In 2017, YNaija committed a big part of its time and resources towards carefully documenting the big stories happening in the country and on the continent and highlighting the efforts of young Nigerians and Africans challenging the tired narratives around the continent through personal achievement and social good. Sometimes these stories are forgotten, buried under the avalanche of a year’s worth of news reporting and spot analyses we
Our reporting has been diverse and extensive, and we have chosen to start our reporting in 2018 by returning to these stories, to remind ourselves and our readers just how much ground was covered in 2017 and reaffirm the level of quality and care we commit to telling our stories in 2018.
We hope they resonate with you now, as well as they did when they were first published.
In 2005, my family moved from Surulere to Okearo, a little town on the outskirts of Lagos. In the summer of 2007, our house was burgled and among the things taken by the thief was my mum’s First Bank Debit card. After a couple of hours and phone calls to the thief, he had a change of heart and our property including my mum’s card was returned. An area boy that helped recover some of the items was describing the card to another area boy as a magic card that you took to a machine and it gave you any amount of money you desired. Essentially describing the debit card as a credit card with zero limits.
In the turn of the new century, technology and financial technology systems have been developed and have improved. In line with helping security and money supply in the country, the apex Bank, CBN has introduced a lot of cashless policies. While in Lagos these policies might fly, Lagos is an inadequate representation of the rest of Nigeria. My town Okearo only as recently as 2015 got its first two ATMs. Any movement outside central Lagos presents an almost accurate representation of the bulk of the rest of Nigeria; significantly lower education and technology penetration rates.
As the world constantly buzzes with advances and developments in technology, finance and the intersection between the two sectors, Nigeria plays catch up. The first ATM was installed by the National Cash Registrars for the Society General Bank in 1987. By 1989, the presence of ATMs became something like a regular phenomenon in select banks and locations mostly in Lagos, Abuja and some parts of Port Harcourt. The application of technology in finance and banking has been a little dicey with Nigeria lagging in internet and technology penetration. ATMs finally became popular in the mid-2000s, around the same time with the GSM penetration in the Nigerian scene.
The introduction of mobile telephony brought with it a lot of potential to the Nigerian banking system but first, the system had to become affordable for everybody. The problems of mobile telephony and internet connectivity are still the same as they were in 2002; calls still get dropped, internet speeds are not as advertised and internet connectivity is not ‘everywhere’ as it should be. There has been development though, the internet penetration rate has increased. There are also more players in the market and in the race for maximum market share, service providers are increasing improving on their offerings while trying to reduce the price to consumers. Mobile telephony has also provided customers with the opportunity to track their account balances through text messages and alerts that are gotten at the end of every transaction.
In some ways, Mobile telephony & mobile and personal internet access made fintech in Nigeria ‘open source’. I use Open Source lightly because while financial technology systems have to be airtight and without loopholes, it opened up a new market, a market we might be seeing but might not enjoy just yet. Mobile applications to provide Nigerians with ease of access to funds for transactions and remittance of bills.
The disruption of the financial services industry is real. Until very recently, banks had an uninterrupted monopoly over banking, financial, commercial, loans and investments. Not anymore. Gone are the days when people are comfortable dealing with just a single entity for all their financial needs. People simply aren’t happy with how their banks treat them and have become increasingly receptive to new solutions.
Banks have had a hard time to win back customer trust even if it’s been nearly ten years since the rumpus that was the 2008 financial crisis. This is even partly the reason why Fintech is able to enter the picture and offer services that poached users away from banks. As banks got stuck firefighting the crisis and dealing with regulation, tech was able to focus on innovation and launch products and services that became integral to people’s lives. Smartphones are arguably more valued by people over their wallets.
Paga internet launched in Nigeria in 2011 and has been on the forefront of financial technology in Nigeria. But with all of the giant strides it makes in the Lagos space, it’s very difficult to see Paga making headway in less ‘fortunate’ areas of Nigeria and rightfully so. The target market is for Nigerians that do not want the stress that comes with carrying cash around. Roughly 30% of the entire Nigeria population has access to formal financial services and roughly 50% of ATMs in the entire country are located in Lagos. Since the launch of Paga, there have been more players in the Nigerian fintech market – Paystack and Flutterwave are notable players in the market. Wallet.ng will be moving from Beta sometime in the year to join in this developing market, but for now, the target market will be the middle and upper class in developed Nigeria. This is partly because these platforms mostly exist for the purpose of transactions and not for the purpose of holding cash. Without access to high-speed internet and the subsequent development that follows in cities like Lagos and Abuja, there is hardly a market for fintech and its services all around Nigeria.
All of Nigeria has a cash bias. While this bias seems to be disappearing in the millennial generation in developed Nigeria and is now extending to other places in Nigeria as they attempt to break into ‘city’ status, this statistic is hardly a fair representation of the rest of Nigeria. This cash bias is a learned habit with Nigerians only using cash since the beginning of time and will rather perform transactions with cash only. This bias can be blamed on poor education and technology penetration rates to the rest of Nigeria but it also begs a bigger question – when does the Nigerian financial status quo change? There are a substantial amount of Nigerians that do not believe in financial institutions and do not transact with them, they prefer to instead store their cash in places other than banks or with them at all times. Change, even positive is a difficult pill to swallow as money matters require trust. To the average Nigerian, there will be no trust with an internet bank without a real office. The reason is this, the banking system and its intersection with technology are far from perfect. ATMs sometimes do not dispense cash but debit bank accounts, for a majority of Nigerians, a sixty-five naira withdrawal fee is a bad idea and leads to major distrust. In these times, Nigerians will rather give and get their monies to physical people and not machines or processes they can not vent their frustrations to. This is an education problem, it is a technology appreciation problem. This problem begs a bigger question about the quality of basic financial education as well as the spread of this education.
In Nairobi, Silicon Savannah’s, Safaricom launched M-Pesa back in 2007 and M-Pesa; an indigenous mobile payment system which preceded both Square and Apple Pay. Kenyans were fast to adopt M-Pesa; by 2013 it had 17 million users in its home country. The Apex bank of the East African country removed most of the restrictions in its banking systems especially in its entry to allow people enjoy the full benefits of mobile money and other types of fintech solutions with new entrants as service providers bringing in revenue and potential jobs.
In the future when the problems of technology penetration and education might have been fixed, there is also the question of the prevalent CBN regulation. Wema bank recently launched Alat, a mobile banking system that did not require the account holders to visit any bank. While Alat is a step up from Stanbic IBTCs offering of an online account, regulation problems might come up as the Stanbic platform still requires a visit to the bank to regularise the account. One reason cited is the CBNs demand that accounts be physically verified before being open. This means there is hardly a disruption in the financial technology space. The need for a physical bank verification only reduces the steps to owning and operating a bank account.
Money is a touchy and important subject that requires all the involved stakeholders to be accessible and accountable. For the time Fintech and all its glory settles in Nigeria, the absence of a physical bank or even the adequate branch network can prove problematic. The developing Lagos tech ecosystem and market does not provide a realistic backdrop for the rest of Nigeria. For fintech to become a reality in Nigeria, the internet service providers need to provide ‘Lagos level’ services to other parts of the country. This will mean that the governments of these other parts of the country will need to increase the appeal of their states to attract a steady flow of people and sufficient economic activity. A lot of financial and technology education needs to go into these areas too because despite being flawed and only growing, technology is here to stay and it provides an ease of access and management of personal funds.