The engine of growth is a way to achieve responsible growth. It is reliant on the customer use of your product or service. McKinsey’s 2022 report on the future of payments in Africa predicts a 20% annual domestic revenue growth compared to 7 per cent in the global market.
The research says Africa is a land of opportunities and talent. This is evident in the participation of foreign investors in local businesses and multinationals set up. Africa has a growing diaspora community. Remittance inflows to sub-Saharan Africa have increased by 14.1 per cent to $49 billion in 2021. This follows an 8.1 per cent decline in 2020. Nigeria was the largest recipient with an 11.2 per cent increase.
On The One Hand
The African Fintech space has recorded significant growth in the past five years. We have witnessed the growth of legacy players and new players across the value chain. Data from NIBSS shows more than N286.45trillion (US$682 billion) passed through its engine in digital payments in 2021. This is a 71.9 per cent growth in digital transactions when compared to the year 2020. Investors’ interest in the region has also surged. The Nigerian Fintech space has US$741.6 million in 2021 in foreign direct investment. This was a significant year-on-year increase compared to 2020.
In the report, the Nigerian Financial Services Market, Industry, Companies, and its People by Intelpoint, Deremi Atanda the Managing Director of Remita Payment Services said the industry is growing. “Major factors that can empower the industry to continue its present trajectory include but are not limited to innovation. Fintech has pushed innovation in diverse areas.”
For instance, Fintech firms have many innovative products in the past decade. These include payments, crypto, insurtech, mobile money, remittances, cross-border exchanges, digital savings and credit, investments etc.
Atanda explained that these innovations have enabled African countries to transition from “physical retail banking to online payments.” The innovations have simplified remittances. Made trans-border solutions possible as well as deepen financial inclusion. “Innovation will continue to play a major part in redefining and repositioning the industry’s future.”
Tosin Eniolorunda, founder and CEO of Moniepoint said payment is the basis for tech products to succeed. “If you have an edutech product, for instance, and customers cannot pay for it. You don’t have a business.” He added that payment companies should lead the way since they are enabling transactions in the digital space. And recent regulations in Nigeria have highlighted the importance of digital payment solutions.
In Nigeria, digital payments have unlocked more opportunities for business. For economic growth. For advancement. Policies meant to foster these opportunities have also inevitably led to the growth of the payments space.
On The Other Hand
The Fintech firms mentioned above have payment engines that are pushing the payments frontier. They have made it easy for customers to make payments conveniently. For instance, Moniepoint started by building infrastructure for financial services providers. Part of its drive is to digitise the African economy. Remita is a household name in the ecosystem. Flutterwave is making waves with its latest launch.
“We have built backend infrastructure used by nearly every major bank in the country. We built some of the earliest digital banking platforms. We are empowering businesses to experience the full banking experience, with appropriate support to grow.” Eniolorunda explained.
In The Long Term
Olugbenga Agboola, founder of Flutterwave pointed out that the key objective of B2B payments is to collect payments quickly, easily and at a low cost. The payments industry still has many opportunities to explore the digital payments sector.
“The tap-and-pay method – mainstream in the UK – can become a mainstay in Nigeria. Payment by e-Naira via QR codes can grow even more. Instore payment through Google Pay and Apple Pay can become even more popular in Nigeria,” Agboola said.
Laurin Hainy, CEO of Fairmoney explained that the credit-led neo-banking model and net banking are still in their infancy in Africa. Despite this, the potential for the future is great. “Leveraging heavily on technology has helped to increase the reach and adoption of neo-banks remarkably. In the next decade, it is almost predictable that a neo bank will be among Nigeria’s top five banks in terms of customer base and transaction volume,” Hainy said.
In The Short Term
How are these Fintech driving payments? Remittance inflows have increased to $49 billion. The funds did not fall from the sky like manna. Did the payment engines make it happen? Yes. There are still opportunities for more growth engines.
