Banking in Nigeria remains a particularly attractive sector, with over $9 billion in value pools, but despite high levels of competition, the vast majority of consumers are underserved. Lack of access to services, especially in rural areas, issues of affordability, and poor user experience all contribute to the frustration consumers experience right across the customer spectrum.
This has created an opening that fintechs have been quick to take advantage of, with many stepping up to develop enhanced propositions across the value chain to address pain points in affordable payments, quick loans, and flexible savings and investments, among others
Start-ups have moved to take advantage of increased technology penetration and high levels of unmet needs in the traditional banking sector to seize market share. In the past three years, fintech investments in Nigeria grew by 197%, with the majority of investment coming from outside the country. There has been a multitude of innovation from fintechs in product development, designing product and services to cater for the needs of millions of Nigerians and in turn fuelling the growth of e-commerce.
However, despite this the impact created by fintechs is still only at a fraction of its potential. However, the opportunity is there, particularly as Nigeria faces a significant financial inclusion challenge with around 40% of the country’s population without a bank account.
The McKinsey report also discusses the potential shift of the drivers of Nigeria’s Fintech sector due to Covid-19, with the impact of the crises on fintech being mixed so far. While lockdowns have accelerated trends driving digital adoption and financial inclusion, the disruption to employment and incomes are expected to have a negative effect on funding and specific product lines.