Fintech is no longer simply a buzzword; it is an essential component of our daily lives. Even if you don’t trade bitcoins or understand how stocks work, you’ve probably used one or two fintech apps, such as online payments or mobile banking solutions.
In reality, global adoption of fintech reached an average of 33% in 2017 (up from 16% in 2015). As a result, there is no doubt that technology will continue to infiltrate the age-old financial business. Half of the CEOs polled by Capgemini believe that new entrants pose a substantial threat to incumbent providers.
But how can you even go into fintech in Nigeria? With hundreds of startups entering the market every month and billion-dollar behemoths dominating the show, it might be difficult to secure your slice of the pie.
In this post, we’ll discuss the hacks on how to start a fintech company in Nigeria, the hazards of beginning a fintech company, and how to properly manage them on your way to success.
The information provided in this article will be valuable for every startup owner wanting to enter the lucrative world of fintech.
What is a Fintech Company?
A Fintech company is a business that leverages new technology to provide innovative financial services. Fintech aims to streamline and democratize financial systems and services, making them accessible and user-friendly.
Often disruptive, Fintech companies can radically change how institutions handle money, transactions, and customer interactions, shifting power away from traditional banks and toward customers.
They can be start-ups looking to disrupt traditional financial systems, or established firms looking to innovate within their industry. Fintech companies blend finance and technology to create efficient and customer-centric financial services, transforming the way we handle money.
The innovative financial services offered by Fintech companies include:
To find out the companies under Fintech, read Top 50 Fintech Companies in Nigeria in 2023
1. Digital Wallets and Mobile Payments
Mobile payment platforms such as Flutterwave, Paystack (bought by Stripe), and Paga have grown in popularity. These systems allow customers to conduct transactions, pay bills, and even receive international payments via their mobile devices.
2. Cryptocurrency and Blockchain
Platforms for purchasing, selling, and trading cryptocurrencies are provided by companies such as TransferXO, which contribute to the adoption of digital currencies in Nigeria.
Insurance companies like Curacel are using technology to simplify insurance processes, making coverage more accessible and suited to individuals’ requirements.
4. Peer-to-Peer lending
Peer-to-peer lending services are provided by fintech companies such as Renmoney and Carbon, allowing individuals and small businesses to obtain loans without the use of traditional collateral.
5. Personal Financial Management
Fintech apps such as PiggyVest and Cowrywise enable individuals to properly save, invest, and manage their finances through user-friendly smartphone applications.
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Current Fintech Market Trends in Nigeria
The fintech sector in Nigeria is experiencing unprecedented growth with various emerging trends. One of the key trends is the rise of mobile payments due to high mobile penetration rates. There is an increasing demand for instant, digital financial transactions.
Another trend is the growing interest in digital lending platforms, which provide access to loans without the need for collateral. Such platforms are proving invaluable to individuals and SMEs alike. Cryptocurrency adoption is also gaining momentum due to the country’s large young, tech-savvy population, looking for alternatives to traditional banking.
Peer-to-peer transfers are also trending, enabling more people to perform secure and convenient transactions. Additionally, financial literacy and inclusion initiatives have increased, especially for the unbanked population, leveraging on fintech solutions to bring banking services to underserved areas.
Overall, fintech in Nigeria is becoming more innovative, inclusive, and crucial to economic growth, drawing considerable domestic and international investment.
Although not a Fintech Company, TransferXO is one of the leading platforms for cryptocurrency trading.
Don’t Fail to Read: Top 15 Companies That Buy Cryptocurrencies in Nigeria | TransferXO 2024 List
Why Start a Fintech Company in Nigeria?
The growing prominence of fintech globally is reshaping the economic landscape and creating opportunities for tech-driven financial solutions.
Nigeria, as Africa’s most populous country and one of its largest economies, offers enormous potential for fintech startups.
Below are several compelling reasons why Nigeria is a great location to start a fintech company.
1. Enormous Market Potential
With a population exceeding 200 million, Nigeria represents a significant market for fintech companies. Moreover, a large portion of Nigeria’s population remains unbanked or underbanked, presenting vast opportunities for innovative financial solutions to serve these communities.
2. Increasing Internet and Mobile Penetration
There has been an upsurge in the number of internet and smartphone users in Nigeria. This growth provides a conducive environment for the development and usage of digital financial services.
3. Government Support and Regulatory Framework
The Central Bank of Nigeria and other regulatory bodies are beginning to acknowledge the importance of fintech and are developing supportive policies and regulations to promote innovation in the financial sector.
4. Existence of Tech Ecosystem
Lagos, Nigeria’s largest city, is fast becoming a hub for tech startups in Africa, boasting a vibrant tech ecosystem, which encourages innovation and collaboration.
5. Access to Investment
Nigeria has witnessed a surge in foreign investment over the past years, thanks in part to its dynamic startup scene. The influx of venture capital indicates a high level of investor confidence in Nigeria’s tech industry.
6. Accelerating Financial Inclusion
Fintech can help accelerate financial inclusion by developing solutions that make financial services more accessible and affordable to the underprivileged and unbanked populations in Nigeria.
7. Growing Middle Class
Nigeria has a fast-growing middle class with increasing purchasing power. This demographic group is tech-savvy and eager to explore and adopt innovative financial products and services.
Nigeria’s promising market potential, government support, increasing internet and mobile penetration, thriving tech ecosystem, and burgeoning middle class, make it an ideal environment for establishing a fintech company. By seizing these opportunities, entrepreneurs can contribute significantly to Nigeria’s economic growth, financial inclusion, and digital innovation.
To know about the payment getaways in Fintech, read Top 15 Best Payment Gateways in Nigeria | 2023 List
How to Start a Fintech Company in Nigeria: 15 Easy Hacks
Fintech, short for financial technology, has transformed the financial sector worldwide. The fast-growing industry represents a new age of financial services where technology is used to enhance activities in finance.
The Nigerian market, one of Africa’s leading economies, presents vast opportunities for aspiring fintech entrepreneurs. So, if you have ever wanted to start a fintech company in Nigeria, here are 15 easy hacks.
1. Identify Your Target Niche
Before you do anything else, you must determine where you want to operate within the huge financial environment.
Our recommendation to all new entrants is to find a specialty that matches your experience and desire. Consider places where demand is increasing or where present providers are underserved.
Your most effective target niche would be one in which you are already well-versed and have contacts with specialists. Here are some of the numerous fintech market niches from which to choose:
- General banking
- Investment banking
- Money transfers
- Cryptocurrency trading apps
- Payroll services
- Personal finance management
- Credit monitoring and reporting
You should also read: Top 50 Most Successful Cryptocurrency Companies in Nigeria
2. Hire a Capable Team
Putting together a good team can help you develop your idea, grasp technical needs, and guarantee you have the essential abilities to execute. A team could be made up of the following members:
- Developers: Technical experts who can create and maintain the platform or program.
- Financial analysts: Finance professionals who can ensure your solutions’ feasibility and profitability.
- Regulatory compliance officers: These are individuals who are informed about financial regulations and can ensure that your startup remains lawful.
- UX/UI designers: Professionals who can construct an intuitive and user-friendly interface
A diverse team can have a significant impact on the course of your startup. You can choose to develop an in-house team. However, most firms should ask for funding from a reputable fintech development firm.
Furthermore, you should prioritize locating possible investors early on. This is especially true if you or your existing companies do not intend to sponsor the new fintech venture.
Don’t Fail to Read: Top 15 Tech Companies in Lagos, Nigeria | TransferXO Rankings
3. Conduct Market Research
You can measure market saturation and uncover potential gaps by looking at existing solutions in your sector. Consider investigating the following points:
- Market saturation: Determine how congested the market is. A highly saturated market may present difficulties in gaining a foothold, but an unsaturated market may provide expansion opportunities.
- Trending features: Understanding popular features and services in the present market might provide insights into what consumers expect.
- Pain points: Identify typical difficulties that people have with existing solutions, allowing you to pitch your product as a solution.
- Regulatory environment: Stay up to date on the regulatory landscape to assure compliance and anticipate potential changes that may affect your startup.
Market research validates the requirement for the involvement of a business analytics specialist. A vendor of fintech development services may offer you a compensated market analysis as part of an in some situations. This is usually a two-week component of a larger project committed to the development of a fintech product.
4. Identify a Unique Selling Proposition
A unique selling proposition (USP) refers to the unique benefit or advantage that makes your Fintech company stand out from the crowd. It could be anything from a unique feature in your mobile banking app, to lower service charges or better customer service.
When starting a Fintech company in Nigeria, having a clear and well-defined USP is crucial. Nigeria’s Fintech industry is increasingly competitive, so it’s imperative to differentiate your startup from others.
Understand what consumers need, and align your business model to deliver a unique solution. Remember, your USP should communicate the specific value or benefits consumers will gain from using your service.
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5. Obtain Necessary Licenses
In Nigeria, Fintech frequently involves navigating a difficult regulatory environment. It is critical to understand these standards early to create a compliant product. The Central Bank of Nigeria (CBN) is the major regulatory body that provides these licenses.
There are other standards related to the place or devices through which your program will be disseminated. Furthermore, to start a fintech business in Nigeria, the following licenses must be obtained:
- Banking license: A banking license is legally essential for any institution that wants to accept deposits and lend money. Institutions cannot act as banks without it, guaranteeing that only qualified entities manage public funds.
- Electronic Money Institution (EMI): An entity that is required to issue electronic money for consumer use. By limiting such services to recognized organizations, consumers are protected from any fraud or misuse of funds.
- Payment Institution (AI) authorization: Required for businesses who want to offer payment services but aren’t banks. This provides uniform standards, protects consumers, and maintains the financial system’s integrity.
Engaging in business activities without the appropriate licenses could lead to fines, sanctions, or in some cases, complete business closure. Hence, securing the right licenses should be a major step in starting your Fintech Company in Nigeria.
6. Develop a Core Idea
Based on your research, the chosen niche, and the developed USP, you may next construct a concept or product idea that meets a specific market need or need.
The domain has a wide range of possibilities. Consider the following finance startup ideas:
- Digital wallets: These apps, and even full-fledged platforms, make online transactions and money transfers easier.
- Personal finance management software: These applications assist users in managing their savings, expenses, and investments.
- InsurTech solutions: InsurTech products such as APIs, apps, cloud platforms, and so on use technology to transform the traditional insurance industry.
- Payment gateways: These encryption methods ensure that online payment operations are smooth and safe.
You should also develop a product vision. This document defines the product’s purpose, the issues it should address, and the steps that must be followed to achieve it. It should convey a larger objective and motivate every team member to achieve their best.
7. Seek for Funds
Funding is the most critical and likely most challenging aspect of beginning any business. You must demonstrate the viability of your company venture. An MVP (Minimum Viable Product) will help you differentiate yourself from other pitchers.
If you don’t have enough money to produce a full Fintech app, you can ask your tech team to create an MVP that you can demonstrate to potential investors as proof of concept and ask for investment in your Fintech firm.
You can construct a full app or software solution for the market using the cash you acquire based on your MVP. That is how all large corporations grew their products and services.
8. Partner with a Bank
Setting up a fintech company in Nigeria involves many factors and one essential aspect is to form a strategic partnership with a local bank. Partnering with a bank helps you understand the nuances of the financial sector, which includes regulatory requirements, operations, risk management, and the general banking system.
This understanding can guide your company in delivering valuable financial services. Moreover, partnering with a bank can boost credibility, widen your consumer base, and open up various business opportunities.
A well-negotiated partnership may even lead to substantial resources and infrastructure support from the bank, aiding in seamless financial transactions. Also, the bank’s large network can provide access to extensive client databases, enhancing your outreach efforts.
9. Adopt Latest Technology
A successful fintech company is heavily dependent on the adoption of the latest technologies. Today’s financial industry has significantly digitalized, thereby leading to a customer preference for online, quick, and secure financial transactions.
To stay relevant and competitive, fintech companies should be adept with blockchain technology, artificial intelligence, machine learning, cloud computing, and cyber-security.
These technologies not only help in offering advanced and diverse financial services but also play a crucial role in ensuring customer satisfaction, security, and improved service delivery.
Utilizing such technology could allow for real-time analytics, accurate risk assessment, personalization, automated customer service, and robust security measures. The adoption of the latest technology also increases efficiency, minimizes human errors, and helps to drive growth in the long run.
10. Leverage Local Knowledge
Leveraging local knowledge is an essential strategy to successfully starting a fintech company in Nigeria. This refers to the idea of integrating insights from local professionals, financial institutions, and consumers into the development and operations of your company.
By doing this, you can gain an understanding of the market conditions, customers’ needs, financial regulations, cultural factors, and prevailing technology trends in Nigeria. You’ll also learn about unique opportunities or challenges that exist in the Nigerian fintech space, enabling you to craft targeted strategies.
This may lead to improved acceptance of your services and potential collaborations, contributing to the success and sustainability of your business.
Leveraging local knowledge includes:
- Studying the Nigerian market’s behaviors
- Listening to customers’ feedback
- Networking with local industry leaders and regulatory authorities
- Incorporating Nigerian financial customs into your operations
- Keeping up-to-date with relevant regulatory changes
11. Provide Secure Platforms
As a fintech company, you are expected to handle large amounts of sensitive financial data. It is, therefore, crucial that you prioritize providing secure platforms for your services. Customers need assurance that their money and information are safe when they engage with your fintech platform.
Investing in cutting-edge security systems and protocols will help prevent data breaches, fraud, and other cyber risks that could tarnish your reputation and compromise your customers’ trust.
Securing your platform starts from the development phase by building strong, intrusion-proof algorithms and coding, adopting two-factor authentication, encryption, secure cloud storage, etc.
It also involves ongoing risk assessment, regular software updates, educating your customers about security measures, and immediate responses to security incidents. Remember, the reputation of your fintech company in Nigeria heavily relies on the security of your platform.
12. Make Your Brand Known
To launch a successful fintech company in Nigeria, a clear, defined, and recognizable brand is crucial. Building a brand entails creating a unique company name, logo, and style that embodies the company’s ethos and services offered.
In addition, a solid marketing strategy that uses various mediums like online, social media, print, and networking events is pivotal. Networking not only increases visibility but also provides an opportunity to forge partnerships with other companies in the same space.
As you establish your brand in the industry, make sure your brand’s voice, vision, and mission remain consistent across all platforms and interactions to achieve trust and credibility.
13. Offer Customer Support
Starting a fintech company in Nigeria would entail putting structures in place that guarantee top-notch customer support. Quality customer support enhances the customers’ overall experience and can become a critical aspect of your value proposition.
Set up various support channels such as phone lines, emails, and social media, ensuring quick response time and availability around the clock. Engage highly skilled professionals to manage these channels who are knowledgeable about your product or service, to assist in addressing customer inquiries and complaints efficiently.
Effective customer support builds customer trust, fosters client relationships, and bolsters the reputation of the company, enhancing overall customer retention and acquisition.
14. Plan for Scalability
Scalability is the capability of your Fintech Company to cope and perform under an increased or expanding workload. It entails how well your startup can scale up to meet growing market demands.
In planning for scalability in Nigeria, you need to create a business model that is not only sustainable but can accommodate future growth. Scalability requires more than just adding more resources. You need efficient, robust, and flexible systems to handle expansion.
Whether it’s managing more clients, developing new product lines, or expanding geographically, the business processes and technological infrastructure should be designed from the outset with scalability in mind. The key is to develop strategies and solutions that allow the business to grow, adapt, and succeed over time.
15. Pursue Continuous Innovation
The financial sector, especially the fintech landscape, is highly dynamic, making continuous innovation a necessity. In Nigeria, where the market is emerging, a startup’s ability to continually evolve and create new products and services can significantly impact its success.
Fintech firms need to create a culture of innovation, investing in research and development to anticipate market trends, understand evolving customer needs, and respond accordingly. The emphasis on innovation should extend beyond products and services to business models, operational processes, and customer engagement strategies.
Also, with advancements in technology such as blockchain, artificial intelligence, machine learning, etc., fintech startups in Nigeria need to continuously explore these avenues to stay ahead of the competition and provide relevant solutions to their target market.
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What Should Be Avoided When Launching a Fintech Company in Nigeria
Starting a Fintech company is not a piece of cake that can be accomplished suddenly or by magic, and clever work will not work if you put all of your efforts into it. Experts believe that with knowledge and skill, Fintech companies may succeed.
Although Fintech companies face similar risks, as do all organizations, you can still thrive in this market by recognizing the hazards and correctly executing them.
Let’s look at some of the most common pitfalls to avoid while beginning your Fintech business!
1. Ignoring the Needs of Your Target Niche
What is a requirement in any business? Knowing and meeting the needs of the consumer, correct?
So, make sure you don’t skip out on any opportunity to match customer wants and don’t leave any stone unturned in determining your specialized market interest. Do this first when you establish the firm because failing to do so will fail in your business.
2. Inability to concentrate
When it comes to the financial technology industry, distraction is not an option. The Fintech domain necessitates entire concentration to generate fresh ideas and suggestions regularly. Having a well-planned idea to follow through on is essential.
3. Hiring Average Workers
In its early stages, a business requires the appropriate skills to function as a cohesive team. However, hiring and retaining professionals may be pricey. However, to grow in the sector, professionals must be hired.
As a compromise, consider hiring an off-shore developer team from a low-cost region. Continue to hire remote workers until you can afford to hire high-paid app developers.
4. Inadequate Capital
Proper equity capital is required in any organization, and Fintech startups are no exception. As a result, be sure you have enough money. With technical advancements and staff, a Fintech business might become expensive.
Taking legal regulations can also be pricey at times. So, to eliminate all of the accumulated expenditures, a proper approach must be implemented. It will help you thrive in business in the long run.
5. A Difficult Payment Process
Never commit this error. Customers will always find a method to connect to the internet. As a result, if any stone is left undisturbed (poor user experience), it will depart instantly.
To avoid the switching stage, make the checkout process as short as feasible to facilitate payment processing.
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Registration of Your Fintech Company with the Corporate Affairs Commission (CAC)
Every individual, whether local or foreign, who wants to establish a Fintech startup or firm in Nigeria must first register with the CAC. The following is the method for registering a corporation with the CAC:
Check with the Corporate Affairs Commission (CAC) to see if the suggested company name is available and reserve it.
The following information must be included in an application form for company registration (Form CAC 1.1)
- Address of the company’s registered office
- Authorized Capital of the Company- A local company’s ordinary authorized share capital is One Million Naira (N1,000,000).
- Details about two directors and shareholders.
- A Legal Practitioner’s Statutory Declaration of Compliance with CAMA Requirements
The following documents are necessary for the second stage and completion of the CAC incorporation:
- Signed and stamped copies of the Memorandum and Articles of Association
- Where applicable, original documents authorizing incorporation.
- Each director or shareholder must provide a photocopy of the data page of their passport or national identity card.
- If the shareholders are foreigners, the company/Fintech is required by law to complete further registrations. They are as follows
- NIPC (Nigeria Investment Promotion Commission) registration
- Permit for Business
- NOTAP (National Office of Technology Acquisition and Promotion) registration
To properly operate in Nigeria, a Fintech company must first register with the Corporate Affairs Commission (CAC).
Following registration with the CAC, the company would apply for the necessary licenses with other regulatory bodies, such as the Central Bank of Nigeria, the Nigerian Communication Commission, and so on.
If the FinTech company wants to start a money lending business, it may need to get a license from the various state government organizations that oversee the money lending industry. The license obtained by a Fintech firm impacts how it functions.
Frequently Asked Questions
How is the Fintech industry in Nigeria?
Nigeria’s fintech industry is experiencing rapid growth, with many startups emerging and gaining global recognition. This growth is fueled by high mobile and internet penetration rates, a youthful population, a large unbanked populace, and supportive regulatory reforms.
How can I raise capital for my Fintech company?
Fintech startups in Nigeria often raise capital through personal savings, grants, venture capital firms, angel investors, bank loans, crowdfunding, and partnerships with established financial institutions.
How do I register a Fintech Company in Nigeria?
In Nigeria, starting a fintech company requires registration with the Corporate Affairs Commission (CAC). Additionally, certain financial services like deposit-taking, foreign exchange, and payment services may require licenses from the Central Bank of Nigeria (CBN).
Starting a fintech company in Nigeria demands in-depth knowledge of the fintech sector, solid business strategies, sufficient funding, an understanding of the regulations set by CBN and other governing bodies, a resilient team, and a product that effectively solves market needs. Success in this industry may not come overnight.
Patience, resilience, creativity, and dedication to understanding customers’ changing needs and behavior are vital.
Despite the challenges, the rewards can be fulfilling, contributing to Nigeria’s growing economy and making financial services more accessible and convenient for everyone.