The co-habitation of startups and corporates in Nigeria’s disruptive FinTech space

Last month, Nigeria’s serial tech entrepreneur, Simeon Ononobi, while speaking at Mobile West Africa 2016 revealed that his latest venture, MyAds, an application that allows users to get rewarded for allowing targeted ads to be displayed on their phones during incoming calls, broke even just two weeks after its official launch and is set for global launch. But MyAds isn’t his first successful venture as his earlier startup, SimplePay, a FinTech startup that allows Nigerian businesses to accept payments, has also been extensively successful especially after it was named the world’s best startup at the Seedstars world competition. However, Ononobi’s ventures are not the only ones that are recording successes in spaces that used to be entirely dominated by big corporate companies – affirming the popular assertion that disruption is quietly and rapidly happening in Nigeria’s tech space, much more in the fintech ecosystem.

According to Jerry Oche, Chief Marketing Officer at Streettoolz – a Lagos-based digital marketing and interactive agency, the disruption is more prominent in Nigeria’s fintech spaces where startups such as Cash Envoy, SimplePay, VoguePay, Quickteller, Etranzact, Paga, Ready Cash, Cowrie Pay among others, are redefining banking with services that are customer-friendly.

“They are basically creating new financial options and making transactions a lot easier for millions of people across the county and beyond. Accenture refers to these solutions as being the core of a consumer’s Everyday Bank,” he said.

He opined that the industry is changing faster than banking innovation.

“These startups are strong challengers and the industry is undergoing silent disruption providing new channels, new processes, reinventing consumer expectations and shifting the financial industry paradigm.”

The spaces that startups are disrupting in Nigeria are largely those that corporates used to dominate but the more common thread is the dissatisfaction of customers with their operational modalities.

One of the reasons why the financial industry is probably the most affected is the long hours that bank customers may have to spend before they can access banking services. Receiving money sent to a receiver in Nigeria through Western Union Money Transfer service is a good example of how startups are offering more customer-friendly services than banks.

For receivers that may want to visit banks, they are expected to go with a valid means of identification preferably an international passport, a driver’s driving license, or a national identity card; the receiver will also fill forms, enter codes and sign accurately and severally. After the transfer information has been confirmed, the receiver would still have to be referred to another cashier that will do the payment or direct bank deposit. This could take between 20 minutes to one hour – or days if the ‘network is down’ as the officials do tell customers sometimes.

But for those that decide to go online and use Quickteller’s Interswitch platform to have the transferred money deposited into their bank accounts, the process could be completed within two minutes if the internet network is strong enough.

“Innovations from startups too are allowing bank customers who are aware of the solutions to have little reasons to go to the banking halls. Now you can do bank transfers online and via USSD. You can pay for stuffs via PoS and things are getting much easier. The last time I was in a banking hall was last July when I went to pick up my new ATM card,” said Olawale Oladiran, a Guaranty Trust Bank customer.

According to Jerry, disruptive fintech startups are building technological blocks and are revolutionizing the way people interact with financial institutions.

“Clearly, business as usual is no longer a viable strategy in financial industry today; this profound disruption is ultimately driving innovation across the industry,” he said.

Also attesting to this development, Benjamin Benaim, Founding Partner at Seedstars, affirmed that there is a wide gap between innovation powered by startups and what corporates are offering.

“Presently, it’s like corporates are fairly isolated and protected from the disruption but disruption is coming and it is coming really fast,” he said.

He called for increased level of awareness among the corporates on the onslaught of innovation-powered disruption in their spaces. When they are aware of this development, he said it would become much easier for them to find a space to play.

“We’ve worked with corporates at different platforms and levels and we’ve realized that education of corporates is a very important point,” he said.

According to him, corporate organizations that are aware of the increasing preference for startups in their spaces are already making moves to remain relevant and competitive.

He said: “Corporates can identify startups that can adequately utilize their expensive technologies and we are also helping corporates to identify startups that can add value to their businesses. Corporates need innovation and they know that if they don’t innovate they’ll become the next Kodak and they will stop growing which means they are dying.

“They have also realized that innovation is not all about money. You can throw as much money as you want on innovation but if you don’t have proper execution, it won’t happen. We work together around mandates and we identify values. We help them find investment opportunities and they co-invest with us.”

Some of the corporate companies are investing in innovations and are partnering with startups. A good example is Nigeria’s GTBank. Following its realization of the increasing preference of customers for banking services outside the banking hall, it decided to invest in the development of a service that allows its customers to transfer funds, check balance and make transactions such as airtime purchases via USSD services. Even though the service is extensively commended and seen as the most popular USSD service in the country, investigation revealed the bank rode on the backbone of a technology developed by a local fintech startup.

Based on the experience of how his company and other Nigerian fintech startups are disrupting the payment scene in Nigeria, Ononobi believes that what is happening in the fintech space is an attestation to the bright future for the startup ecosystem in Africa.

“I believe the future is bright and entrepreneurship will run Africa and make Africa great. It’s growing and will continue to grow. The disruptions will continue in different sectors and it will only be good for Africa. I believe that a future with brightness will fall amongst our generations to come and Africa will be one of the greatest continent solely due to skilled and strong entrepreneurs,” Ononobi said.