What is FinTech? Everything You Need To Know About FinTech in Nigeria on Naijatechnews: Financial technology is one of the new waves in the financial sector, that is kindled by IoT and the increasing digitalization of the world. In the last decade, the industry has grown by more than 100 times from $1.8billion in 2010 to $19billion in 2015. Recently, the size of the global FinTech industry has been valued at $127.66 billion and is expected to grow at an annual average of 24% to amount to $309.98 billion by 2022.
What is Fintech? An Overview
Fintech is a combination of the terms “finance” and “technology” and refers to any business that uses technology to improve or automate financial services and processes. The term is a broad and rapidly growing industry serving both consumers and businesses. From mobile banking and insurance to cryptocurrency and investment apps, fintech has broad applications.
The industry is huge. According to CB Insights, there are “41 VC-backed fintech unicorns worth a combined $154.1B.” One driving factor is that many traditional banks are supporters and adopters of the technology, actively investing in, acquiring, or partnering with fintech startups because it is easier to give digitally-minded customers what they want, while also moving the industry progressing and staying relevant.
FinTech in Nigeria
What is FinTech and Everything You Need To Know About FinTech in Nigeria? Fintech stands for Financial Technologies. It refers to technological innovation in the financial sector, including anything and everything from mobile banking and peer-to-peer payments to distributed ledger technologies and digital currencies.
Fintech companies integrate technologies (like AI, blockchain, and data science) into traditional financial sectors to make them safer, faster, and more efficient. They are lots of firms or products that are currently taking breaks and leveraging tech to tackle financial quandaries in Nigerian society. They can be clearly divided into Payments, Asset/WealthTech, CreditTech, InsureTech, Crypto, Personal Finance, etc.
Use of FinTech in Nigeria
Banking
Mobile banking is a large part of the fintech industry. In the world of personal finance, consumers have increasingly demanded easy digital access to their bank accounts, especially on a mobile device. Most major banks now offer some kind of mobile banking feature, especially with the rise of neobanks.
Cryptocurrency & Blockchain
Running parallel to fintech is the birth of cryptocurrency and blockchain. Though both are different technologies considered outside the realm of fintech, there are complimentary applications in which all three can work together to deliver new kinds of financial services.
Investment & Savings
Fintech has caused an explosion in the number of investing and savings apps in recent years. More than ever, the barriers to investing are being broken down by companies like Robinhood, Stash, and Acorns. While these apps differ in approach, each uses a combination of savings and easy, small-dollar investing to introduce consumers to the markets.
Machine Learning & Trading
Being able to predict where markets are headed is the Holy Grail of finance. With billions of dollars to be made, it’s no surprise machine learning has played an increasingly important role in fintech. The power of this AI-subset lies in its ability to run massive amounts of data through algorithms designed to spot trends and risks.
Payments
Moving money around is something fintech is very good at. The phrase “I’ll Venmo you” is now a replacement for “I’ll pay you later.” Venmo, of course, is a go-to mobile payment platform. Payment companies have changed the way we all do business. It’s easier than ever to send money digitally anywhere in the world. In addition to Venmo, popular payment companies include Zelle, Paypal, Stripe, and Square.
Lending
Fintech is also overhauling credit by streamlining risk assessment, speeding up approval processes and making access easier. Billions of people around the world can now apply for a loan on their mobile devices, and new data points and better risk modeling is expanding credit to underserved populations.
Insurance
While insurance-tech is quickly becoming its own industry, it still falls under the umbrella of fintech. Insurance is a somewhat slow adopter of technology, and many fintech startups are partnering with traditional insurance companies to help automate processes and expand coverage.
Top FinTech Companies in Nigeria
The list below contains some of the top fintech startups in Nigeria that are offering financial services with easy accessibility to the population to know, thereby promoting financial composition and enabling seamless payments across multiple platforms. Note that the list of FinTech companies in Nigeria below is not curated in the order of their importance or popularity.
- Paystack
- Flutterwave
- Paga
- Interswitch
- PiggyVest
- Kuda Bank
- E-Transact
- Paylater (Carbon)
- Remita
Paystack
PayStack fintech payment solution is arguably the leading and ever-growing fintech company in Nigeria you should know. The Paystack is a payments platform that makes the online payments process consistent for both the consumers and the businesses they are attempting to pay. Paystack is arguably among the top Fintech companies in Nigeria that enable businesses to complete payments from clients utilizing MasterCard, Visa, and Verve cards anywhere on the planet.
Flutterwave
Flutterwave provides a payment service for global merchants and payment service providers. It provides technology, infrastructure, and services to enable global merchants, payment service providers, and helps banks and businesses build secure and seamless payment solutions for their customers by smoothening the exchange of funds.
Paga
Paga is a mobile payment company. In Nigeria, Paga is building an ecosystem to enable people to digitally send and receive money and creating simple financial access for everyone. Nigeria is paga’s first market where it is the leading mobile payment company with over 9 million customers and 17,000 agents. It was founded in 2009 by Jay Alabraba and Tayo Oviosu.
Interswitch
The well-known Interswitch is an Africa-centered integrated digital payments and commerce company headquartered in Lagos. Interswitch was founded in 2002 by Mitchell Elegbe. For short, Interswitch uses a ‘switching’ infrastructure to connect the different banks in Nigeria and provides technology for ATM cards. Nigeria’s Interswitch encourages the electronic circulation of money just as the exchange of value among individuals and associations on a convenient and steady basis.
PiggyVest
Formerly Piggybank.ng, PiggyVest enables Nigerian debit cardholders to save little amounts of money frequently with minimal effort. They automate the process of saving tiny amounts daily, weekly, or monthly; and then allowing you to withdraw for free on only set withdrawal dates thereby practically making saving more possible for you by eliminating the temptation to withdraw.
Kuda Bank
Formerly known as Kudi Money, it rebranded to Kuda Bank after being granted a license by the Central Bank of Nigeria. The startup was founded by Babatunde Ogundeyi in 2017. Kuda Bank is designed for your smartphone, free of ridiculous charges, and great at helping you budget, spend smartly and save more. The startup raised $1.6m Led by Haresh Aswani in 2019.
E-Transact
eTranzact, launched in 2003, is a multi-application, multi-network, and multi-channel electronic payment platform that supports every significant network; including AMEX, VISA, and MasterCard. eTranzact is one of the Fintech companies in Nigeria designed as a credible option in contrast to all transaction which is right now cash or checks based.
Carbon (Paylater)
Carbon is a mobile-only digital bank that provides innovative financial services to the financially underserved mass retail segment. It was formerly known as Paylater. Carbon offers bill payments, fund transfer, and savings products, in addition to loans.
Remita
Remita is a pacesetter for Fintech companies in Nigeria. They help associations (SMEs, Multinationals, State Governments, Government Agencies, NGOs, Schools and Educational Institutions, and Individuals to Receive and Make payments electronically. Developed by SystemSpecs, Remita is in fact a success story and a pride to Africa. SystemSpecs was established in 1991 by John Obaro.
Threats and Challenges to FinTech in Nigeria
FinTech businesses have an unprecedented combination of exposures that are not pondered by traditional financial institution’s products. Below are the top five challenges or threats facing FinTech businesses in Nigeria today:
Professional liability
Negligent advice and failings in client services are common risks for any company providing financial services, especially fintechs who offer new financial products through new distribution models. Fintechs can also have a reliance on third-party contractors, adding an extra liability risk due to third-party negligence.
Regulatory environment
New technology, new products and new distribution brings a wealth of opportunities, but also new regulatory exposures. Fintech companies will need to ensure they keep on top of the implementation of suitable and satisfactory risk management systems.
As the fintech market evolves, so will the regulatory environment, and a major risk for fintechs will be keeping pace with the regulators’ latest updates. Fintechs will also have to consider differing regulations in multiple territories should they operate internationally.
Theft of funds
The majority of FinTechs deal with a high frequency of funds movement. High volumes of payments, transactions and customer accounts, as well as the fast growth and implementation of new technology, leaves them vulnerable to theft. These thefts could be by an employee or an external party.
Cyber event
Given the nature of their operations, fintech companies are prime targets for cybercriminals. Network security, data breaches or even a denial-of-service attack – as well as damage and rectification costs following these incidents – should be a major concern for fintech companies.
Technology failure
Innovative technology is essential for fintech companies – it is how they have disrupted traditional financial services – but this heavy reliance on technology infrastructure means firms can be vulnerable. Technology failure can mean customers are unable to access services resulting in lost income or lost customers.
Technology failure
Innovative technology is essential for fintech companies – it is how they have disrupted traditional financial services – but this heavy reliance on technology infrastructure means firms can be vulnerable. Technology failure can mean customers are unable to access services resulting in lost income or lost customers.
Fintech businesses will need a dedicated policy to manage their evolving risks. A fintech policy should offer coverage for both liabilities arising from financial services and technology services, as well as management liability, theft of funds and cyber coverage.
Coverage can be found spread across multiple policies but a single, comprehensive policy is more cost-efficient and will prevent gaps in coverage and complications in the event of a claim.
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