Update time：2021-10-07 05:10Tag: paytm real cash game
The global new normal that has compelled all businesses, including commerce and banking to go online, has opened vista of opportunities for FinTech companies who develop the apps that connect businesses to the internet, writes Emma Okonji
In the days of physical transactions, where gigantic structures were built for the ease of trading, not much was known about financial technology (FinTech) players, whose profession is about developing software applications (apps) for online transactions.
As new technologies emerge, people began to see the need to transact online businesses via the internet, without physical contact, which automatically removed the risk of carrying physical cash from one location to another, while transacting a single or multiple businesses. It also removed the risk of traveling long distance by road, sea or air, just to conclude business deals that ordinarily would have been transacted within minutes from the comfort of homes and offices, using online technology.
The FinTech players saw the need to develop payment apps that will ease business transactions, but not many merchants and business owners, including the banks, saw the need for such apps initially, until the COVID-19 pandemic struck and spread across globe, and locked down economies in 2020. The devastating effect of the pandemic, gave rise to a new normal where keeping of social distance became the norm, and that was the turning point for fast thinking FinTech players to begin to develop more financial transaction apps that enable people to trade seamlessly, without physical contact, via the internet. The situation forced businesses to go online and it became a boom for FinTech players to rise endlessly in bid to sustain online transactions that have cut across all sectors of the Nigerian economy.
FinTechs as Game-Changers
FinTechs have changed the narrative in the financial sector by digitally transforming all banking transactions to a level, where bank customers do not have need to stay in long queues, just to get access to financial transactions. With the multiple apps developed for financial transactions by FinTech players, customers can now transact seamlessly from their mobile devices, through downloaded apps that support such transactions. Developing payment apps has become a lucrative business for FinTech players, since they offer services to small, medium, and enterprise businesses, including individuals, who are bank customers.
It becomes more lucrative, since it is a knowledge-based business that has nothing to do with huge investments in physical facilities. As a knowledge-based business, the starting capital is minimal, but the return on investment is huge and rapid, since the majority of businesses have gone online and people need apps to access online businesses and to trade on them.
Founder of Interswitch, a FinTech company that plays in the payment space, Mr. Mitchell Elegbe, said opportunities abound for FinTech players, and they do not need big capital to begin. “It’s about a knowledge-based economy that requires skills and little capital that grows into large financial base over short period of time. FinTech is only a payment aspect of the general start-up ecosystem, since diversification in the start-up ecosystem has led to the development of solutions that are addressing challenges in sectors of the economy, using the same technology skill in different ways,” Elegbe said.
Pointing out that FinTechs are fast changing the banking sector and the Nigerian economy, the Co-founder and CEO of Appzone, a FinTech company, Mr. Obi Emetarom, said: “FinTech is transforming the way financial services work in Nigeria and is expected to completely replace brick and mortar operations within years. FinTech platforms will significantly reduce the cost of delivering financial services to the extent that micro, consumer and SME customer segments that were previously unprofitable to service will become attractive targets for innovative new offerings.”
According to him, access to finance would become ubiquitous, consumer spending power would increase through access to loans, velocity of money will accelerate through digital payments and idle funds within the economy would be captured more effectively through savings. “The increased efficiency in deployment of latent wealth towards productive activities will inject new funds into the productive economy and effectively stimulate economic growth,” Emetarom said.
Founder and CEO of TeamApt, Mr. Tosin Eniolorunda, said people would find it easier, faster and cheaper to do digital banking transactions from mobile devices, and that would make the services of FinTech players valid and acceptable to many. “The development speaks volume of the activities of FinTech players in the financial services sector. The digital trend in the financial services sector, makes financial transactions easier and cheaper for people, and FinTechs are driving that revolution. Nigerian FinTechs are building the economics of scale in the financial sector by expanding their solutions and services to outside of the country,” Eniolorunda said.
The Chief Executive Officer, 9PSB, one of the licensed payment service banks, and a major player in the FinTech space, Ms. Branka Mracajac, is of the view that FinTechs are playing major role in financial transaction space, and have grown tall in financial service provisioning.
She listed three major things that have made FinTechs thick and resilient in the financial service space as: the right blend of domain knowledge in finance; domain knowledge of technology and the less tangible of the other two domains, entrepreneurial talent, which is the ability to identify commercial opportunities and bring together resources required to materialise those ideas.
According to her, 9PSB is at the intersection/sweet spot between banking/financial services, mobile telephony, and FinTech. 9PSB is combining knowledge of financial service and mobile telephony to realise and bring financial services with convenience and speed to largely the underserved and unbanked demographic in the society.
Mracajac however said the resilient factor among FinTechs must be sustained by responsive and supportive regulations along with an enabling environment to encourage funding/investments and training in tech and finance. She said so long as brands would keep a finger on the pulse of the consumers and respond with iterative technology solutions, the future would see sustained tempo in the sector.
Also, giving his views as to why FinTechs have suddenly become the players to look out for, the Founder/CEO of Paga, a fast-growing FinTech company in Nigeria, Tayo Oviosu, said FinTech players are using emerging technologies like Artificial Intelligence (AI) and Analytics in addressing societal challenges in the financial industry. “At Paga, we are driven by a massive transformative purpose, to make it simple for a billion people to access and use their money. We are using technology in making life possible for our customers by building the Square/PayTM for Nigeria, making it easy for individuals to perform digital transactions and sellers to collect payments.
In solving the societal challenge of cash use, Paga has developed a home-grown solution, which customers can now download to link their bank cards or accounts, or fund the account at agents, and transact digitally,” Oviosu said.
Those who have multiple bank accounts can transact from one place with money in any of their accounts. Those who are not banked can leverage Paga’s agent network to come into a digital world. Shops can use Paga’s application to collect payments digitally and reduce the acceptance of cash, and thus reduce theft, he said.
Founder, PhastMoney, Mr. Dotun Adefioye, whose company plays in the lending space of the Nigerian FinTech community, said they have developed solutions that address unique approach to lending and growing the finances of small and medium size companies in Nigeria.
“FinTech community, especially the payment industry, is making remarkable progress, and at the same time driving the nation’s economy big time,” Adefioye said, adding that most of them were being acquired for huge sums of money, running into billions of dollars, while some go into merger to form a robust and viable FinTech company.
Managing Partner, Pelse Consulting, Mr. Boboye Oluwafemi, who runs a FinTech company said: “Emerging technology has made the world a global village. Any company that will succeed, must embrace technology and infuse technology into the business.” According to him, technology would reduce overhead cost and would help businesses to scale fast. It is the same technology that is driving FinTech businesses all over the world and Nigerian FinTech companies are taking advantage of the technology to develop innovative solutions and creating ideas that are driving development in the country and beyond.
In spite of the remarkable progress being made by FinTech players, industry stakeholders have called for collaboration among the operators in order to sustain the tempo.
According to them, collaboration would make FinTechs to reason alike and become more innovative in driving financial transactions and addressing the challenges of financial inclusiveness that could pose threat to digital transformation, which the federal government is currently driving to achieve across the country.
Oviosu, who called for collaboration in the growth of FinTech players, said:
“There is significant collaboration behind the scenes. Paga has opened up all its APIs for not just other FinTech players but the entire technology community. Now any business can leverage Paga’s APIs on Paga.dev to innovate, without worrying about payment infrastructure. Two great examples are Flutterwave’s partnership with Paga to allow for consumers to pay with their Paga accounts; and Visa’s partnership with Paga to drive contactless payments. We are also seeing traditional banks want to partner more deeply with us to leverage our retail distribution and access to the last mile.”
Although the coast is clear for FinTech players to explore endless possibilities in the payment system, but their success is not without some challenges. In May this year, the Central Bank of Nigeria raised the capital base for payment service providers to N250 million from the initial N100 million.
The new CBN framework also reviewed downward, the capital requirements for licensing of payment solution services (PSSs) to N100 million from N250 million. However, capital requirement for the switching and processing licence remains unchanged at N2 billion, including mobile money operator licence, which was retained at N2 billion.
In December 2020, CBN had approved a new licence categorisation for payment service providers and other financial institutions in Nigeria in a bid to promote a strong and credible payment system, before introducing the new framework for capital base and licensing of payment solution services providers in May this year.
Reacting to the new framework, Mracajac of 9PSB, said: “The Central Bank of Nigeria (CBN) has raised the minimum capital requirement for payment solutions service providers (PSSPs) to N250 million from N100 million. According to the capital requirements, the payment firms must have an escrow of refundable value in the CBN PSP share capital deposit account. Escrowed funds were invested in treasury bills, which would be refunded accordingly. This is mainly to avoid volatility and help shield participants in payment solution services from the risk of a loss due to economic collapse of the providers.”
Speaking on the sustainability of the new CBN framework, Mracajac said: “The thrust of our business is to provide our customers with an experience that is reciprocal to the trust that they have place in us; the financial services sector bears an expectation to deliver a stable and secure product for the consumer.
As such, the regulator decision to provide these checks and balances is to protect the consumers and afford mainly competent and viable providers to play in the industry.”