Depending on who you ask, Nigeria has at least 150 fintech startups. According to Statista, there were 144 fintech businesses in 2021, while a 2020 McKinsey research estimates that there are over 200 independent fintech startups. According to ongoing research by our data arm, Intelligence by Techpoint, Nigeria has at least 270 active companies.
The majority of these businesses, according to the McKinsey research, are focused on payments and financing. As a result, it’s not uncommon to hear remarks about the country’s abundance of fintech businesses, which begs the question: are there too many fintech startups in Nigeria?
Too many firms are fixing the same problem and hardly shifting the needle, according to a widespread critique in the finance community. Many firms’ value propositions center on banking the unbanked and offering better (read faster) financial services.
Even with all of this, one could argue that financial services have only improved minimally, with most fintech businesses failing to compete with traditional financial institutions.
In Nigeria, for example, lending applications provide loans in minutes without needing customers to provide collateral. Even with all of this, companies still have to deal with debt collection. While a few businesses declare payback rates in the 90th percentile, there have been several tales of lending startups using extreme means to recoup their debts.
Another component of fintech businesses that do not appear to have been fully mastered is customer service. In a test done by the Techpoint Africa team, we observed that traditional financial institutions outperformed fintech firms in terms of customer service. In fact, they outperformed finance firms on several parameters.
The mission to bank the unbanked, which is frequently mentioned, is likewise proceeding slowly, with just 54.6 million Nigerians having a BVN, which is required to create a bank account in the country.
People can only register for their BVN at banks, unfortunately. As a result, fintech businesses can only do so much in this area. Still, one has to ask if, rather than pursuing new frontiers, most businesses have chosen to construct clones of current solutions.
Are there too many fintech companies?
The numbers alone imply that there are too many financial businesses, so let’s see how Nigeria stacks up against the competition.
India is only second in population to China, with 1.4 billion people. There are 6,636 fintech startups in the city. For its 215 million people, Brazil, the largest country in South America, boasts 1,446 fintech businesses.
We have two of the world’s greatest economies in the United States and the United Kingdom. While the US has 8,775 fintech businesses serving its 334.6 million people, the UK has 1,600 fintech startups serving 68.5 million people.
The following table shows the number of fintech companies per 100,000 people in each country:
- 1 fintech for 210,970 persons in India
- 1 fintech for 148,686 persons in Brazil
- 1 fintech for 38,131 persons in the United States
- 1 fintech for 27,200 persons in the United Kingdom
- One fintech for 740,740 persons in Nigeria
According to this information, Nigeria does not have many startups. According to the estimates, the country requires at least 1,000 additional financial businesses.
While the focus is frequently on how effectively they have enhanced financial services in the country — valid criteria for evaluation — perhaps we should look at other metrics such as the number of jobs they have generated and the businesses or services they support.
Fintech businesses have leveraged an agency banking model to bring financial services closer to the last mile, which indirectly offers jobs for these agents. OPay, TeamApt, Paga, and CrowdForce are among the startups with the most agents, with at least 434,000 agents between them.
When you factor in MoMo’s 770,000 and First Mobile’s 120,000 agents, it’s evident that financial businesses are providing value.
Other sectors are fueled by fintech businesses. PiggyVest, which was founded in 2016 to assist consumers to digitize their money, is a good example. Their ability to debut after Paystack was vital to their success. If they had debuted sooner, consumers would have had fewer alternatives for depositing money, potentially forcing the company to close.
Fintech firms support eCommerce businesses by providing merchants with a wide choice of payment alternatives that would have been inconceivable only a few years ago.
To the stars
Whatever progress financial firms have achieved, one thing is certain: much more can be done. While the number of Nigerians with bank accounts has consistently increased, according to an EFInA study from 2021, just 45 percent of Nigerians are banked.
Similarly, less than 30% of adult Nigerians have or utilize non-banking financial services, according to the report. There is still space for innovation in insurance, where 97 percent of Nigerians do not have health insurance, investments/wealth management, and cross-border payments, despite the fact that most active fintech businesses are focused on payments and loans.
More participants are needed to accomplish the arduous job of delivering financial services to rural inhabitants or upgrading the services now offered to urban people as the population grows. In any case, “it is day one,” as a wise man once stated.
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