, offering users an opportunity to invest in international stock markets from their local currency account through their app.”

Meanwhile, McKinsey also said that access and convenience are driving the adoption of fintech services on the customer side not necessarily dissatisfaction with the services of traditional banks. “Despite the dissatisfaction among consumers with traditional banking services and the rise in fintech products to address these pain points, the switch to fintech is not an automatic step for many,” they noted.

It is not all light for the fintech sector though as 67% of banked customers still maintain that they trust their traditional banks than fintech solutions. But it is not all gloom either as Mckinsey notes, “trust in fintechs is growing, particularly among lower-income segments, with 51 per cent of youth and mass-market customers saying they trust fintech about the same as they trust banks. SME owners also say that they increasingly trust fintech because of its speed in settlements.