Fintechs cannot close the gap in financial inclusion

Can fintech drive adoption at the bottom of the pyramid?
Rarzack Olaegbe



He beat Lionel Messi. He was the youngest footballer to play for Barcelona. He scored 800 goals for various age groups. That is before he joined Barcelona. However, Pep Guardiola handed Bojan his debut at Barcelona. Aside from that, football pundits said Bojan would be bigger than Messi. Bojan was hype. An exaggeration.

That is because Bojan did not get to play. He lost his place in the team. Barcelona invested in David Villa and Zlatan Ibrahimovic. Bojan could not fit into the first team. Owing to this, Bojan moved to Roma. He is now roaming. At 26 years, he has changed clubs 6 times. He plays in the Bundesliga for Mainz. He is not getting regular playing time. Bojan did not add value. Bojan has not closed the gap between him and Messi.

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Fintechs are not directly competing with the banks. Neither is there a threat between these two entities.

On the one hand

Do Fintechs add value to the economy? Or is it smoke and screen-like? Like Bojan? Fintech has enjoyed tremendous media exaggeration. Fintech firms have attracted funds from venture capitalists and investors. As investments in startups across Africa keep growing, Fintech has taken a large chunk.

For instance, in 2021 alone, Disrupt Africa reported that Fintech received 50% of the over $2 billion raised by African tech startups. It has been like that since 2015. As the most promising sector for securing investments, six unicorns have emerged.  The success has contributed to the exaggeration that has made the Fintech sector so popular.

It is the same elsewhere. For instance, data from EY shows that the USA has over 8,775 Fintechs with a 330 million population. The United Kingdom with a 680 million population has over 2,500 Fintechs. Africa with a 1.2 billion population has 573 Fintechs. While Nigeria with 200 million people has about 144 Fintechs. Fintech is not about payment only.

The same data shows a widely spread ecosystem. In Nigeria with 144 Fintechs, payment, mobile money, and digital banking shared 38%. Lending has 23%. Savings, investments, and crowdfunding get 15%. Business services and infrastructure 13%. Cryptocurrency 8%. Insurance 3%.

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Payment is most active in Nigeria. Research has shown that, despite the media hype, Fintech has not scratched the surface. Challenges abound in Nigeria: Dearth of financial infrastructure. An uneducated, unbanked population. Rife financial inclusion. The development will not happen without closing the financial inclusion gap. Anything to the contrary is a delusion. An exaggeration. Fintech cannot close the gap.

Financial inclusion is more than what we have in Nigeria. Research shows that there is a need for a well-functioning infrastructure in Africa. Three things happen: Individuals are empowered. Businesses are empowered. People are encouraged to be economically active. The sun shines.

Outside of the media exaggeration, Fintechs have created another channel to do banking without stress. Fintechs have given Nigerians opportunities: To invest. To save. To borrow. To earn without the tedious traditional banking.

Ayowole Ayodele, CEO of Fincra mentioned that the fourth industrial revolution would usher in more opportunities. With the 4IR, blockchain technology, artificial intelligence, and augmented reality will deliver “a better customer experience for Fintechs.” He is convinced that Africa has enormous potential to become the new frontier of this financial opportunity.

On the other hand

Fintechs are not directly competing with the banks. Neither is there a threat between these two entities. Instead, there are endless opportunities for Fintechs and banks. These opportunities need to be utilised to close the financial inclusion gap. The banked Nigerians are about 45%. Enhancing Financial Innovation and Access (EFInA) report has shown that the financially excluded Nigerians are about 36%.

On its own, Fintechs cannot close the gap of financial inclusion. Fintechs must leverage banks’ influence. That way, synergy happens. It is better now. Before, banks and Fintechs are not this close. There is a common front now. There is a deliberate way of working now. However, the parties need to do more.

On its own, Fintechs cannot close the gap of financial inclusion. Fintechs must leverage banks’ influence. That way, synergy happens.

In the short term

Are there plans to close the financial inclusion gap?

When the rubber kisses the road, plans change. The strategy must change, too.

What is the strategy?

It is a difficult assignment to explain the life of a camel to a whale.

What do you mean?

I am Bojan!

*Olaegbe ([email protected])

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