Agpaytech’s Research

28th June, 2024

Cashless Economy
How Fintech is Reshaping
Nigeria Payment System

Agpaytech
Executive
Summary
The traditional banking sector in Nigeria has
faced numerous challenges, including limited

‘‘
access to nancial services, high transaction
costs, and low nancial inclusion rates,
particularly in rural areas.
The emergence of
The transition rom cash to digital in Nigeria’s economy signies
a paradigm shit towards a more inclusive, efcient, and digitally-
FinTech solutions
driven nancial ecosystem. has disrupted
The emergence of FinTech solutions has disrupted these
these barriers,
barriers, oering innovative digital platorms and services that oering innovative
cater to the diverse needs o consumers and businesses alike.
One of the key drivers of this transformation is the adoption of
digital platforms
mobile banking and payment solutions. and services that
Mobile penetration in Nigeria is exceptionally high, providing a
cater to the diverse
fertile ground for FinTech companies to introduce convenient needs of consumers
and accessible banking services through mobile apps and
USSD codes.
and businesses
alike. One of the
These digital platorms enable users to perorm various nancial
transactions, including payments, transfers, and savings, with
key drivers o this
just a ew taps on their smartphones. transformation is
the adoption of
Moreover, FinTech banking has acilitated nancial inclusion
by reaching previously underserved populations, such as the
mobile banking and
unbanked and underbanked segments. payment solutions.

Through partnerships with telecom operators, banks, and other In conclusion, this research stresses the transformative potential
nancial institutions, FinTech companies have extended their of FinTech banking in Nigeria, highlighting its role in driving
reach to remote areas, bringing essential nancial services to economic growth, promoting nancial inclusion, and ostering
millions of Nigerians who were previously excluded from the innovation.
ormal banking system.

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 Table of Content
Executive Summary 2

Financial Technology Ecosystem in 5

the Nigerian

Fintech Services, Applications & 9

Technologies

FinTech Digital Solutions and Services 12

Market Trends o Fintech Activities 14

FinTech Banking Use Cases in Nigeria 17

Fintech Banking Benets and Challenges 20

Conclusion 23

About Agpaytech 25

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Agpaytech 4
Financial Technology
Ecosystem in Nigeria
Financial Technology (FinTech) in Nigeria Without doubts, the Nigeria’s vibrant ntech industry has the

has grown remarkably especially after the capacity to address every digital-related challenges by utilizing

COVID19. mobile money, digital payment platforms, and wallets to connect

with underserved populations in rural and remote regions.
The implementation of the Payment System Vision 2020, open
banking regulation, blockchain foundations and the notable
enhancement in the use o cards, ATM, Point-o-Sales (POS)
terminals, electronic fund transfer and mobile payments and
other central bank reforms have led to the emergence of several
FinTech rms.

Figure 1: Fintech Ecosystem

Digital Payments InsurTech

Mobile Transfer, Digital Remittances, Digital Commerce Neobrokers, Robo-Advisors

Digital Assets Alternative Lending

Cryptocurrencies, NFT Marketplace Lending (Consumer), Crowdlending (Business)
Buy Now Pay Later (BNPL)

Alternative Financing
Crowd investing, Crowdfunding

Regulators
Central bank, Security and telecom agencies

Source: Agpaytech

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 For instance, in 2023, Statista reported there were 217 ntech Moreover, not only does FinTech focus on banking services
startups in Nigeria. The number o startups in this sector but has widened to cover non-nancial services and integrate
experienced an increase. robust payment systems in transport, education, trade, SMEs,
utility payments and others.
The huge investment and partnerships boost from both
international and local players are making FinTech oer instant,
convenient and accessible banking services.

Figure 2: FinTech building resilient ecosystem

• Investment
• Wealth
manaagement
• Money transfer
• Utility Settlement
• Remittance
• Digital payments
• Insurtech

Fintech Banks

Financial institutions Non-nancial institutions

Regulators
Other stakeholders

Source: Agpaytech

In the case o Nigeria, is Arica’s undisputed real-time payments FinTech services in Nigeria are largely focused on payments
and digital payments leader, recording 3.7 billion real-time and remittances with the majority o the rms in mobile transer,
transactions in 2021 and ranking 6th in the league table of the lending, and cross-border payments representing a share o
world’s most developed real-time payments markets (ACI, over 30%.
2022).

Most FinTech startups are concentrated in Lagos and it is the The history o FinTech in Nigeria dates back to when the rst
only African city in the top 100 Global Startup Ecosystem Report Nigerian bank started incorporating technology into their
(StartupBlink, 2023). banking system or smooth operations. Some o the early
FinTech companies in Nigeria are Interswitch, Etranzact, Precise
Financial Systems (PFS) and SystemSpecs.

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‘‘
FinTech services in Nigeria
are largely focused on
payments and remittances
with the majority o the rms
in mobile transfer, lending,
and cross-border payments
representing a share o over
30%.

Figure 3: FinTech startups in Nigeria by Sector 2023

40

35 33.5

30
% of startups 2023

25

20.00
20

15 13

9.5
10 8
5
5 3.5 3.5
2.2 1.8

0
Blockc hain Business In su rte ch In ve stec h Le nding & Payme nts & Personal Regtec h Security & IDs Others
Administratio n financi ng remittance finance

Source: Agpaytech

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Agpaytech 8
 Fintech Services,
Applications &
Technologies

‘‘
The word “FinTech” is simply “nancial” and
“technology” which describes the use of
technology to deliver nancial services and
products to consumers. FinTech solutions
This could be in the areas of banking, insurance, investing, or
have enormous
anything that relates to nance. Fintech Banks reer to a bank potential to transform
that primarily operates using nancial technology solutions.
the provision o
These banks leverage technology to oer innovative nancial nancial services
services such as online banking, mobile banking apps, digital
in Nigeria through
payments, peer-to-peer lending, robo-advisors, blockchain-
based transactions, and more. the development
o innovative
FinTech solutions have enormous potential to transform the
provisiononancialservicesinNigeriathroughthedevelopment
instruments, channels
o innovative instruments, channels and systems. and systems.

The sector has attracted substantial investment, both local The FinTech oerings go beyond payment services to ull
and international, resulting in a vibrant ecosystem of FinTech business integration in the nancial and economic market.
companies.

To the business world, FinTech activities in Nigeria are providing While some FinTech rms provide direct consumer nancial
pragmatic ideas through FinTech services, technology and services others engage in backend technology supports such
applications to improve the nancial ecosystem. as sotware-as-a-service, cloud inrastructure, regulatory
embedded (smart contracts), API, data security, and many
others.
The FinTech oerings go beyond payment services to ull
business integration in the nancial and economic market.

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 Figure 4: FinTech banking by services, applications and technology

Services
• Payments,
• Lending,
• Remittances
• Savings, etc.

Technology
• Blockain, security,
AI, E-commerce,
• DLT, APIs, cloud
infrastructure

Application
• Apps/web plat-
forms
• BaaS, Saas, APIs
• Security solutions

Source: Agpaytech

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Agpaytech 11
FinTech Digital
Solutions and
Services In most cases, FinTech partners with
conventional banks and telecom networks
In Nigeria, FinTech utilizes various digital channels to oer its to leverage the use o nancial technology
services to customers. These digital channels enable customers in providing convenient nancial services to
to access and manage their accounts, make transactions, and customers.
interact with the FinTech.

One key example is the numerous electronic banking models

Also, the availability and specic digital channels oered by such as ATMs, POS, Internet Banking, and many others. With
FinTechs in Nigeria may vary based on the individual FinTech banking activities, FinTech provides numerous banking services
strategy, technological capabilities, and customer preerences. or the consumer to choose rom.

Figure 5: FinTech banking channels

Fintech Digital
Services

Internet Card Mobile

banking payment banking

Telephone
Web ATM banking

Mobile App/
POS web

SMS/
USSD

Source: Agpaytech

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Agpaytech 13
 Market Trends
of Fintech
Activities
And one of the contributing forces to reaching this height
is FinTech products and services. FinTechs provide
banking services and nancial products through mobile
apps and websites, oering customers a convenient and
user-riendly banking experience.
‘‘
Meanwhile in Nigeria
today, the average
transaction value per
In Nigeria, FinTech has gained signicant popularity and
user in the FinTech
has been instrumental in driving nancial inclusion by segment amounts to
reaching unbanked and underbanked populations.
US$2.00k. While the
In large, the growth driver of FinTech in Nigeria can number of users is
be credited to the convergence of increased internet
expected to amount
penetration, and the mass number of Nigeria’s unbanked
and underbanked population coupled with the growing to 2.11m users by 2027,
number o customers demanding digital nancial
services.
user penetration will
be 0.4% this year and
Meanwhile in Nigeria today, the average transaction value is expected to hit 0.9%
per user in the FinTech segment amounts to US$2.00k.
While the number o users is expected to amount to 2.11m
by 2027, according to
users by 2027, user penetration will be 0.4% this year and statistics shared by
is expected to hit 0.9% by 2027, according to statistics
shared by Statista. Statista.

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Figure 6: Transaction value by segment

25000

20000 19050

16580
IN MILLION USD

15000 14250
12150
10560
10000 8365
7029 7512
6062
4722 5195
5000 3561 4172
2629 2910
1140 1769 1658
781.5 150 273.2 324.5
0 0 0 46.81 0 101
0
2019 2020 2021 2022 2023 2024 2025

Digital Assets Digital Investment Digital Payments Neobanking

Source: Statista.com

Figure 7: Average transaction value by the user

14000 13310

12000
11000

9804
10000 9499
9094 8998 9230

8000
$ Million

6000

4000
2490 2734
2000 2245
1599 1727 1807
2000

3 13 12 14 16 18 21
0
2018 2019 2020 2021 2022 2023 2024 2025 2026

Digital Assets Digital Payment Alternative Financing Neobanking

Source: Statista.com

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Agpaytech 16
 FinTech Banking
Use Cases in
Nigeria
The digital banking landscape in
Nigeria is dynamic, and new players
may emerge while existing ones may
evolve their oerings.
‘‘
These key services
and roles of FinTech
contribute to a
Most FinTechs have similar services and products
that they oer to their users. One o the signicant
more convenient,
roles o FinTechs in Nigeria is promoting nancial accessible, and
inclusion.
user-friendly
By leveraging technology and innovative business banking experience
models, FinTechs reach underserved populations
and provide them with aordable and accessible
or individuals in
banking services. Nigeria.
They help bridge the gap between the unbanked or underbanked individuals and the ormal banking sector.
These key services and roles o FinTech contribute to a more convenient, accessible, and user-riendly
banking experience or individuals in Nigeria.

However, the specic services and eatures oered may vary rom one FinTech to another.

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Figure 8: FinTech banking Use Cases in Nigeria

Digital Account Opening:

FinTech like Neobanks allow customers to open accounts entirely
online through their mobile apps or websites. This eliminates the
need for physical branch visits and paperwork, making the account
opening process quick, convenient, and accessible to a broader
population

Mobile Banking:
FinTech in Nigeria prioritize mobile banking services, providing
customers with intuitive and user-riendly mobile apps. Through
these apps, customers can perform various banking activities such
as checking balances, making transfers, paying bills, managing
transactions, and accessing nancial insights

Payments and Transfers:

FinTechs enable customers to make payments and transfers
easily and securely. They typically oer eatures like und transers
between accounts, sending money to other banks or users, and
making bill payments or utilities, subscriptions, and other services.
These transactions can be initiated and completed within the
mobile app.

Savings and Current Accounts:

FinTech provide savings account options that allow customers to
deposit and save their money. Neobanks oer current accounts
that allow customers to manage their day-to-day nances. These
accounts typically come with features like a debit card, account
statements, transaction history, and the ability to receive and send
payments.

Loans and Credit:

FinTechs enable customers to make payments and transfers
easily and securely. They typically oer eatures like und transers
between accounts, sending money to other banks or users, and
making bill payments or utilities, subscriptions, and other services.
These transactions can be initiated and completed within the
mobile app.

Value-Added Services:
FinTech oten collaborate with other nancial service providers
or ntech companies to oer value-added services. This can
include features like investment opportunities, insurance
products, virtual card, etc.

Source: Agpaytech

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Figure 9: How most FinTech rms make money

Transaction
fees

Foreign
exchange
fees
Account Subscription
maintenance fees
fees

Credit Value-added
lending services

Interest Partnership Premium

income & referrals oering

Source: Agpaytech

‘‘
While FinTech in Nigeria has been successful in
promoting nancial inclusion and oering innovative
banking solutions, it also faces several challenges in its FinTech in Nigeria
operations. faces challenges such
FinTech in Nigeria faces challenges such as customer
as customer trust
trust and awareness, as some individuals may still prefer and awareness, as
traditional banking methods. some individuals may
still prefer traditional
Cybersecurityanddataprivacyarealsocriticalconcerns, banking methods.
given the online nature o FinTechs. However, the Central
Consider factors such as the bank’s reputation, security
Bank o Nigeria has issued several guidelines and
measures, customer reviews, product oerings, and any
regulatory measures and advancements in technology
associated ees or charges.
continue to address these challenges.

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 Figure 10: Challenges of FinTech operations

• Fierce
competition
• Technology
infrastructure Cybersecurity
& fraud

Regulatory • Trust & awareness

environment • Data insecurity

Source: Agpaytech

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 Conclusion
Nigeriahasbeenexperiencingsignicant

‘‘
growth in its Fintech sector in recent
years and Neobanks are becoming the
avorite digital payment channel due to
their commitment to more transparency Furthermore,
and customer satisfaction.
the integration
The country’s large population, growing mobile phone o innovative
penetration, and limited access to traditional banking
services have created a favorable environment for
technologies such
Fintech innovation. as blockchain and
Furthermore, the integration of innovative technologies
articial intelligence
such as blockchain and articial intelligence (AI) has (AI) has enhanced the
enhanced the security, efciency, and transparency o
nancial transactions in Nigeria.
security, efciency,
and transparency of
Blockchain technology, or instance, ensures tamper-
proo record-keeping and acilitates seamless cross- nancial transactions
border transactions, thereby reducing transaction costs
in Nigeria.
and enhancing nancial accessibility.

Overall, However, challenges such as regulatory By embracing this digital revolution, Nigeria is poised
compliance, cybersecurity risks, and infrastructure to unlock new opportunities and propel its economy
limitations persist and require proactive measures towards greater prosperity in the digital age.
rom policymakers, nancial regulators, and industry
stakeholders to ensure the sustainable growth of
FinTech banking in Nigeria.

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 References
AricaNenda, ECA, & World Bank (2022). The State o Instant and Inclusive Payment
Systems (SIIPS) in Arica 2022.

Central Bank o Nigeria (2022) National FinTech Strategy, www.cbn-national-

ntech-strategy-2023.pd

Central Bank o Nigeria (2022) Payments System Vision 2025 (PSV2025)

Central Bank o Nigeria (2023). Framework or Regulatory Sandbox Operations.

Dunn, M., & Johnson, C. (2020). Payment acilities underpin the scaling o Arica’s
digital platorms. i2iacility.org

FinTech Global (2023). RegTech100-Report2023, www.ntech.global/about

GPSS (2020). Payment systems worldwide: a snapshot. www.worldbank.org

GSMA (2016). Connected Society: Digital inclusion in Latin America and the
Caribbean. https://us.docworkspace.com/d/sID_G tM_yp3ZpQY

Juniper Research (2022). Fintech payments and regtech market size.

juniperresearch.com/researchstore/intech-payments/regtech-market-size-
report

McKinsey & Company (2022). FinTech in Arica: The end o the beginning.

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About Agpaytech Ltd.
Agpaytech Ltd. is a company pioneering in the Fintech space with a ocused approach to building robust technologies or
e-commerce Card Processing Solutions or Payment Service Providers (PSPs). Additionally, we provide Compliance and
Regulatory Umbrella, Remittance-as-a-Service (RaaS), Banking-as-a-Service (BaaS), Foreign Exchange, Cross Border
Payments, and digital currency technology.
We also provide practical white paper research support to central banks, government and private institutions, economic
organizations, and NGOs in Arica. Our services expand rom research projects, state-o-industry reports, project assessment,
data collection, and consulting services in the ntech space.

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