Nigeria has a population of over 200 million, which correlates to its big economy. The country’s technology sector has been booming for the past few years. The contribution of the ICT sector to the GDP was 17.47% in 2023 [NBS]. Nigeria’s technology and financial landscape has changed due to the rise of FinTech.

Over the past decade, the growth of financial technology startups has accelerated. Large local and international investments fueled this acceleration. The total funding received by Nigerian startups reached $1.2 billion in 2022. These innovations are reshaping the economy. They are also pivotal in promoting financial inclusion in Nigeria. A large segment of the population had limited access to traditional financial services. These innovations are driving the change.

Over the last decade, Nigeria’s bankable adult population has been increasing. The financial exclusion rate stood at 41.6% in 2018. Due to the boom of mobile money platforms, it had reduced to 26% in 2023. As of 2023, there are 217 FinTech startups operational in Nigeria [Statista]. The banks have been working on FinTech to increase customer satisfaction level

The Challenge

Nigeria has long faced a challenge in financial inclusion. Due to constant high inflation, the local currency (Naira) has depreciated a lot. The country’s poor banking system exacerbated this depreciation. Fewer amounts of money in the banks meant fewer ways to reduce the devaluation of the Naira.

A significant part of Nigeria’s population was also unbanked or underbanked. This made matters even worse. Several factors contributed to this high number of unbanked people. The first one is an inherent mistrust of traditional banking institutions. The lack of enough banking infrastructure was also a factor. The final factor was the geographical barriers. These barriers limited people’s access to financial services in rural areas.

The existing banking system was not equipped to handle the situation. The needs of a population with economic variety left many without the means to save or invest. The situation got so bad that people could not perform basic financial transactions.

The Solution

Nigeria’s response to the challenges was like that of Zimbabwe. They decided to introduce the unbanked population to mobile money platforms. These platforms had non-traditional banking methods. Their introduction meant that people did not have to be present at the banks. Thus, the people’s mistrust of traditional banking was also solved.

The adoption of FinTech platforms meant developing a new infrastructure. The companies had to create a completely online ecosystem. Cloud computing and online database management systems changed the entire system.

These innovations offered a variety of financial services via mobile devices. The apps allowed users to manage money, make payments, and access credit products. The people could do so without needing to access physical bank branches. This solved the geographical barriers to accessing financial services in rural areas.

Companies like Interswitch, Flutterwave, Paystacks, and Carbon have been at the forefront. They have been leveraging technology to provide various services. Digital wallets, Mobile banking, and Payment services are some of those services. The companies make sure to cater to the needs of both urban and rural populations. The FinTech sector has shifted from traditional banking to a more inclusive model. This model centers around providing digital solutions to financial service needs.

Implementation

The implementation of these FinTech solutions involved several strategic steps. Each company adopted its own implementation methods. But, a general format of these strategies includes some of the steps mentioned below.

• Development of Technological Infrastructure:
  The first step was to build a solid technological infrastructure for these platforms. The platforms had to be capable of handling larger volumes of transactions. In the initial stages, the companies focused on a mobile-first approach. This was due to the widespread use of smartphones in Nigeria.
• Regulatory Compliance and Partnerships:
  The startups had to partner with traditional banks to help broaden their user base. They partnered up with regulatory bodies like the Central Bank of Nigeria. The goal of this partnership was to ensure compliance.
• Integration Using APIs:
  Companies needed to process real-time transactions with banks. For that, they had to implement Application Programming Interfaces into their apps. This integration also allowed them to access banking data and more.
• Pilot Testing:
  The companies had to conduct the tests before the broader rollout of the application. This helped address issues, ensure platform stability, and refine the application. They also took the initiative to raise awareness among people. To let them know about the benefits of using such an app.
• Expansion of Services:
  The companies gradually expanded their services to include complex products. They adapted their services to include more products. Financial service products like loans and insurance. Expanding based on consumer needs and demands was integral to their success.
• Ongoing Support and Innovation:
  The last implementation step was providing necessary customer support. Forms of support included handling their queries and introducing new technologies. The goal of the introduction of new technologies was to enhance user experience.

The Results

The impact of FinTech on financial inclusion in Nigeria has been profound. These companies have played a significant role in increasing financial service access. Mobile agents and ATM systems per 100,000 adults have increased in the last decade [CBN].

The financial exclusion rate in Nigeria has decreased significantly. This rate tells us the percentage of people who do not have access to financial services. The rate decreased from 46.3% in 2010 to 26% in 2023.
Due to microfinancing, access to financing is much easier now. This revolution has also made the increase of digital identity possible. People can now verify their identity using biometrics and facial recognition on their phones.

Mobile money platforms have seen a dramatic increase in the number of users. Millions of Nigerians use these services for their daily transactions. The volume and value of these transactions have increased at a swift pace. This makes a significant contribution to the country’s economic activity.

The rise of these fintech companies has also affected the employment rate. An increase in FinTech companies means an increase in the workforce. Thus, this revolution has also had a positive effect on the employment rate in Nigeria.

Final Remarks

The FinTech revolution in Nigeria has changed the economy in multiple ways. However, its most significant impact has been in increasing financial inclusion. The increase in mobile monetary platforms has driven this change.

Despite the current state of the FinTech sector, it will still face many challenges in the future. The most prominent one is ensuring secured transactions through the app. The industry needs to adapt as it moves forward. It needs to tend to the financial needs of the people. It also needs to maintain the reliability it currently has among the people. These companies also need to ensure the quality of the services provided.
The technology industry will be reshaped if it successfully tackles the mentioned challenges. Resulting in the ICT sector making a significant contribution to Nigeria’s economy.