Fintech In Nigeria: Why Are We Limited To Payment & Lending?
Financial technology simply means using technology to improve finance. This means improving the crude nature of finance, especially in the traditional sector; improving accessibility, creating ease, establishing or enhancing payment to a digital level, and removing the barrier that face-to-face business transactions can cause while developing a global network where transaction becomes borderless and not limited to native and fiat currencies.
Lending & Payment
In Nigeria, lending and payment seem to be the biggest ways Fintech is developing and this is because the Nigerian finance system seems to have reduced accessibility to blockchain technology through recognizable finance entities and cutting off crypto trading through banks, either virtual or physical banks.
The fiat system is the only transactive means of exchange in Nigeria at the money and this is probably because crypto is out of the picture. In the past, Nigerian commercial banks gave access to crypto platforms like LUNO, one of the endless possibilities was that people could directly convert cash to crypto without needing peer-to-peer trading.
A Case Study Of LUNO
Back then, people didn't even need to calculate how much worth of any crypto they were using. It's directly reflected in the naira (the native currency).
LUNO on the other hand was in liason with the central banks and people could easily access their money from their bank accounts, even if they had their money stashed in Luno just five minutes ago. However, the Nigerian government has killed the prospect of blockchain technology, because they cannot see it being integrated without crypto reigning supreme.
Nigeria however has one of the biggest commercial markets and this is why payment and lending is the developing aspect of Fintech in Nigeria, and Nigeria has deteriorated greatly in this aspect. The reason is because of the monopoly they've enjoyed over the years from the central bank.
Accessibility: A Big Issue
Accessibility is one of the biggest problems that the Nigerian traditional system has been able to solve. Till now, people still fill out forms in the bank to get ATM cards, when virtual cards are being dispatched already but virtual banks already.
Nowadays, people no longer want to spend time in the bank because they want to send or receive money from abroad, people want to be in the comfort of their bedrooms, receiving money or sending money from the comfort of their homes.
However, we do not have common borderless accessibility integrated into the trusted traditional banks.
Third party System Thriving Over Traditional Banks
This is why there are third-party systems that are designed for these purposes that keep popping up every single day. Fintech start-ups in Nigeria over the years have increased and this is because of the void they're trying to fill.
The funny this is that most of these businesses still cannot go mainstream because they're not trusted and many of them perform the same function of payment and lending without tapping into other sophisticated technological enablements to improve finance in Nigeria.
Using Technology To Track Financial Crimes
For example, one aspect of technology that I expected the Nigerian commercial bank to improve on is using technology to track financial crime. One of the aspects where we should have been able to experience improvement from traditional banks is tracking the anomaly in the transactions of their customer, using this data to determine if they've been hacked or to know if someone else has stolen their bank accounts.
For example, if a person who has never purchased anything using third-party apps, suddenly requests an OTP to make an online purchase, I expect the real owner of the account contacted and the transaction flagged since it's a new form of strange transaction being entered into their database.
Why the limit?
Financial technology shouldn't just be about payment and lending in Nigeria. However, I feel that this is two of the simplest and easiest applications of fintech in Nigeria.
Financial crimes are thriving daily in Nigeria and this is because of the lack of adequate technological tools and applications that are still not being integrated.
The Nigerian traditional finance system has failed woefully and the banks' inability to provide smoothness and ease to digital transactions is the main reason why people have turned to virtual banks.
Blockchain technology In Nigeria Had Prospects
For example, I've been using my Zenith mobile bank app to do almost all my transactions, but I've switched to OPAY lately.
Can you believe that for being a virtual bank, these guys track your transactions, using these data to predict your next transactions, gives you access to whatever payment format you want, and still gives you discount on transactions, while providing real-time customer care at your beck and call.
Imagine if Crypto transaction was still a thing in Nigeria, these developers will completely murder the traditional banks with the level of sophistication and utility they'll provide.
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The financial sector and innovation are not mutually exclusive. Prior to the blockchain, the only financial innovation was the ATM machine. They must be conservative by nature, and they are hesitant to modify what works for them. Unfortunately for them, blockchain will force them into a direct that they will not accept. The financial landscape is about to undergo significant transformation.
You're absolutely right. However, blockchain entry into the some rural African countries has been really difficult. I feel that the traditional finance system of a country really needs to be open to truly undergo transformation.
Yes, I agree. I am from South Africa. Our banking system is really good, but there are a lot of people in the rural areas who has not access to bank accounts. I think the cell phone network can play a bigger role in Africa in reaching these areas.
I use first bank and I'm currently using Opay too. I want my last penny to be accounted for which the traditional banking system are busy playing with.
No doubts, these virtual banks are killing it hands down and are responsive than our primary banks.
I remember then we don't worry about third party before buying cryptos.
I think virtual banks like Opay only needs people to trust them for them to take over. People are still being restrictive and this is because of the security reasons that they might have towards virtual banks since they do not have real-time officers. Immediately virtual banks begins to gain the trust of people commercial banks in Nigeria will die
You're right about the trust thing. Opay has been around from 2019 - that's when I knew about it, though it was running so many services then.. registered Keke riders were using it to get customers which was very cheap then in Enugu state..a ride within town was #50.
So I feel there should have been big convert if it started operating as a virtual bank since its inception.
Btw I enjoy your contents.
Tbh, I only found out about opay this year when the cash crises hit. If it wasn't because of the cash crises. Opay might still remain just a virtual auxillary bank. In Lagos here, the growth has skyrocketted and they can still handle transaction very fine. I think its only a matter of time.
Thanks for reading.
I prefer virtual banks to physical banks by a big mile. Traditional banks have really not keep up with the innovations and fintech is disrupting the whole financial landscape. No doubt blockchain tech with crypto will put things on steroids if the permission was granted. I think traditional banks should realise that in this digital age, convenience and efficiency is a prerequisite.
I would not lie, Luno was very helpful but it got to a point when I stopped using it. I can't even remember what happened then...
Financial crimes are thriving and will continue to thrive if the country doe not do the needful.
Just like you, I have abandoned my Zenith account and now using Palmpay and which tracks every transaction made which can be seen.
Nigerians know the way forward but there are bigger hurdles at bay.
PS: Is that our wife's picture right there? Hehe. She's beautiful ☺.
I hardly use my zenith account for anything these days and this is because during the cash scarcity, I lost a lot of money because of zenith bank. The accessibility and ease that Open gives me is immeasurable so I'm never using zenith for why transactions again.
Like you said, financial crimes might continue to thrive.
Loo wife me? No o for where? It's a picture I told, the phone didn't belong to me.
Tell me about it. Zenith almost wrecked me and I couldn't do transactions during the day. It must be the night when I am not... 😏😏 haha
Yeah, sadly.
Oh, 😔😔 and here I was planning the colour of Asoebi for the Hive family.😂😂.
Great article on fintech in Nigeria. It is quite unfortunate what Nigerian govt and central bank did to cryptos. However, bitcoin and decentralized cryptos cannot be controlled and are here to stay, it's like trying to catch the wind.
In Kenya, the traditional banks are also going down slowly, most people use mobile money platforms like Mpesa for transactions. With fiat on the mobile and platforms like binance most people are able to trade and make money without needing banks. Just like Nigeria banning Luno, I feel the govt might one day come out and ban these platforms, but so far so good.
However, all is not lost for blockchain in Africa, it will take time but it will eventually happen. And we don't need it for money only, I was reading an article on how blockchain can bring fairness in elections too. People will in future vote on their phones, there will be no vote stealing/rigging. It will be amazing.
In Kenya, land registration is being put on the blockchain, people can log in and see which parcel of land belongs to who and which land is public or govt. So far Nairobi is done and rolling out to the rest of the country. This will make buying and selling of land easier and corruption free.
Thank you for sharing and keep enjoying your Sunday :}
I think it's a topic to look at. Financial crimes are rampant and the banks/credit card companies are obviously doing all the things they can to solve this. Using whatever they, they should build a more robust system and I think crypto/blockchain can definitely be a part of that.
Our commercial banks are still backward and not embracing virtual banking atall. Imagine the amount of time i have to spend in fcmb just to get my atm card.
Then again, lots of people have lost trust in the banking system as regards with the safety of the money entrusted to them. Three million naira was debited from my friend's savings account and its been three weeks of no good reply from the bank as to what happened to the money.
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