If we had a dollar for everytime a Fintech startup in Nigeria raised funds this year, chances are we’d be rubbing shoulders with Dangote now! (OK maybe that’s a bit of a stretch). The point is, FinTech in Nigeria is growing in leaps and bounds. Innovative products that solve real life problems for the everyday Nigerian are being launched ever so often. From products like Abeg which helps users request and send money using tags, to products like Patricia, a cryptocurrency based payment App, to our very own Agency Banking solution, COVr which currently powers the Agent Banking platform for several financial institutions in Nigeria.
The FinTech industry in Nigeria still has a huge potential for growth especially with the increase in smartphone users and the generally youthful population, we’re expecting to see more innovation around savings, lending, payments, account management and general financial services.
So what are the trends we expect to see in 2022?
- Collaboration between FinTech startups and Traditional financial institutions: We saw a number of Digital-only banks this year such as Kuda Bank, V Bank, Carbon e.t.c this is an indication that the banking sector in Nigeria is being heavily disrupted. But are traditional banks going to sit around and wait to be pushed into extinction? Not likely! Collaboration is the new competition and we are already seeing traditional financial institutions collaborate with innovative FinTech start ups to deliver solutions to users and remain relevant. This is definitely expected to continue in 2022. Well established traditional banks will work together with FinTech startups to the mutual benefits of each other.
- Real time cross border payments: With the rise of eCommerce has come the need for cross border payment but not just payment but real time payment. The Bank of England predicts that by 2027 the total global cross border payments will hit US$250 trillion. More and more, we are transacting beyond the borders of Nigeria, from making purchases on Amazon to investing in the global stock market and sending money to friends and family outside of Nigeria. Cross border payments will rise in 2022 and so will the need for real time settlement, efficient and affordable transaction fees.
- AI and ML powered fintech products: Artificial Intelligence (AI) and Machine Learning (ML) are two powerful and transformational technologies that are already revolutionizing many industries. The use of AI and ML will definitely accelerate financial services and improve innovation. These are some of the important uses we expect to see FinTech firms utilize Artificial Intelligence and Machine Learning in the coming years: Improved financial decision making, Security & fraud detection, Asset management, quick and customized responses to customer queries, determining risk levels for insurance policies, calculating credit scores and a person’s ability to pay back loans, making financial forecasts and of course, delivering personalized services.
- Blockchain and Decentralized finance: If there’s a recurring theme in the FinTech industry this year, It’s definitely Blockchain and Decentralized finance aka Cryptocurrency. The rise in the popularity of Cryptocurrency has exploded into a trillion dollar industry, disrupting the financial industry worldwide. According to CNBC, Bitcoin has risen nearly 70% since the start of 2021, driving the entire crypto market to a combined $2 trillion in value. A number of Nigerian Startups emerged out of this new Decentralized Finance world. However, as we saw in 2021, there’s still a lot of ambiguity surrounding the Cryptocurrency industry and due to the largely unregulated nature of Blockchain and Decentralized Finance, there’s a lot of crackdown and policies by the Government. In 2022, there will be a lot more innovative solutions around DeFi in Nigeria as the trend has already begun in 2021.
- Banking as a service: Ever heard the term ‘Every Company Will be A FinTech Company’ by Angela Strange? Well it’s true. Very soon, every company that transacts will see the need to offer financial services but the truth is not every company can be a Bank, the very nature of banking makes that impossible. And that’s where banking as a service comes in. According to James Bessenbach, “Banking as a Service (or BaaS for short) describes a model in which licensed banks integrate their digital banking services directly into the products of other non-bank businesses” This is going to be a trend on 2022, where we see more collaboration between Traditional banks and new FinTech Startups.
Hope you enjoyed reading this!
See you in our next blog post!