In recent years, Nigeria’s fintech sector has evolved at a rapid pace, introducing innovative digital solutions that are transforming the landscape of financial transactions. These fintech companies have disrupted traditional banking by offering convenient, user-friendly platforms that enable seamless transactions for both individuals and businesses. With the rise of Point-of-Sale (PoS) systems and digital payment platforms, many Nigerians, including those in rural areas, have gained easier access to financial services. ALAO ABIODUN explores how fintech companies are emerging as formidable rivals to Nigeria’s traditional banks
For 42-year-old Mrs. Kemisola Akano, a market seller in the Ikotun area of Lagos State, partnering with a fintech firm, Moniepoint, has transformed her business operations. “Before now, I faced constant challenges receiving payments from customers. Some would make fake transfers, while others struggled with transferring to my regular account. Since I got Moniepoint’s point-of-sale (POS) machine, my business transactions have been seamless,” she said with relief.
Her experience underscores the vital role fintech firms play in bridging financial gaps, particularly during a period of banking network disruptions. Since September, bank customers across Nigeria have faced difficulties accessing their funds and completing transactions due to persistent outages in core banking applications. Frustrated customers have expressed how these disruptions have not only hindered their activities but also eroded trust in traditional banking institutions, which many see as the cornerstone of financial stability.
Fintech firms like Moniepoint, however, have stepped in to fill the void. With a network of agents nationwide, these companies are reshaping financial inclusion by offering accessible and affordable services to the unbanked and underbanked population. Digital banking, often described as traditional banking in a digital form, has struggled to meet the expectations of customers due to inconsistent service delivery. In contrast, fintechs have thrived by leveraging innovative technology and a decentralised model to meet the needs of everyday Nigerians like Mrs. Akano.
While banks struggled to adapt to the naira redesign and related pressures, fintech companies experienced a surge in demand, as many Nigerians turned to them for daily transactions. Checks by The Nation reveal that Sterling Bank was among the first to experience prolonged downtime, which began in September and reportedly lasted over five days. The disruption followed the bank’s switch from its T24 core banking application to SEABaaS, a platform developed specifically for the African market by Peerless. Sterling touted SEABaaS as a tailored solution, but the transition came with significant challenges.
Other banks soon faced similar hurdles. GTBank transitioned from Basis/Banks software to Finacle in September, following a decision made in September 2023. Zenith Bank also upgraded its core banking system, moving from Phoenix to Flexcube. Initially, Zenith Bank assured customers that its downtime would be brief, spanning just five hours on September 29 for “routine maintenance.” However, users reported prolonged issues. Access Bank followed suit with a scheduled downtime from October 12 at 10 PM to October 13 at 6:30 AM. The bank announced that the interruptions, which impacted services like the Access More app, internet banking, and ATMs, were part of a comprehensive system upgrade to enhance functionality.
These transitions, while aimed at improving operational efficiency, left customers frustrated, eroding trust in traditional banks. The situation created an opportunity for fintech firms to step in, offering more reliable and accessible services. As banks grappled with outages, fintechs thrived, consolidating their role as essential players in Nigeria’s evolving financial landscape. Amid the banking downtime, many Nigerians turned to fintech platforms like OPay, PalmPay, and Moniepoint for their financial transactions. OPay, owned by Chinese billionaire Yahui Zhou through Opera, has emerged as a popular alternative for money transfers and bill payments, particularly during periods of cash shortages.
The fintech sector in Nigeria has experienced explosive growth, with increasing investments aimed at expanding service offerings. These platforms have gained traction with the country’s youth, tech-savvy individuals, and even older adults using internet-enabled smartphones. However, in an era of rising internet fraud and online scams, experts warn of the risks associated with relying entirely on digital banks and fintech solutions.
For many Nigerians, fintechs are seen as “life-savers.” Business owners and Point of Sale (POS) operators, in particular, rely on these platforms for seamless transaction processing where banks often falter. Among them, Moniepoint has garnered significant attention following a $110 million Series C investment led by Development Partners International’s ADP III fund, alongside Google’s Africa Investment Fund and Verod Capital. This investment, which valued Moniepoint at $1 billion, solidified its unicorn status. Moniepoint, founded by Tosin Eniolorunda and Felix Ike in 2015 as TeamApt, initially built software for traditional banks. By 2019, it secured a licence for agency banking, allowing it to bridge gaps between banks and customers. The platform has since grown exponentially, handling 5.2 billion transactions worth over $150 billion in 2023. By early 2024, Moniepoint had onboarded 2.3 million businesses using its payment machines.
With its new funding, Moniepoint aims to accelerate its pan-African expansion, creating an integrated platform for businesses across the continent. The platform’s success highlights the vital role fintechs play in providing reliable alternatives and enhancing financial inclusion in Nigeria. In June 2023, Moniepoint ranked as Nigeria’s second-largest player in the point-of-sale (POS) agent network, holding a 20% market share. Its closest competitor, the Chinese-owned fintech OPay, backed by SoftBank Vision Fund and Sequoia Capital China, led the market with a 37% share, according to the Nigerian Financial Services Report.
Despite being a runner-up in POS dominance, Moniepoint has aggressively expanded its offerings. In August 2023, it entered the personal banking market, achieving a staggering 2,000% growth in personal finance customers over the past year. Its revenue growth has also been impressive, with a compound annual growth rate (CAGR) exceeding 150% in recent years. Currently, Moniepoint processes over 800 million transactions monthly, with a total value surpassing $17 billion. This rapid growth and consistent performance have solidified its position as one of Africa’s leading fintech companies.
Explaining the investment appeal of Moniepoint, Adefolarin Ogunsanya, Partner at Development Partners International, described it as one of Africa’s most exciting and fastest-growing firms. “Moniepoint is well positioned to continue its impressive growth trajectory while driving financial inclusion for underserved businesses and individuals across Africa. DPI has a long-track record of supporting businesses like Moniepoint to achieve their next stage of scale.
“The company’s combination of innovative technology, fast growth, and positive impact on the continent underpins our conviction in its future success. We look forward to working closely with Tosin and his talented team to expand Moniepoint’s customer base by providing businesses and individuals with first-class banking and payments services,” Ogunsanya stated.
Fintech companies in Nigeria have gained significant traction by offering user-friendly apps that provide a wide range of services, including loans, savings, investments, and seamless financial transactions. This growth has been particularly notable during periods of economic stress, such as the recent naira redesign and cash shortages, which pushed many Nigerians toward alternative financial platforms.
The competition within Nigeria’s fintech market has intensified as consumers are presented with a growing number of options. Start-ups are vying for customer loyalty through innovative solutions and enhanced user experiences. According to a McKinsey & Company report, Africa’s fintech industry is rapidly expanding despite political and economic challenges, with the sector’s revenue expected to reach $230 billion by 2025. These companies are increasingly dominating the financial services landscape by offering accessible and efficient payment solutions.
An analysis of fintech app performance on the Google Play Store highlights their rising popularity. Unlike Nigeria’s commercial banks, none of which have surpassed 10 million downloads, fintech apps are attracting a significant user base. This suggests a shift in consumer preference toward fintech platforms as they address gaps in traditional banking services and cater to the evolving needs of customers.
As of November 2024, several fintech apps in Nigeria have recorded impressive download numbers on the Google Play Store, reflecting their popularity and adoption among users. These include Moniepoint, which has achieved over 5 million downloads, and Paga, with over 1 million downloads. Piggyvest, another favourite, also boasts more than 1 million downloads, while Carbon and Kuda each have over 5 million downloads. Other notable apps include Okash, Palmcredit, PalmPay, Fairmoney, and OPay, each with over 10 million downloads, showcasing their dominance in the sector. JumiaPay and Smartcash PSB have similarly garnered significant traction, each crossing the 5 million download mark. Renmoney, a financial services platform, has achieved over 1 million downloads.
In June 2024, the Central Bank of Nigeria (CBN) lifted the restriction on new account openings for OPay, Moniepoint, Kuda, PalmPay, and Paga. This decision followed an earlier directive in April 2024, where the CBN had instructed these five fintech firms to pause onboarding new customers. The temporary suspension was part of a broader initiative to address fraud and ensure stricter compliance within the rapidly growing fintech industry.
“It is imperative to reiterate that OPay strictly adheres to the approved KYC verification processes and urges our esteemed customers to ensure that the due verification processes are followed for all accounts and all requirements are completely fulfilled,” a statement on OPay’s social media handles read.
Lifting the ban could be linked to the fintechs satisfying KYC standards required by the CBN. The CBN froze 1,146 bank accounts linked to unauthorised forex transactions. In May, the neobanks met with the National Security Adviser (NSA), the Economic and Financial Crimes Commission (EFCC), and the CBN to discuss lifting the ban on new customer onboarding. Authorities mandated the neobanks to restrict peer-to-peer crypto transactions. They were also instructed to update customer details and require bank verification or national identity numbers for all tiered accounts.
Stream of investments into fintech sector
The National Bureau of Statistics reports that Nigeria’s banking sector contributed 16.36% to the nation’s real GDP in Q2 2024, up from 2.98% in Q1. The sector faces increasing competition with recent payment-service banking licences granted to MTN Nigeria and Airtel Africa, joining Globacom’s Money Master and 9Mobile’s 9PSB. This positions all four major telecom operators to offer banking services, further transforming the financial landscape.
Fintech start-ups have fuelled growth in alternative lending, offering investors higher yields and borrowers faster, cheaper loans. Companies like Carbon and Branch provide lower interest rates by avoiding the operational costs of traditional banks. Among the standout players is Flutterwave, valued at $3 billion, making it Nigeria’s most prominent payment company. Founded in 2016 by Olugbenga Agboola and Iyinoluwa Aboyeji, Flutterwave facilitates online payments for merchants and businesses, attracting global investors like Visa and securing a $250 million investment in 2021 to expand its African footprint.
Despite rapid growth, Nigeria’s fintech sector grapples with challenges, including regulatory barriers, ambiguous policies, public mistrust, and a lack of understanding of e-commerce and fintech by regulators. Fraud and low digital literacy further undermine the sector’s potential, hindering its ability to match the advancements seen in developed economies.
In January 2017, the Central Bank of Nigeria (CBN) issued a circular declaring virtual currencies, including cryptocurrency, as non-legal tender in Nigeria. Banks and financial institutions were warned that any transactions involving cryptocurrency would be at their own risk. In February 2021, the CBN intensified its stance by directing all financial institutions to cease holding cryptocurrency or facilitating payments with it. The directive further instructed banks to identify and close accounts of customers engaged in cryptocurrency transactions. These stringent regulations have significantly impeded the growth of cryptocurrency in Nigeria.
Despite these challenges, Nigeria’s fintech sector has continued to attract substantial funding. Between 2014 and 2019, the industry raised over $600 million. Notable successes include Kuda Technologies, a mobile-first bank in Nigeria, which secured $25 million in Series A funding led by Valar Ventures. Flutterwave, a payment platform, achieved unicorn status in 2021 after raising $170 million in Series C funding, valuing the company at over $1 billion. The funding, led by Avenir Growth Capital and Tiger Global, helped Flutterwave expand its global reach. Its partnership with PayPal now allows international customers to pay African merchants, bridging gaps in cross-border transactions. Regulated by the US Securities and Exchange Commission, Flutterwave is also exploring a listing on the New York Stock Exchange.
In terms of consolidation, the Nigerian fintech space made history in October 2020 when Lagos-based payment platform Paystack was acquired by US payment giant Stripe in a landmark $200 million deal. This acquisition remains one of the largest in Africa’s fintech history, showcasing the sector’s potential despite regulatory hurdles.
Why Gen Z, others age brackets are embracing fintech apps
Currently, 17 companies in Nigeria are licensed by the Central Bank of Nigeria (CBN) as Mobile Money Operators, though the broader fintech sector boasts over 200 companies. These mobile money operators, often referred to as fintechs, have become a significant part of Nigeria’s financial landscape. For instance, All Adeyinka, a University of Lagos student, was able to complete a transaction at a vendor on campus simply by downloading the OPay app. After signing up and verifying his phone number, Adeyinka could choose the ‘verify account’ option, input any bank account number along with a random address, local government area, and state, and instantly create an account. “Using OPay has saved me a lot,” Adeyinka explained. “When my main bank app is down or experiencing interruptions, I just use the alternative, and it has helped me many times.”
Similarly, Kemisola Akijyemi, a young entrepreneur, described fintech apps as ‘life savers,’ especially when other banking options are unavailable or unreliable. These platforms offer convenience, helping users navigate banking challenges with ease. “For me, since Moniepoint became a top choice for me and I also have the PoS, it has helped to ease my financial transactions. I prefer to stick with the other ones because everything goes smoothly in no time because this is business. Although I have my bank app for personal use, I have their time when things go south.”
Mr. Hassan, a POS operator, shared that many Gen Z users now prefer conducting money transfers through fintech platforms rather than traditional banks, citing their convenience and ease of use. However, Mama Rukayat, a food vendor, expressed hesitation about fully embracing fintech services. Despite having accounts with several conventional banks, she remains cautious about moving entirely to fintech platforms due to concerns over falling victim to fraudsters.
Financial expert Samuel Adewunmi pointed out that the erosion of trust in fintech companies has led some conservative bank users to remain loyal to traditional banks, valuing their perceived security and reliability. In an interview, the Managing Director of PalmPay, Chika Nwosu, acknowledged that one of the biggest challenges fintech companies face in Nigeria is building trust with the public, a critical factor for their long-term growth and success. “Many Nigerians remain sceptical of digital finance platforms, feeling wary about investing in services they cannot physically see or touch. This caution is amplified by memories of past Ponzi schemes that left people with significant financial losses, fostering a general distrust toward any online financial service.
“To counter these concerns, we have taken comprehensive measures to earn and secure public trust. Firstly, we are fully licensed and regulated, and our funds are protected under the Nigeria Deposit Insurance Corporation, ensuring financial security for our clients. We also prioritise customer data protection, implementing strict privacy policies and robust cybersecurity measures to safeguard against fraud and criminal activity.”
Recently, Moniepoint appointed Bayo Olujobi as the Chief Financial Officer (CFO) of its microfinance banking subsidiary, Moniepoint MFB. Olujobi, with nearly 20 years of financial expertise, joins Moniepoint from Stanbic IBTC Bank, where he held the positions of CFO and non-executive director. This appointment follows Moniepoint’s recent $110 million funding round, which will drive its aggressive expansion plans. Moniepoint aims to digitise operations for millions of small and medium-sized businesses across Africa, with a goal of onboarding 30 million businesses over the next five years. Tosin Eniolorunda, Group CEO of Moniepoint Inc., expressed confidence in the company’s customer proposition, highlighting its secure, convenient, and easy-to-use platform for managing both personal and business finances.
In addition, Moniepoint is reportedly in discussions with the CBN to secure a commercial banking licence, which would give it a competitive edge over rivals like OPay and PalmPay. If successful, Moniepoint would become the first Nigerian fintech to hold a commercial banking license, a strategy similar to that of Nubank in Latin America, which applied for a banking license after becoming the primary bank for a significant portion of Brazil’s population.
A commercial banking license would be a major milestone for Moniepoint, highlighting its growth and its commitment to adapting to Nigeria’s changing regulatory environment. Since the CBN increased scrutiny of fintech firms in December 2023, obtaining this licence would position Moniepoint as a stable, compliant, and forward-thinking player in the country’s rapidly evolving financial ecosystem. If granted, the commercial banking licence would provide Moniepoint with the ability to operate without the geographic and service limitations imposed by its current microfinance banking license. This would enable the fintech to expand beyond the South-West region of Nigeria and offer a broader range of banking services to businesses and individuals across the country.
Fear and cybercrime
Cybercrime remains a significant hurdle for the growth of Nigeria’s digital payment system, with an increase in fraud incidents largely attributed to relaxed transaction rules and inadequate customer verification standards. Phishing attacks, where scammers impersonate legitimate bank social media handles to steal customer information, have become widespread, compromising both banks and fintech companies. These vulnerabilities, coupled with insufficient identity management systems, make fintechs prime targets for cybercriminals.
To counter these threats, fintech companies have invested heavily in robust security measures. For example, OPay has introduced the Large Transaction Shield, which uses facial recognition authentication to protect users from unauthorised transactions. This feature allows users to set personalized transaction limits, adding an extra layer of security for large or unusual transactions. Fintechs have also addressed the gaps left by traditional banks, particularly in the area of lending. While traditional banks often had stringent requirements, fintech companies have innovated by introducing online lending platforms that allow access to loans without the need to visit a physical bank. These platforms use alternative credit scoring methods, including Bank Verification Number (BVN)-linked phone numbers, to assess creditworthiness and repayment behavior.
Meanwhile, MTN Nigeria’s MoMo Payment Service Bank (PSB) is further diversifying by applying for two new licenses, the Payment Service Solutions Provider (PSSP) and Payment Terminal Service Provider (PTSP). This strategic move could disrupt Nigeria’s digital finance landscape, enabling MoMo PSB to offer a wider array of financial services. These developments reflect how fintechs are evolving to meet the needs of a more digitally-savvy population while contending with cybercrime challenges.
These new licences would allow MoMo PSB to handle payment terminals and manage backend processing for digital payments. This move opens up MoMo PSB to provide in-store and online transaction solutions for more merchants and customers.
Regulations in fintech industry and CBN’s role
Data from the Nigeria Inter-Bank Settlement Systems (NIBSS) has shown that licensed mobile money operators, including Palmpay, OPay, and 15 others, processed transactions worth N41.5 trillion between January and July 2024. This marks a significant 74% increase compared to the N23.9 trillion recorded during the same period in 2023. In 2023, mobile money operators collectively processed N46.6 trillion in transactions, the highest annual figure for mobile money in Nigeria’s history. This surge in mobile money activity mirrors the broader rise in e-payments in the country, with total transactions across all electronic channels reaching N566.3 trillion between January and July 2024.
The fintech industry in Nigeria has seen significant regulatory advancements, with the CBN playing a key role in driving these changes. In January 2021, the CBN introduced a Framework for QR Code Payments, aimed at promoting contactless payments, particularly in the wake of the COVID-19 pandemic, which saw many physical cash systems shut down. This move was part of a broader initiative to enhance digital payment solutions across the country. That same year, the CBN launched the Framework for Regulatory Sandbox Operations to support fintech start-ups in navigating regulatory challenges while fostering innovation. The Securities and Exchange Commission (SEC) also took steps to formalize investment-based crowdfunding, publishing rules to regulate this space.
Further regulatory development occurred with the CBN’s introduction of the Open Banking Framework in February 2021, making it easier for fintech firms to access financial data and create more integrated financial services. In October 2021, the CBN unveiled the eNaira, Nigeria’s digital currency, which operates alongside the physical naira, expanding digital financial inclusion and offering a government-backed alternative to cryptocurrencies.
Additionally, the Pan African Payments and Settlements System (PAPSS) was established with guidelines set by the CBN, facilitating cross-border payments across Africa. These regulatory initiatives are integral to shaping Nigeria’s rapidly growing fintech ecosystem and ensuring it develops in a secure and controlled environment.
At the 2024 Nigeria Fintech Week, the theme “Positioning Africa’s Fintech Ecosystem to Accelerate Inclusive Growth” underscored the critical role fintech plays in driving socio-economic development across Africa. The event highlighted the continent’s growing fintech presence, offering innovative solutions that address its unique challenges, but also stressed the importance of reaching underserved populations who still lack access to traditional financial services.
Emomotimi Agama, Director General of the Nigeria Securities and Exchange Commission (SEC), emphasised the need for “smart regulation” to manage the rapid growth of fintech. This approach balances innovation with essential protections for investors and market integrity. Agama advocated for flexible but rigorous regulatory frameworks that ensure fintech companies meet security, consumer protection, and market integrity standards. Aminu Maida, the Executive Vice Chairman of the Nigerian Communications Commission (NCC), also stressed the importance of strengthening regulatory frameworks for fintech. He praised Nigeria’s regulatory approach, noting that it has garnered global recognition, particularly within the International Telecommunication Union’s collaborative regulation benchmark, a testament to Nigeria’s growing influence in the fintech space.
Point-of-Sale (PoS) systems have become a popular choice for many business owners, including traders and ride-hailing drivers, as their preferred tools for daily operations. Despite the availability of banking apps, many individuals in these sectors consistently lean toward fintech apps for easier transactions. The rise of PoS systems has undoubtedly made banking more accessible, especially in rural areas, and has significantly promoted financial inclusion. However, this adoption has also led to a surge in fraudulent activities, with scammers using PoS terminals to deceive unsuspecting Nigerians.
According to data from the Nigeria Inter-Bank Settlement System (NIBSS), the number of registered PoS terminals in Nigeria reached 26.54 million within seven months, marking a 22.59% increase from the 21.65 million recorded in July 2023. This growth highlights the increasing shift toward digital payment platforms, driven by policies aiming to reduce the reliance on cash transactions. The number of newly registered PoS terminals in January 2024 alone reached 3.44 million, a 48.5% increase from January 2023.
Despite the growing adoption of fintech solutions, digital banking services in Nigeria have faced erratic service delivery, with transactions that once took minutes now stretching into days. Additionally, many customers remain skeptical of fintech platforms, largely due to a lack of awareness and understanding. This ignorance, coupled with concerns about trust and security, leads many to continue relying on traditional banks for their transactions. Fintech companies still have a significant amount of work to do in terms of public sensitization and building trust within the Nigerian market.
