Fintechs’ growing market share threatens banks’ dominance
The growth of the financial technology, Fintechs, with over 200 startups, is revolutionising the financial services industry.
The sector raised about $440 million in investments in 2020 and more than $600 million in 2021, amounting to nearly a quarter of the total funds attracted by African tech startups.
According to the Nigerian Startup Ecosystem Report 2022 published by Disrupt Africa, Nigerian startups have raised a combined $2,068,709,445 between January 2015 and August 2022, a total amount higher than any other African country. This figure was culled from the raises of 383 tech startups. Fintech was the leading sector with more than one third (38 per cent) tech-startups innovation.
The growth of fintechs in the past one year has been tremendous, which is evident in their significant customer base.
Interactions with some fintech users revealed that these Fintech platforms have given them no reason to be anxious about network issues as their apps function 24/7. Most especially, Opay and Palmpay have been acclaimed for relieving Nigerians of a prolonged period of unforeseen transaction failures.
In the report compiled by Similar Web, a web analytics company, both apps became the principal alternatives to mobile bank apps for money transfers and bill payments during the cash crisis. These apps were mostly used by merchants and agents to send and receive money due to the seamless transaction they offer to users.
Recently, Opay expressed its gratitude to millions of users for increased patronage in the last three months. The payment and financial service company disclosed that its customer base crossed over 30 million registered app users, as well as 500,000 agents and 100,000 merchants.
Recent developments in the banking sector over the naira redesign policy implemented by the CBN, which led to a cash crisis in the country, prompted a large percentage of Nigerians to resort to the use of electronic channels for financial transactions. Unfortunately, the increased dependence on mobile banking apps and USSD wrenched banks’ performance and put a strain on the already weakened Digital and IT infrastructure of banks.
Transactions took longer than usual and failed transactions were not resolved until after five working days or more, leaving many customers in distress. These events instigated the transition of a large number of bank customers, who were already frustrated due to the shortage of cash , to Fintechs like Opay, Palmpay, Interswitch, Flutterwave, Kuda, Carbon, PocketApp, Moniepoint, Vbank, to mention but a few, which they revealed were more reliable and faster than traditional banks.
Indisputably, the transaction hitch experienced by bank customers was advantageous to fintechs, as the recent cash crunch skyrocketed their customer base, which they had struggled to build before the cash crunch.
Tajudeen Ishaq, a ride-hailing app driver while discussing with our correspondent, said his reason for switching to Opay was ascribed to the transaction glitch with his bank.
“I switched to Opay when I was experiencing failed transactions with my bank. Customers would send money to my account and I won’t get credited until after 48 hours. I never got some at all, on several occasions the customers claimed their accounts were debited without a reversal.
“When I couldn’t endure this anymore, I downloaded the Opay application and I haven’t had any payment issue since then. Transactions are super fast on the application with little charges. I receive money after few minutes of transaction and I do not have to worry about failed transaction anymore,” he stated.
Temitope Adenekan, a textile merchant at Tejuosho market, disclosed that her reason for choosing Palmpay over her bank was due to the fintech’s reliability and efficient services.
“Before naira scarcity, I was contemplating opening another bank account because I was tired of my bank’s constant network issue. The naira scarcity worsened the network issue, I could barely make financial transactions for weeks. Since I downloaded Palmpay, transaction on the app has been so fast and efficient. Palmpay is a life saver and it is reliable.
“I can sleep with my two eyes closed knowing that my money isn’t stuck somewhere due to network issues,” she explained.
Aside offering huge relief to Nigerians during the cash crunch, Fintechs are instrumental to promoting financial inclusion, as Nigerians can now open an account with ease using their smartphones unlike the traditional banks, where proper documentation is required to open an account.
