The prospect of Africa’s biggest economy going cashless has led to the revolution in its digital payment landscape and the move to deepen its financial inclusion penetration.
Owing to this, volumes and values of electronic financial transactions are increasing in recent times especially following the pandemic, as financial service providers and businesses increased their digital offerings.
Despite this success, 38.1 million of Nigeria’s 106 million adult population remains financially excluded, a 2021 report by EFInA states.
Nigeria’s quest to deepen its financial inclusion lies in embedded finance, as it enables non-financial businesses to provide a variety of financial services to millions of their customers.
Embedded finance, also known as embedded banking, refers to the seamless integration of financial services into a non-financial platform. It allows customers to access financial assistance through a third-party app or without in-context.
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It’s designed to streamline financial processes for consumers, making it easier to access the services they need when they want them.
For Africa’s most populous nation to drive its financial inclusion, embedded finance will be the game-changer, as it allows individuals without a bank account to easily be integrated into the financial system through their trusted brands.
And as more traditional businesses continue to engage finance on a new level by integrating financial mechanisms into their overall business plan, the era of embedded finance is taking hold, it is clear it is not just a financial fad, but the future.
According to a report by Research and Markets, Nigeria’s embedded finance is expected to grow 54.5percent from $1.6billion in 2022 to over $8billion by 2029.
It is currently gaining momentum in Nigeria as more retailers can digitally request inventory directly from the warehouse and have it shipped to them by leveraging embedded finance offered by Omnibiz – a unified distribution platform in Nigeria.
Through this, large pools of retailers in urban and rural areas are accessed through embedded finance services offered by the non-banking business, enabling instant and low-cost financial services to be offered to customers. Savings can also be digitally mobilized through these alternatives, and it will lead to convenient banking.
“Embedded finance can be used as a way to establish credit history and deepen financial access. No, the banks and every other financial player will not be threatened, they will only be riding on the back of embedded finance to reach the last miles that have remained elusive for –several decades now,” Ope Adeoye, chief plumber at One Pipe, says in an op-ed article published by BusinessDay.
According to him, Nigeria can achieve and go beyond its 20 percent target of financial inclusion before the 2030 target estimated by EFInA, if it embraces the new possibility represented in embedded finance.
“With embedded finance, a civil servant that is well known by an employer/the union he belongs to or a retailer known by his or her distributor can be better served by these entities that know them, in the form of non-financial service providers.”
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