Thought leaders and experts in disruptive innovation have anchored the growth of FinTech in Nigeria on the ability of the many tech start-ups in the country to discover ways to be more specialised in using technology to meet the needs of different industries, without necessarily having to narrow down to payments alone.
Experts who converged at the BusinessDay FinTech summit last Friday, observed that the margins provided for returns in payment processing, which the bulk of tech start-ups are interested in, is often so minute they struggle to break even, neglecting other options such as serving niche markets and even big-data services which would have put their innovations to better use.
Regulatory compliance is also a factor considered by some intending FinTech start-ups as an encumbrance, but deemed necessary to ensure they are competent enough to handle funds committed to them by members of the public.
Dipo Fatokun, director, Banking and Payments, Central Bank of Nigeria (CBN) said at the summit, that Nigerian FinTech innovators who are driving disruptive technologies to redefine the financial system, need to meet up with global standards by at least knowing the basic requirements for them to operate in the payment space.
“Being a FinTech does not automatically mean a service provider should operate in the payment space. You can provide technology services in health, education, and other industries. But if you want to provide technological services in the payment space, then you have to be regulated,” Fatokun said.
Speaking with BusinessDay after the summit, Fatokun reiterated that for FinTech providers to legitimately operate and make impact in the market, it was important they got acquainted with relevant regulatory information. He explained that “the CBN website offers information on the different licenses that are issued, including share capital requirements, so it is very important that intending FinTech operators go there and study these requirements and see what you can do and what kind of license you need. That will assist them to get themselves prepared.”
Olayinka David-West, academic director, Lagos Business School, also corroborated the view on thinking beyond payment processing alone, saying “We need to change our thinking about data-mining and think of how to commercialise it.”
David-West, also expressed the view that “it is important to be mindful of the fact that compliance is something we cannot give up in an innovative environment. We need an environment where we can welcome innovative technologies without disrupting the financial system.
“There is no limitation to innovation as long as they are not focusing on just tech but also working to achieving harmonious balance.”
Folashodun Shonubi, managing director, NIBSS Plc, in assessing the different FinTech start-ups in the Nigerian ecosystem, holds the view that “we have a very long way to go.
“What I would compare it to, is the guys in traffic who are selling recharge cards, they’ll never scale. The companies that buy the recharge cards in bulk will scale. We have too many small (FinTech) players that cannot build a niche that will give them a sufficient market share to guarantee that business,” said Shonubi.
According to him, “there are two ways to manage it, because there will always be a break-even volume and for FinTech, it is always people and transactions. So it is either you come in at a very low cost, so your breakeven is small, or you get a captive market whose numbers are sufficient to cover your break-even, but they (FinTech start-ups) do not have anyone of them. So, most of them with good ideas will not make much of a progress, I am sorry to say.”
Uzoma Dozie, CEO, Diamond Bank Plc, in his Keynote address, however reckoned that the possibilities for FinTech remain enormous, describing it as an enabler for businesses to transform, reducing the barrier to enter markets, while allowing more access and capacity to reach more customers.
“FinTech is going to create more products, more opportunities and new markets,” said Dozie.
CALEB OJEWALE & FRANK ELEANYA
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