How Nigeria can leverage the rise of fintech for economic progress

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Fintech -financial technology concept Image by Putilich from Getty Images

Fintech is driving the transformation of Nigeria’s traditional banking systems at an unprecedented pace, increasing the reach and efficiency of financial services in Africa’s most populous country.

Through mobile banking, digital payments, and other innovations, fintech is extending financial services to previously underserved communities, driving financial inclusion and widening economic opportunities.

There is much growth potential in the sector. A 2022 McKinsey report projects that Africa’s financial services market could grow at about 10 percent per annum, reaching around $230 billion in revenues by 2025. Nigeria’s fintech sector makes up about one third of Africa's fintech market.

However, about half of Nigeria’s adults remain unbanked or underserved, primarily due to the limitations of traditional banking infrastructure. This is especially true in rural and underserved areas, where physical bank branches are scarce or nonexistent.

Nigeria's dynamic fintech sector holds the potential to bridge those gaps with mobile money and digital payment platforms and wallets to reach underserved populations in rural and remote areas.

One example is Quickteller Paypoint, an agency banking platform launched by Interswitch, an IFC partner, that is helping individuals and smaller businesses access financial services.

Agency banking is a model where traditional banks partner with local businesses or individuals, known as agents, to provide essential financial services, including cash deposits, withdrawals, and payments. Through an extensive network of agents nationwide, Quickteller Paypoint is providing these services and more in financially excluded locations across the country.

Fintech companies are also collaborating with traditional banks to tailor services to the evolving needs of Nigerian consumers and businessesThese offerings pair a range of traditional banking products such as savings accounts and bill payments with innovative tech solutions such as lending platforms, virtual investment advisors, digital insurance products, and digital remittance solutions.

For example, Interswitch is partnering with commercial banks in Nigeria to provide services including management of automated teller machines (ATMs), acquisition and issuance of Verve cards – a chip debit card, owned by Interswitch Group, and accepted across all payment channels in Nigeria – as well as customizable mobile banking solutions such as USSD banking and mobile wallets that provides convenient, low-cost access to financial services.

In addition, Rave – a white label payment gateway service (a gateway system that allows brands to process online payments using their brand name while using third-party services) – is provided by Flutterwave, a fintech company that provides payment solutions for merchants and powers online digital payment collection across major banks in Africa.

Fintech offers more widely accessible financial products that can help close the unmet credit demand of micro, small and medium sized businesses in the country. A 2022 IFC Nigerian SME Finance Market report estimates this is around 13 trillion Nigerian naira (equivalent to US$9 billion today). These products include invoice financing services, supply chain finance solutions, inventory management systems, data analytics tools, digital capital investment, digital assets, neo banking, and digital accounting and bookkeeping tools tailored to their needs.

Of course, none of these fintech products are possible without reliable internet infrastructure and services.

To increase broadband penetration, IFC invested $100 million in a bond issued by telecoms and tech solutions company, Liquid Telecommunications, in 2021 to expand its digital infrastructure across Africa, including Nigeria. The more the private sector gets involved in expanding broadband penetration to enhance connectivity and market access, the more opportunities are created to foster innovation, optimize operations, and leverage market opportunities.

The rapid growth of Nigeria's fintech sector is a positive force for economic development, financial inclusion, and innovation, shaping a more inclusive and digitally empowered economy, with its impact resonating far beyond its borders, and radiating throughout the broader African region and beyond.

This Opinion piece by Dr. Dahlia Khalifa, International Finance Corporation (IFC)’s Regional Director for Central Africa and Anglophone West Africa, was first published in Nigeria’s The Guardian Newspaper.

Dahlia Khalifa

Regional Director for Central Africa and Anglophone West Africa

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