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FinTech, as is known today, only became mainstream late 2015 with the emergence of companies like Flutterwave and Paystack (F&P.) Arguably, they led this new wave of cool FinTechs that have emerged within the payments ecosystem.
It is crucial to establish that while I will reference them (F&P) a lot, the focus of the write-up is on the learnings that can be extracted from their market entry strategies. I will be highlighting what I consider the levers that have partly bolstered the growth within the FinTech & Payments ecosystem. They are obvious enough to be overlooked but also important enough to have created the domino effect we are currently experiencing.
Of course, traditional FinTechs like Unified Payments, NIBSS, Interswitch, SystemSpecs, etc have been operational before 2015. As such, it can’t be said, as a matter of fact, that FinTechs have only existed for 5 years. However, what is clear is that with the arrival of F&P and those after them, a new class of FinTechs have emerged. Think of it as being upgraded from economy to premium economy or business/first class for a lower fee, greater convenience, and increased speed. (The latter part isn’t possible but just imagine it!)
In 2013, I jointly started an e-commerce company and we needed to have a payment gateway set up to receive payment. At the time, the default provider was Interswitch (WebPay) and the cost of setup was N150,000 ($400). If you were a GTBank customer, half the payment N75,000 or $200 was waived by the bank. This cost was exclusive of transactional charges still to be incurred recurrently. Browsing through the email threads/correspondence we used then, the integration started on the 12th November 2013 and only went operational (after several hiccups) on the 28th February 2014, almost 4 months later.
While a couple of factors may have led to this on both sides, this is very unlikely to happen in 2021. Before this, however, we were required to fill & sign hardcopy forms (4 of them), write a cheque in favour of GTBank and physically deliver it at a designated branch. We then waited for days to receive the “Congratulations! Your company has been set-up on…” email. Sadly, the project was soon abandoned (a couple of other reasons contributed), but you can imagine my frustrations as a budding entrepreneur who had just left his bank job to start a business and was unable to receive payments.
About the same period in 2012, there were well over 17 million MSME – Micro, Small and Medium Enterprises – in the country with 99.87% of them not being registered. Even if only 0.5% (86,305) wanted to receive payments online, many would have been disqualified since they were not registered businesses which is often a requirement. Those that qualified would have had to pay the setup fee, require a developer to complete the integration, & generally have had to put up with an experience similar to mine. It was the best the market could offer, and we had to put up with it.
Less than 5 years down the line, with the introduction of zero setup fee, self-setup (the ability to implement without the need of a developer) and the shortened turnaround time were just about the changes required to trigger a new crop of FinTech in Nigeria.
While these factors may not have exclusively driven the growth of FinTechs in Nigeria, fact that F&P’s response to obvious cannot be ignored but inadvertently overlooked challenges that many businesses were facing around payment collections was a crucial growth driver.
Of course, F&P didn’t just stop there, and it isn’t the sole reason why they are successful today, but they introduced a new experience, simple as it may appear, but latent enough to give them a sizable share of the market. They prioritised agility, efficiency and customer-centricity in responding to the market. They have scaled and grown to be mammoth entities within the sub-industry.
They lowered the barriers to entry and made it possible for more business owners to collect payments, and with time, individuals could now also receive payments without the need to always share their account details. By telling the customer that they would only make money if the customer made money (transaction-based pricing model), they made a bold statement of trust.
At the onset, Flutterwave and Paystack could have hardly imagined that they would turn out to be so successful. Flutterwave has raised $64.7M while Paystack recently got acquired by Stripe for $200m.
Similar patterns have been seen for many successful companies that set out to solve simple but obvious problems, and have grown to become extremely successful today. Kiichiro Toyoda built a machine called the Toyoda Automatic Loom in response to the inefficiencies of manual weaving which lead to the founding of Toyota Motor Corporation in 1937.
Also Amazon Founder Jeff Bezos started with selling books but today has become the largest online retailer in the world. The examples are endless, but beyond FinTech and payment it teaches a few business lessons; one, it can never truly be known how successful an enterprise until inception. Secondly, perfection is attained only in motion, not at the beginning. Thirdly, the potentials of a business are hidden in the business itself. Lastly, the simplest things are oftentimes the most important.
Between 2014 and 2019 alone, the FinTechs in Nigeria have raised more than $600m in funding and 2007 alone saw a 287% increase in funding. We currently have over 200 FinTechs in Nigeria alone, and according to Frost and Sullivan, Nigeria’s fintech revenue is expected to reach US$543.3 million in 2022 from US$153.1 million in 2017.
The traditional banks like GTBank, Access Bank, Sterling Bank, etc. are embracing Holdco structures for several reasons, primary amongst them being the ability to further deepen their digital offerings and capabilities (banks in Nigeria are regulated by the CBN and activities such as digital services are not permitted within their banking license)
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