Nigerian banks face survival of the fittest in fintech era

Concerned about fintechs and telcos muscling into their customer bases, Nigerian banks are planning their own forays into technology.


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These are not the best of times for Nigerian banks. Caught between the attrition of fintech companies nibbling away at market share and the muscle of the latest entrants to the financial system – mobile-phone companies – they are forced to contemplate the portents of a fast-changing industry.

Measures by the Central Bank of Nigeria (CBN) to bring more people into the financial system have boosted the growth of fintech companies offering everything from digital banking to payments, investments and wealth management services.

Popular names such as Cowrywise, Flutterwave, Paystack, Risevest, Renmoney, Bamboo, Fundall, Carbon, Zedvance and Page Financials have joined more established players such as Quickteller, eTranzact and Paga.

With the recent payment-service banking licences issued to MTN Nigeria and Airtel Africa, the two leading mobile phone companies in the country, all the four phone networks active in Nigeria are now set to provide some banking services, further roiling the financial services sector.

MTN already has MoMo payments, while Airtel has its Smartcash. Globacom, the third-biggest network, operates Money Master, while 9Mobile has 9PSB.

“These are companies that are already well established in the telecoms sector, each with tens of millions of customers,” says Inatimi Spiff, a telecoms consultant and head of Abuja-based Iniye Communications. “They already have a catchment market as well as the infrastructure to take on large numbers of digital banking customers.”

Though they’re not allowed to give loans, issue credit cards or accept foreign-currency deposits, they will be able to collect naira deposits, issue debit cards, operate electronic wallets and prepaid cards as well as have the opportunity to invest in some securities.

“The Central Bank has already taken measures to protect the banks to ensure their core areas are not encroached on,” says Spiff.

Yet, the changes in the industry are already being felt. Several of the biggest established banks, including Guaranty Trust Bank, Stanbic IBTC and First Bank, reported significant profit declines in 2021. Reports from the boardrooms indicate concerns about fintechs taking up significant market share.

Guaranty Trust has responded by acquiring a wealth management firm to give it a presence in an area where companies such as PiggyVest and Cowry­wise have made a big impact by developing apps to mobilise investors to buy both local and foreign securities with as little as the equivalent of $10.

Stanbic IBTC announced in January it had received a payments-service licence. This will enable it to play in a segment where companies like Quickteller, Paystack, Flutterwave, Opay and Paga have already made an impact. While Quickteller, which started in 2002 as a unit of Interswitch, has been around longer, it is Paystack and Flutterwave, both founded after 2015, that appear to have made the biggest strides in the shortest time.

Paystack founders Shola Akinlade and Ezra Olubi are computer science graduates from Babcock University outside the commercial capital of Lagos, who started out writing banking software before hitting on the payments idea. The company hit the big time in 2020 when it was acquired by Stripe, the US payments giant, for $200m as part of its African expansion.

With a valuation of about $3bn, Flutterwave has become the most famous of the payment companies operating in Nigeria. Founded in 2016 by two Nigerians, Olugbenga Agboola and Iyinoluwa Aboyeji, to provide online payments to Nigerian merchants and businesses, the company now has international investors such as Visa and payments deals with PayPal. It raised an additional $250m last year for its African expansion.

The rise of the fintechs

For many of the fintechs, 2016 was pivotal. That was the year Nigeria experienced its first year of economic contraction in a quarter of a century, triggered by the collapse of the price of oil, the country’s main export and source of more than 70% of government revenue at the time. Many Nigerians faced ruin as their savings lost value to naira depreciation and, simultaneously, the cost of acquiring foreign goods and services rose.

It was at this point that some fintech companies emerged, offering Nigerians the opportunity to buy dollar-denominated securities as a hedge against inflation and future devaluations. They have found favour with the country’s youth, which is significant in a country where half of the population is under 19 years and early adopters of technology.

The same combination of factors has also spurred a surge of cryptocurrency trading in recent years that has made Nigerians the biggest holders of Bitcoin outside the US. Bisi Ademola, a 26-year-old employee of a fashion house in Abuja, who operates three bank accounts, exemplifies a common trend. Two of the accounts are with traditional brick-and-mortar banks, while the third is with a fintech.

“I use my Zenith Bank account to receive my monthly pay, while the Access Bank account is mainly to fund my Visa card for online shopping,” says Ademola. “But my savings and investments are with PiggyVest.”

While Zenith and Access are among the country’s top 10 banks, PiggyVest is a fintech founded in 2016 by Somto Ifezue, Odunayo Eweniyi and Joshua Chibueze, who met as students at Covenant University near Lagos.

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Conceived as a digital alternative to the piggy bank, the company’s app offers users higher interest rates than those offered by traditional banks, with options to invest in securities or join in the crowdfunding of small businesses. Deposits aggregated by PiggyVest go mostly into government debt instruments.

At the end of 2021, PiggyVest had more than 3.5m customers and had paid out N242bn ($581m) to customers during the year, according to CEO Ifezue. That was well above the N90bn it paid in the preceding year.

Cowrywise, like PiggyVest, offers higher interest rates for savings. It also enables subscribers to buy into a broad range of mutual funds from equities to fixed income, and even Eurobonds, offered by fund and wealth managers such as Meristem, ARM, Afrinvest and United Capital.


The fintechs that have proved to be the most controversial are those that have offered brokerage services to invest in international stock markets and buy shares such as those of Apple, Tesla, Amazon, Google and Microsoft.

Fintech companies such as Chaka, Bamboo and Risevest have drawn a large number of Nigerians keen to keep some foreign currency investments to protect themselves against inflation and the inevitable naira devaluation.

The CBN last year blamed them for adding to the pressure on the naira exchange rate. It ordered a freeze on their bank accounts and announced an investigation. The companies challenged the CBN in the courts and won.

Perhaps sensing the changing playing field, Standard Chartered Bank has moved to reduce its physical presence, closing more than 60% of its branches around the country in the past two years, while urging customers to use their banking app more. It’s also offering customers offshore investments in equities and fixed income securities to protect against the vagaries of the local currency.

Could this be the future of banking in Nigeria? It may not seem so considering that healthy profits can still be found in the traditional banking sector – Zenith Bank turned in a record performance of N242bn in post-tax profits while operating out of more than 400 branches spread around the country. Yet many banks seem to have decided that they can only ignore the impact of technology on the industry at their own peril.

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