Data analytics has been instrumental in the transformation of Nigeria’s financial technology (FinTech) industry. It has enabled FinTech companies to analyze vast amounts of data and gain insights that have allowed them to develop better products and services, improve risk management, and enhance the customer experience. In this article, we will explore the impact of data analytics in Nigeria’s FinTech industry today.
Data Analytics in the credit System
One area where data analytics has had a significant impact in Nigeria’s FinTech industry is in credit scoring. Credit scoring is an essential aspect of lending, and it allows lenders to assess the creditworthiness of potential borrowers. By analyzing data on a borrower’s credit history, income, and other factors, FinfiTech companies in Nigeria can use data analytics to develop more accurate credit scoring models. This has enabled them to make better lending decisions, reduce the risk of default, and improve the overall efficiency of their lending operations.
Carbon, formerly known as Paylater, is a Nigerian Fintech company that provides digital financial services such as loans, bill payments, and investment opportunities. Carbon uses data analytics in several ways to improve its services and provide better value to its customers.
One way that Carbon uses data analytics is to assess credit risk. When a customer applies for a loan, Carbon uses data analytics to analyze their creditworthiness by looking at their credit history, income level, and other factors. By analyzing this data, Carbon can determine the likelihood of the customer repaying the loan, and make decisions on whether to approve or reject the loan application.
Carbon also uses data analytics to optimize its loan products. By analyzing customer data, Carbon can identify trends and patterns in borrowing behavior, such as the most popular loan amounts, repayment periods, and interest rates. Carbon can use this information to fine-tune its loan products and offer customers loans that are better suited to their needs.
Additionally, Carbon uses data analytics to improve its customer experience. By analyzing customer feedback and transaction data, Carbon can identify pain points in its services and make improvements to address them. For example, if customers frequently complain about a particular feature or process, Carbon can use data analytics to understand the underlying issue and make changes to improve the customer experience. By leveraging data in these ways, Carbon can provide better financial services to its customers and achieve greater success as a Fintech company in Nigeria.
Data Analytics in Risk Management
Data analytics has also helped FinTech companies in Nigeria to improve risk management. By analyzing customer data and monitoring transactions, these companies can identify potential risks and vulnerabilities in their systems and take proactive steps to mitigate them. For example, payment processing companies can use data analytics to detect fraudulent transactions in real-time, thereby reducing the risk of financial losses.
An example of a FinTech company using data analytics in Nigeria is Paystack, a payment platform that helps businesses accept payments from customers. Paystack uses data analytics to gain insights into customer behavior, identify trends, and improve their payment platform.
For example, Paystack analyzes transaction data to identify patterns in payment failures, such as declined transactions, failed transactions, and payment timeouts. By understanding why payment failures occur, Paystack can help businesses reduce these failures, which in turn improves their revenue and customer satisfaction.
Paystack also uses data analytics to monitor the performance of its payment gateway, such as transaction processing times, transaction success rates, and other key metrics. By monitoring these metrics, Paystack can quickly identify and address any issues that may arise, improving the reliability and performance of their payment platform. By doing this they have improved payment processing, reduced payment failures, and provided businesses with valuable insights into customer behavior.
Moreover, data analytics has enabled FinTech companies in Nigeria to develop more personalized products and services. By analyzing customer data, these companies can gain insights into customer behavior, preferences, and needs. This allows them to develop products and services that are tailored to the specific needs of their customers. For example, digital banks can use data analytics to analyze customer spending patterns and offer personalized budgeting tools and financial advice.
Data analytics has also helped FinTech companies in Nigeria to improve the customer experience. By analyzing customer data, these companies can gain insights into customer behavior and preferences, and use this information to provide a more personalized and seamless experience. For example, mobile money companies can use data analytics to develop mobile apps that are user-friendly and easy to navigate, thereby enhancing the customer experience.
Furthermore, data analytics has enabled FinTech companies in Nigeria to streamline their operations and reduce costs. By automating routine tasks and using data analytics to identify inefficiencies in their processes, these companies can reduce their operational costs and improve their bottom line. For example, insurance companies can use data analytics to automate claims processing, thereby reducing the need for manual intervention and speeding up the claims process.
Current Issues faced by Tech companies in the FinTech space
Like any rapidly developing industry, the FinTech space in Nigeria faces several issues with data analytics. Here are a few of the most pressing concerns:
Data Privacy: One of the biggest issues facing FinTech companies in Nigeria is data privacy. With the rise of data analytics, companies have access to more personal data than ever before, and there is a risk that this data could be used for malicious purposes. To address this, FinTech companies need to ensure that they have strong data protection measures in place and comply with relevant data protection regulations.
Limited Data Availability: Another issue facing FinTech companies in Nigeria is limited data availability. Many companies in Nigeria, particularly small and medium-sized enterprises, do not have the necessary data infrastructure to provide the data that FinTech companies need to make informed decisions. To address this, FinTech companies need to work with other stakeholders to improve data availability in Nigeria.
Limited Analytics Talent: There is a shortage of skilled data analysts and data scientists in Nigeria, which makes it difficult for Fintech companies to leverage data analytics effectively. To address this, there is a need for more training and development programs to build a pipeline of skilled data analytics talent in Nigeria.
Data Quality: FinTech companies in Nigeria also face challenges with data quality. Inaccurate or incomplete data can lead to faulty insights, making it difficult for companies to make informed decisions. To address this, Fintech companies need to invest in data quality assurance processes and tools to ensure that the data they use is accurate and reliable.
Regulatory Compliance: Finally, FinTech companies in Nigeria need to ensure that they comply with relevant regulations regarding data analytics. This includes regulations around data privacy, cybersecurity, and financial reporting. Companies that fail to comply with these regulations can face fines, legal action, and reputational damage.
Potential solutions to issues faced by Tech companies in the FinTech space
There are several potential solutions to the current issues facing data analytics in the fintech space in Nigeria. Here are a few possible solutions:
Data Privacy: To address the issue of data privacy, fintech companies in Nigeria should invest in strong data protection measures such as encryption and secure data storage. Companies should also ensure they comply with relevant data protection regulations, such as the Nigerian Data Protection Regulation 2019. Additionally, companies can be more transparent about their data practices and provide customers with clear information about how their data is being used.
Limited Data Availability: Fintech companies can address the issue of limited data availability by partnering with other stakeholders to improve data infrastructure and availability in Nigeria. This can involve collaborating with government agencies, financial institutions, and technology companies to increase the availability of data and promote data sharing.
Limited Analytics Talent: Fintech companies can address the issue of limited analytics talent by investing in training and development programs to build a pipeline of skilled data analytics talent in Nigeria. This can involve collaborating with universities and training institutions to provide specialized courses and workshops on data analytics.
Data Quality: Fintech companies can address the issue of data quality by investing in data quality assurance processes and tools to ensure that the data they use is accurate and reliable. This can involve implementing data cleansing and normalization processes, and using tools such as data visualization to identify and correct data quality issues.
Regulatory Compliance: Fintech companies can ensure regulatory compliance by keeping up to date with relevant regulations, and implementing processes to ensure compliance. This can involve appointing a dedicated compliance officer, implementing regular compliance audits, and providing compliance training to staff.
In conclusion, the impact of data analytics in Nigeria’s FinTech industry today cannot be overstated. It has enabled companies to make data-driven decisions, improve risk management, enhance the customer experience, and reduce costs. Additionally, data analytics has enabled FinTech companies to expand access to financial services to previously underserved populations in Nigeria. As the industry continues to grow and evolve, we can expect data analytics to become even more important in driving innovation and growth in Nigeria’s FinTech ecosystem. With continued investment in data analytics and emerging technologies, the future of Nigeria’s FinTech industry looks promising.
Babajide is a co-founder and CTO at Welkom-U, Canada; a social-enterprise tech start up impacting the immigration space in Atlantic Canada. He is also a principal developer at Forfront in the United Kingdom, where he also attained a Master’s degree in Big Data Analytics from Sheffield Hallam University. At age 26, He was awarded a Top 30 under 30 innovator in Atlantic Canada by The Atlantic Business Magazine for his impactful work in the immigration space through Welkom-U. Babajide Will be speaking at the Social Enterprise World Forum Youth Forum program in Amsterdam on the 28th of March 2018 where he will be speaking about technology and its impact on Immigration. He can be reached on Ronnie.Sosan@Welkom-U.ca
