Squad, a payment platform launched by HabariPay, the fintech subsidiary of Guaranty Trust Holding Company Plc (GTCO), made some eye-popping announcements in its report for the first quarter of 2023 without spending top dollars on advertisement.
The bank-backed startup launched in June 2022 recorded N1.15 trillion in gateway and switching segments in less than one year of launch. The company’s report also shows that it became a profitable business within one month of launch and has hit N200 billion in monthly transactions by January 2023.
Although Squad’s transaction volume is about 5.8 percent of the N19.82 trillion reported by Moniepoint in its first quarter report, it is very significant in the context of a startup that is less than a year in the market. Moniepoint, founded in 2015, has a well-oiled marketing strategy and only recently signed Phyno and Timaya as brand ambassadors.
Squad’s performance only shows the extent to which Nigerian banks are going to secure their top share of the market in financial services amid a very motivated fintech ecosystem.
Nigerian fintech companies have been the most funded tech companies in Africa between 2020 and 2022. According to a report by Disrupt Africa, the total funding raised by Nigerian fintech companies in 2020 was $89.34 million. This improved significantly to $536.66 million, and $1.2 billion in 2022. The increasing funding activities have also meant that a few of the fintech companies saw high valuations, sometimes higher than some Tier 1 banks in Nigeria.
For example, in 2021 when OPay raised $400 million from venture capitalists, which pushed its valuation to $2 billion, BusinessDay reported that it was worth more than five of the country’s top five biggest banks. While the high valuation positions the fintech ecosystem as the most attractive segment of the emerging tech ecosystem, they also serve as a wake-up call for the traditional banks that there is much value they have left uncovered, which, if ignored, could decide who controls the market in the nearest future.
GTCO launched Squad in June 2022 with N3.5 billion ($7.59 million) in startup capital. Access Holdings, Stanbic IBTC Holdings and Sterling Bank Limited have all launched digital banking subsidiaries including Hydrogen Pay, Stanbic IBTC Financial Services and Alternative Bank Limited respectively.
In March, Zenith Bank said it has received approval-in-principle from the Central Bank of Nigeria to convert its present operational structure to a holding company. Once the bank gets substantive authorisation and the licence is delivered, Zenith plans to veer into other businesses within financial services including pensions, insurance, asset management and fintech.
“In 2023, the Group will continue to focus on sustainable growth across all its business segments, as it reorganises into a holding company structure, add new verticals to its businesses and expands into new frontiers,’ Zenith Bank noted in its first quarter 2023 report.
Experts say the launch of more bank-backed fintech companies makes the market more competitive and the consumers are the ultimate winners. Competition means access to better service options, lower charges (sometimes free), and more innovations.