Nigeria, other investments in FinTech hit $800m
Investments in Financial Technology (FinTech) in Nigeria and other parts of Africa have moved from about $198 million in 2014, to $800 million currently.Though global investments in FinTech were put at $19 billion in 2015, indications have shown that investors are increasingly attracted to the industry’s potential to tap Africa’s huge unserved/underserved population.
FinTech is a technology based business that competes against, enables and/or collaborates with financial institutions.According to KPMG in its publication titled: FinTech in Nigeria: Understanding the value proposition, the firm disclosed that Nigeria, which is one of Africa’s main FinTech investment destinations witnessed increasing deal activity over the last few years, with about 14 deals reported in September 2016 compared to just two deals in 2010.
KPMG, a professional service company and one of the big four auditors, claimed the deals were driven by growing availability and adoption of innovative FinTech solutions.
The report, which was made available to The Guardian, observed that investments in Nigeria and Africa as a whole were primarily focused on payment solutions, as other FinTech segments such as lending, wealth management, and a host of others are in a relatively nascent stage.
Coincidentally, it was discovered that the Nigerian economy, which is predominantly cash driven has been responding well to the FinTech opportunity, partly demonstrated by the exponential growth in mobile money operations from an average monthly transaction of $5 million in 2011 to $142.8 million in 2016. This FinTech penetration has been attributed to surge in eCommerce and smartphone penetration.
KPMG observed that the last three years have been formative for the Nigerian FinTech sector and have seen the emergence of numerous FinTech start-ups, incubators and investments.
The firm informed that investment in Nigerian FinTech over the last two years exceeded the $200 million mark. Nigeria, Egypt and South Africa were the top three recipients of FinTech investments in Africa over the last two years.
This is even as start-ups are increasingly accounting for a significant portion of FinTech investments, accounting for 30 per cent of the total funding raised by African tech businesses in 2015.
Similarly, the firm said reported investments in Start-ups in Nigeria have increased to $49 million in 2015 compared to $16 million in 2014.The report observed that Venture Capitalist/Angel investors were early stage investors in FinTech businesses in Nigeria in line with global trends. It however said Nigerian banks, which had previously invested in FinTech start-ups such as Interswitch and Valucard are now predominantly consumers.
The professional service firm posited that the evolution of start-ups is imperative for a successful FinTech ecosystem, stressing that the flourishing effect of FinTech start-up has been catalysed by an increasing demand for digital financial products by consumers, rampant rise of connected devices and support of venture capitalists.
According to KPMG, while start-ups are redesigning the financial services processes with their high-end technological expertise, incumbent players are also following suit and investing heavily in creating new products of their own.
It stressed that the trend is increasingly shifting from start-ups seen majorly as disrupters to also being enablers of change, “hence, there is greater collaboration being seen and expected between different players of the ecosystem with start-ups.
“However, for FinTech start-ups to maintain their momentum, they need to demonstrate to regulatory bodies that they can benefit the society by putting forth ample evidence that they can be regulated and monitored sustainably.”