Beyond innovation, Nigerian fintechs must build strong partnerships to truly win

The previous decade has seen Nigerian fintechs disrupt the operations of conventional banks by providing digital-driven services and products. But to truly win, fintechs must embrace partnerships.

There is a operating joke that the phrase “banking the unbanked” ought to be completely erased from techspeak. The motive isn’t far-fetched. Over the years, many Nigerian fintech startups have sprung up to disrupt conventional banking identified for its unsteady infrastructure. But for all of the innovation and technology-driven comfort that digital banks have introduced, some have questioned whether or not these upstarts are fixing the issue of economic inclusion. According to this KPMG report, multiple in 3 Nigerian adults are financially excluded. Bar a couple of fintechs that seem to have hacked the company banking mannequin, most digital banks are banking the already banked.

At the Development Bank of Nigeria (DBN)’s Techpreneur 2023 Summit held on Tuesday, Olu Akanmu, president and co-CEO of OPay Nigeria, acknowledged that there are extra Nigerian fintechs centered on offering providers for present financial institution clients as an alternative of focusing on the unbanked inhabitants.

“There is a greater purpose fintechs have to fulfill to drive more extended financial inclusion, not just to chase the customers of incumbent banks even when they might have been underserved,” he mentioned in his keynote deal with.

To totally grasp the efficiency of Nigeria’s monetary inclusion journey, let’s examine it with Kenya. Per the 2021 FinAccess Household Survey, monetary inclusion in Kenya stood at 83% in 2019, with banks offering 44%, whereas non-banks—largely fintechs—contributed 39%. But in Nigeria, monetary inclusion stood at 51% in 2020, in accordance to the EFInA Access to Financial Services Survey. Of this determine, the banks led the best way with 45%, whereas solely a further 6% was served by the non-banks principally fintechs. 

Partnerships as the best way ahead

Today, fintechs and banks are converging within the enterprise of constructing platforms and providing monetary providers. While banks are fortifying their know-how to retain clients, fintechs aren’t resting on their oars to reinforce inroads into the market. Industry specialists have since made a case for collaboration between each gamers.

Akanmu, whose firm helped Nigerians cope with a money crunch in early 2023, argued that the digital improvements of fintechs when mixed with the partnerships may develop market entry and attain and scale without charge. “With deliberate partnerships for a bigger purpose to create more value, the customers and the businesses will benefit,” he mentioned.

Speaking throughout a panel session themed, ‘Promoting Innovation and Sustainable Partnerships’, Kristin Wilson, Strategy Lead at Spurt, reiterated Akanmu’s level on the essence of partnerships. “It is such a critical aspect of what makes it possible for early-stage tech businesses to thrive. It is important for businesses to continuously invest in partnerships that allow them to access customers,” she mentioned.

But partnerships are a tough enterprise. As this TechCabal article argues, Nigerian banks need fintech collaborations, however for particular and distinctive wants. “In essence, the future of fintech-bank relationships rests on meeting at a point of common needs, where original value is exchanged at mutually beneficial costs,” it acknowledged.

Akanmu admitted that it is a contentious challenge, “especially for startups that sometimes feel that they are getting the short end of the stick”. However, he urged startups to consider the chance value of connecting with larger platforms (learn: banks) to develop their attain and market entry.

Another necessary challenge tied to partnerships is the query of regulation. Nigerian fintechs are inspired to have proactive administration of regulatory and compliance points. For instance, in May, the Central Bank of Nigeria revoked the working licenses of greater than 100 monetary establishments—together with fintechs—for non-compliance. But Akanmu famous that tech gamers ought to have an open thoughts to rules: “Regulators see wider and broader than our individual businesses in terms of the macro effects of our innovations and their unintended consequences.”