Niyi Toluwalope, CEO of eTranzact International Plc, discusses the growth, challenges, and potential of fintech in underserved Nigerian communities with Josephine Ogundeji.
Fintech innovations, such as mobile and USSD payments, have transformed financial access in Nigeria’s underserved areas. Agency banking has enabled people to open bank accounts, pay bills, and conduct transactions. However, infrastructure challenges and financial illiteracy keep over 26% of Nigerians financially excluded.
Toluwalope highlights the transformation in Nigeria’s payment ecosystem, driven by fintech companies and the rise of digital payment systems like mobile money, online banking, and cryptocurrencies. Collaborations between banks, fintech firms, and telecommunications companies have spurred this growth. He notes, “We have played a critical role in this evolution by providing innovative solutions and infrastructure for other fintechs.”
Navigating a Decline in Tech Funding
Nigeria’s fintech industry saw a 74% drop in funding in 2022. Startups can survive this period by focusing on strategic mergers and consolidating resources, as seen with successful cases like Carbon & Vella and Mathesis Analytics & Migo.
The Growth Stage of Nigeria’s Fintech Startups
Fintech adoption is accelerating, especially after events like COVID-19 and the 2023 cash crunch, leading to increased transaction volumes and Bank Verification Number (BVN) registrations. From December 2023 to May 2024, BVN registrations grew by 1.75 million. Regulatory involvement and the consolidation of fintech companies have contributed to a more competitive market.
Challenges of Running a Fintech Startup
According to Toluwalope, securing capital, navigating infrastructure constraints, and retaining talent are the biggest hurdles for fintech startups. eTranzact supports startups by providing essential infrastructure, allowing them to focus on innovation and growth.
eTranzact has pioneered several fintech innovations, including USSD and mobile banking. The company raised over N2 billion in capital, followed by an additional N9 billion in 2021. Recently, eTranzact developed a mobile verification platform for veterans, streamlining pension verification processes through AI and government identity platforms.
Toluwalope emphasizes the need for strong corporate governance in Nigerian startups to prevent financial mismanagement and build investor confidence. Startups should focus on transparent financial reporting and open communication with stakeholders.
Regulatory Challenges for Fintech Startups
Startups face regulatory complexities due to multiple regulatory bodies, frequent policy changes, and high licensing costs. Toluwalope urges fintechs to engage actively with regulators to ensure compliance and sustainable growth.
Leveraging AI and Data Analytics in Fintech
AI and data analytics can enhance customer experiences by providing insights into consumer behavior and preferences. AI-driven credit scoring tools and transaction monitoring software can also help detect fraud and manage risks.
Opportunities in Rural Markets
Fintech companies have a significant opportunity to provide financial services in Nigeria’s rural areas, where many remain unbanked. However, challenges like poor internet connectivity, illiteracy, and unreliable power supply must be addressed for fintech companies to succeed in these markets.
Bridging the Funding Gap for Female-Led Startups
Female-led startups face significant funding challenges. Between January 2022 and April 2023, these startups raised only 2.9% of total funding. To bridge this gap, Toluwalope calls for a collective effort from investors, policymakers, and the business community.
Toluwalope attributes his success to consistency, adaptability, and faith. He emphasizes eTranzact’s operating mantra, “TAWID” (Think fast, Act faster, Work smartest, Innovate, and Dominate), as a key driver of the company’s achievements.
