The Impact of COVID-19 on Nigeria's Fintech Ecosystem

The outbreak of the COVID-19 virus affected multiple industries in the world, and the Nigerian fintech market was not an exception. The crisis brought changes in strategies and caused many companies to reconsider their work switch to new models and actively implement digital technologies. Nevertheless, the COVID-19 outbreak was a wake-up call to the Nigerian fintech players, who rose to the occasion and came up with ingenious ways of managing the increasing growth in demands for online financial services, contactless payments, and financial inclusion.

In this blog post, we will identify specific strategies that Nigerian fintechs undertook before, during and after the COVID-19 outbreak that enabled them to not only weather the pandemic but emerge stronger. We will also look at how these adaptations establish the foundation for future development and financial liberalization across the continent.

 

The Emergence of Fintech in Nigeria Before The COVID -19

To better examine how Nigerian fintech companies responded to the changes that the pandemic brought, let us first take a look at the state of the industry before COVID-19. The fintech ecosystem of Nigeria had already begun to appear due to the exponential growth of digital payments, mobile banking, and financial inclusion. Market players like Flutterwave, Paystack, Moniepointe, Opay, Palmpay, Fairmoney, Carbon and Paga among others were among the vanguard seeking to bridge these gaps by providing mobile money, contactless payment, and special solutions for the untapped demographic.

So, Nigeria’s fintech environment was also helped by a youthful, technologically inclined population and growing levels of internet connectivity. Nigeria offers a good environment for the development of the sector as the population is already using online banking and embracing the developments in the mobile money markets.

 

How the Pandemic Impacted Nigeria's Fintech Sector

Fintech in Nigeria had to pivot when COVID-19 began impacting the society and the world’s economy. Mandatory restrictions like lockdowns and social distancing affected physical branching and restricted the consumer’s movement towards digital banking. This meant that for many, the role of fintech solutions in their daily transaction needs and otherwise financial service provision was on the rise. But it had some disadvantages as well, noteworthy of which was the increased demand which came all of a sudden.

Fintech companies had to combat higher traffic rates, protect payments and transactions, and cope with customers’ new preferences, and expectations. However, the same crisis opened a big opportunity for fintech firms to offer services that were previously offered by the traditional banks where the industry showed that it could not move as swiftly as was needed.

 

1. Higher Demand for Electronic Money Transfer

Probably the most prominent change that Nigeria experienced in the middle of the pandemic was the fast-tracking of the trends of digital payments. Given that the physical exchange of goods and services was now tainted with the virus, persons and entities began adopting digital means to transact. Some of the highlighted fintech firms, which embraced diversification to deepen their payment processing wings, include Flutterwave and Paystack received a boost as they tore into many sectors of the economy such as the e-commerce segment, health, and logistics.

The outbreak of the pandemic made it important for people to transact safely, securely and swiftly hence resulting in increased use of mobile money platforms and online banking services. The reviewers established that the uptake of digital payments, particularly in Nigeria, created added revenue for Fintech firms but stimulated them to find ways of enhancing performance and extending services.

 

2. Mobile Money as a Tool for Financial Inclusion

The COVID-19 crisis also ramped up the push for more financial innovation across Africa and the expansion of mobile money. Most key areas in Nigeria had a large percentage of its population that had not subscribed to any bank, and this gave room for fintech firms to penetrate the Nigerian market as they lighted the mobile money payment sector. Fintechs such as OPay and Paga scaled up, to ensure that many more people had access to basic financial services during the crisis.

Mobile money proved to be instrumental for people in these regions by enabling them to transact, including sending/receiving money, paying bills, and borrowing, without having physical contact with branches of established commercial banks. The case of mobile money in Nigeria during the pandemic demonstrated that the use of fintech can help increase financial inclusion in Africa.

 

3. Contactless Payments and E-Commerce Expansion

COVID-19 helped to make contactless payments much more popular with consumers because people wanted to avoid touching things during transactions. Nigerian fintech companies were able to alter their methods by enhancing the security and convenience of contactless services. Contactless payments in Nigeria also favored e-commerce as a means of shopping for goods and services was made more popular.

Fintech companies in Nigeria for instance like flutterwave assisted the SMEs to develop online payment gateways that would enhance the sale of their products. This in turn led to the development of payment platforms hence placing fintech firms strategically in the Nigerian e-commerce sector.

 

4. Digital Transformation and Fintech Resilience

Due to the pandemic, the situation forced fintech companies operating in Nigeria to leverage technological solutions at an accelerated pace. When it comes to all the achievements that include process automation and new product evolution, Nigerian fintech firms stood tall. This phase of development also witnessed emerging players of Fintechs entering into partnerships with conventional banks where the technological knowledge of the Fintech players was used to support Internet banking solutions.

In addition, the prevalence of fintech innovations went on in Nigeria because companies started looking into various other solutions such as blockchain, P2P, and AI among others to enhance their operations. The fintech sector proved to be rather resistant not only throughout the critical period of the pandemic but also in the context of further development despite further existent economic difficulties.

 

5. Government and Regulatory Support

Fintech firms in Nigeria received crucial support from the Nigerian government and other regulating authorities during the COVID-19 pandemic. The Central Bank of Nigeria (CBN) and other financial regulators put out measures that led to the improvement of the stability of the financial systems and the use of digital channels. It is with such support that fintech firms were able to overcome COVID-19 challenges and continue to grow.

Also, the Nigerian fintech industry received more investment during the pandemic and global investors realized that Nigeria can greatly aid the advancement of the fintech industry across Africa.

 

Conclusion

The effectiveness of Nigeria’s fintech sector was challenged when the COVID-19 pandemic disrupted the market and pushed the firms to adapt their business models and fasten the pace of digitalisation. Across varying levels adopted by the people in emerging economies, the fintech companies were not only up to the task, but they also ensured these changes also helped in enhancing the level of financial inclusion.

The Nigerian Fintech generally has many prospects for the future especially given the increasing trends of more people adopting digital financial products. It is argued that the challenges related to the Pandemic have made the development of agile customer-oriented solutions pertinent, thus, fintech firms that are capable of adapting and responding to the new dynamics and peculiarities of users’ needs will have the discretion of determining the future of financial technology in Africa.

Indeed, the COVID-19 pandemic has shaped positive changes for the Nigerian fintech industry; many of the adaptations made during the crisis will remain embedded in the future fintech environment of Nigeria, as well as within the structures of the country’s overall economy.