AI, AfCFTA, embedded finance to shape fintechs’ 2025 — Oturu

Davidson Oturu, General Partner at Nubia Capital, a US-based Venture Capital Firm focused on funding and investing in tech-enabled startups in Africa and North America, speaks to BusinessDay’s Boluwatife Omotayo about the Nigerian fintech industry and projections for 2025.

A lot happened in the fintech sector in 2024. As the year wraps up, how did the African fintech ecosystem perform in 2024?

It’s been an exciting yet challenging year. We’ve seen some major wins, like Nigeria’s Moniepoint and South Africa’s Tyme achieving unicorn status, which shows African startups’ global potential, and fintechs continue to drive financial inclusion. Solutions like digital wallets, mobile payments, and instant loans are making a real difference, especially in underserved regions, by giving more people access to savings, insurance, and credit.

On the funding side, fintech raised $1.6 billion this year. While that’s down from $1.9 billion in 2023 to $2.7 billion in 2022, it’s still significant. The decline reflects global challenges (inflation and rising interest rates), but fintech remains the dominant force in African tech investments, pulling in about 40 percent of all funding.

Regulation has been a mixed bag. Stricter rules in crypto and lending have created obstacles, but initiatives like Nigeria’s open banking framework are laying the groundwork for future growth. What stands out, though, is the sector’s resilience. Fintechs are adapting through innovations like micro-loans, embedded finance, and agent banking, which are helping them reach rural markets. Overall, there’s plenty of reason to stay optimistic about the future of African fintech.

What are some trends and projections to look out for in 2025?

We’re looking at transformative developments, starting with cross-border payment solutions tied to the African Continental Free Trade Agreement (AfCFTA). Platforms like PAPSS will simplify trade by enabling instant, local currency settlements. AI will revolutionise fraud detection, credit scoring, and personalised financial services. Clearer cryptocurrency regulations across countries like Nigeria and South Africa will also pave the way for safer crypto adoption. Additionally, embedded finance and hyper-targeted products for rural areas will deepen financial inclusion, while e-commerce-driven fintech products will flourish.

As a venture capitalist investing in African startups, how can Nigerian startups better position themselves in the coming year?

Nigerian startups have significant opportunities to position themselves better for funding in the coming year, but this requires addressing key gaps. The data tells part of the story; funding dropped sharply in 2023, with startups raising only $399.9 million, a 59 percent decline from $976.1 million in 2022, highlighting the need for strategic action to regain investor confidence.

First, startups must focus on solving real problems. Investors are drawn to businesses that clearly articulate the problem they are addressing and present a compelling case for why their solution is the best fit. Clarity and focus on the core value proposition are critical.

Second, keeping financials in order cannot be overstated. Accurate tracking of revenue, expenses, and customer growth builds credibility and demonstrates that the business is viable and scalable. Investors want assurance that their funds will be handled with discipline.

Third, startups must build trust by complying with regulations and engaging proactively with regulatory bodies. A compliant and transparent startup is far more attractive to investors than one that operates in a grey area.

Additionally, fostering trust through honesty and prudent financial management is paramount. Stories of startups burning through cash irresponsibly have made investors increasingly cautious.

Trust is strengthened through consistent updates, transparent reporting, and ethical practices. Demonstrating responsible use of funds reassures investors and establishes a foundation for long-term partnerships. Finally, networking is crucial. Startups should seek partnerships with established companies and remain visible in local and global ecosystems. These connections can open doors to funding, mentorship, and strategic collaborations that enhance growth prospects.

What is the future trajectory of Nigerian fintechs?

The future of fintech in Nigeria is promising. We will see increasing partnerships between fintechs and traditional banks. Rather than competing, these collaborations will aim to create integrated solutions that leverage the agility of fintechs and the resources of established banks to deliver value to a broader range of customers.

A significant shift will likely occur in efforts to reach underserved and rural areas. Bridging the financial inclusion gap will remain a priority, ensuring that access to essential financial services extends beyond urban centres and into Nigeria’s most remote communities. This will not only drive economic empowerment but also unlock new market opportunities.

On the innovation front, open banking is poised to revolutionise the financial ecosystem. By enabling secure sharing of financial data between institutions, open banking will foster the development of personalised and customer-centric products. This will also pave the way for a more interconnected and competitive financial landscape, ultimately benefiting end users.

Additionally, as e-commerce thrives, we can expect a surge in fintech products tailored to online shopping experiences. From streamlined payment gateways to buy-now-pay-later solutions, fintechs will play a key role in supporting Nigeria’s growing digital economy.

What are some regulations that need to be implemented to improve Nigeria’s fintech ecosystem?

The fintech sector in Nigeria needs regulations that promote growth without stifling innovation. To achieve this, several regulatory gaps must be addressed:

First, there is an urgent need for comprehensive cryptocurrency regulations. Nigerians rank among the top cryptocurrency adopters globally, yet the regulatory framework remains restrictive. This creates significant risks for users and companies operating in the space. Clear and balanced guidelines are essential to reduce uncertainty, protect users, and encourage institutional involvement.

Second, consumer data protection must take centre stage. Fintech companies process vast amounts of sensitive information, and strong regulations are required to ensure responsible handling and security of this data. Strengthening data privacy frameworks and enforcing compliance will build consumer trust and confidence in the ecosystem.

Third, licensing processes need to be streamlined and made more transparent. Complex and unclear licensing requirements can hamper startups’ ability to innovate and scale effectively. Simplifying these processes will encourage more participation in the sector and foster a more vibrant ecosystem.

Ultimately, Nigeria must strike a balance between nurturing innovation and safeguarding its financial ecosystem. By addressing these regulatory gaps, the country can create an environment that encourages growth while protecting consumers and the integrity of its financial systems.

How would the funding landscape evolve in 2025?

The funding landscape for African startups is evolving, and 2025 will likely see a mix of challenges and opportunities. Foreign investors will remain significant players, but global economic pressures may lead them to be more cautious and selective. Startups will need to demonstrate strong fundamentals, scalability, and the ability to solve real problems to attract their attention.

On the other hand, the role of local investors is becoming increasingly critical. When African investors back African startups, it fosters a sense of shared responsibility and ensures that more value is retained within the continent. Local investors also bring unique insights into the specific challenges and opportunities within African markets, which can be instrumental in guiding startups toward success.

Looking ahead, 2025 may witness the rise of blended funding models, where startups receive a mix of local and foreign investments. This approach can provide a balanced mix of global expertise and local market understanding. Additionally, alternative funding avenues like crowdfunding and angel investment networks are poised for growth, enabling more individuals to invest in and support homegrown solutions. These trends signal a more diverse and inclusive funding ecosystem that could benefit African startups in the coming years.

What lessons have you learned from startups that could influence investors’ assessment and support businesses in 2025?

Every startup journey is unique, and there’s no one-size-fits-all formula for success. One key lesson is the importance of resilience. African startups often operate in tough environments, so founders who can adapt and stay focused tend to do well.

Another lesson is the value of strong teams. A great idea means little if the team behind it doesn’t have the skills or determination to execute.

Finally, patience is key. Building a successful business takes time, especially in Africa, where infrastructure and regulatory challenges can slow things down. As investors, we need to provide more than just money; we need to mentor, support, and create the right networks to help startups thrive.