According to an article by Quartz, in January 2018, almost $65 million, out of the $195 million invested in African start-ups, went to fintechs with a large chunk taken by Nigerian firms. Hence, the potential of the space to become a major channel for foreign investments development in the coming years is quite strong; particularly wealthtechs who are attracting attention as they work towards bridging the wealth gap through automated savings and investments.
As with any business entity, wealthtechs are subject to scrutiny on how well they are doing with growth. Sadly, the metrics applied to traditional financial institutions are imperceptibly defining the standards for measuring the new kids on the block—whose core goal should be financial inclusion.
Going by the regular measure of financial inclusion, observers tend to depend almost solely on number of accounts opened with a financial service provider—bank, investment platform etc. The insufficiency of this measure has been pointed out by a number of policy economists and notable champions of financial inclusion like the Alliance for Financial Inclusion.
For a more robust measure, we can look to the indicators of financial inclusion, as outlined by the World Bank—access, usage and quality of impact indicators. Access indicators measure depth of outreach. It is one thing to launch a wealthtech in Lagos, and another to not just have Lagosians access it but also students in Maiduguri, mechanics in Paiko or storekeepers in Awani. So, we must continually test the accessibility of these platforms.
Usage indicators measure how clients actually engage with services provided. After people signup, are the platforms designed to allow for easy deposits? Are these deposits regular? Usage is quite important because if a wealthtech fails at it there will be little or no impact on the living standard of its users.
Unsurprisingly, usage is closely related to the quality of services offered. Quality questions border around how offerings match needs of its users. For instance, there might be no quality offering to a mechanic from a wealthtech that only offers automated savings, given that the income pattern of such people aren’t regular.
Hence, it is only wise that wealthtechs focus on not just improving the market size of its users through intelligent engagement strategies, but also on effective usage. This will help them actively tackle their actual and biggest competition at the moment—nonconsumption. Nonconsumption, according to an article by EfosaOjomo, a Harvard scholar, is the inability of a person to purchase and use a product/service required to fulfil a task. In the Nigerian wealthtech space, the competition of a service provider is not necessarily a similar provider but nonconsumption.
To simply explain the concept of nonconsumption, we can refer to the need of everyone to have a roof over their heads. Despite the crucial nature of this need, simply advertising a house that requires a one-time payment NGN5 million to the everyday Nigerian does not mean everyone will jump at the offer. The reason isn’t farfetched, not everyone can afford to drop that amount at once—a classic case of nonconsumption. An arrangement that allows for flexible payments spread over a very comfortable period of time will definitely lead to increased patronage.
Similarly, wealthtechs are faced with the challenges of nonconsumption which can sometimes be fuelled beyond reasons related to cost. Four major factors fuel the nonconsumption of wealthtech services in Nigeria:
- Inability to earn
- Poor money management, and
- Poor product education.
Trust is the most important factor on the list, and one way wealthtechs can build trust is by establishing partnerships with notable firms. As new boys on the block, wealthtechs should not expect funds to be handed to them without questions, it will take strategic collaborations to earn that. A trust agreement, for invested funds, is a good example.
Partnerships don’t automatically elicit trust from prospects; the message has to be established through product education. Product education is a continuous process that must be styled to fit the audience. A simple choice of hosting information sessions on platforms like WhatsApp can make this process easier. A more robust solution can be found in partnering community influencers to host info sessions.
Further, people might love the idea of saving and investing but sometimes they just don’t earn enough to survive talk less of saving, or they might just have bad financial habits preventing them. The easy way out, speaking in terms of profit for the firm, is to chase after a few big clients to pump in funds, but as I mentioned earlier there is a grave danger in towing this route.
A more effective route, which requires patience, is to have wealthtechs offer free advisory services which can be delivered offline andonline, from time to time, with clearly defined and workable strategies that can help users improve on financial responsibilityand earning capabilities.
Hence, wealthtech teams need to look beyond the tech while settingup and seek out sound financial minds that will commit to developing tailoredfinancial advice as a firm is only as healthy as its clients are.
Digital payment companies have done a great job with providing wealthtechs with the ability to operate easily. Right now, it is the turn of the wealthtechs to do the work themselves and face their biggest competition by growing the market. These beautiful words from the book How Google Works sum it all up: “Instead of fighting over market share, grow the market for everyone”.
Ajetomobi leads brand engagement at Cowrywise