Introduction To The Nigerian Fintech Space

Introduction To The Nigerian Fintech Space



The word “FinTech” is coined from a combination of the words “financial” and “technology”. It denotes the use of technology to deliver financial services and products to consumers.[1] The term could also refer to software and other modern technologies used by businesses that provide automated and improved financial services.[2]

Andrew Davis[3] defines it, in its broadest sense, as high-growth organization combining innovative business models and technology to enable, enhance and disrupt Financial Services. This definition however limits the understanding of FinTech to the Institutional frameworks, be it start-ups, new entrants or matured companies engaged in providing FinTech solutions to end users and not acknowledging the technology being utilized.

When FinTech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. ​Since then, however, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition. FinTech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management to name a few.[4]

The main attribute of FinTech that makes it preferable over traditional financial service providers is that it is more customer-oriented, requires lower capital, simple to use and highly convenient, and it is readily accessible by the unbanked population. The predominant FinTech businesses in Nigeria are Mobile Payment Applications, Mobile lending Applications/Websites, Crowdfunding/Peer-to-Peer Payment websites and a host of others.



Financial services are amongst the most heavily regulated sectors anywhere in the world. This is not surprising, as the major concern amongst government has been how to adequately regulate the operations of FinTech companies.[5] In some countries, because FinTech are largely unregulated or sparsely so done, they have become fertile ground for scams and frauds.[6]

In Nigeria, there is no comprehensive law enacted by the Federal Legislature aimed at directly regulating FinTech and the activities of FinTech companies. However, there are several extant laws which apply, albeit in part and indirectly, to the licensing, operation and regulation of FinTech companies. Also, sector-based regulators such as the Central Bank of Nigeria (CBN) have periodically released several guidelines to regulate FinTech in Nigeria. Some of these laws/regulations/guidelines are espoused below.

  1. CBN Guidelines on Mobile Money Services in Nigeria, 2009.[7]

This guideline, in providing for rules, roles and responsibilities of Mobile Money service Providers, identifies two models for the implementation of mobile money services which are Bank Led (Bank or Consortium of Banks providing as part of its banking services) and Non-Bank Led (a Corporate Organization duly licensed as lead initiator).[8] All Mobile Money Operators (MMOs) must be licensed by the CBN on such terms and conditions as prescribed which may be reviewed from time to time. The Guideline also extends the application of the provisions of the Guidelines for the Regulation of Agent banking and Agent banking relationships in Nigeria to Mobile Money Agent Network.[9]

  1. CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, 2016.[10]

These Guidelines supersede the previous Standards and Guidelines on ATM Operations in Nigeria and Guidelines on PoS Card Acceptance Services, issued by the CBN. These guidelines were developed to provide minimum standards and requirements for automated teller machine (ATM) operations; point of sale (PoS) card acceptance services; mobile point of sale (MPoS) acceptance services; and web acceptance services.

  • CBN’s Regulatory Framework for the use of Unstructured Supplementary Service Data (USSD)[11] for Financial Services in Nigeria, 2018.[12]

This Framework seeks to establish the rules and risk mitigation considerations when implementing USSD for financial services offering in Nigeria. The framework is specifically targeted at Financial Institutions, Mobile Money Operators (MMOs), Mobile Network Operators (MNOs) stipulates that MMOs are eligible for the issuance of USSD short codes from the Nigeria Communications Commission (NCC) after meeting the necessary requirements of the NCC for the issuance of same. For CBN licensed entities, other than Mobile Money Operators, a letter of no objection/introduction from the CBN would be required before being considered for the issuance of the USSD short codes by the NCC, subject to meeting the requirements of the NCC.[13]

  1. Revised Regulation on Electronic Payments and Collections for public And Private Sectors in Nigeria, 2019.

The Regulation is a revision of the Guidelines on Electronic Payment of Salaries, Pensions, Suppliers and Taxes in Nigeria (2014), and is intended to guide the end-to-end electronic payment of salaries, pensions and other remittances, suppliers and revenue collections in Nigeria.

  1. Cybercrime (Prohibition, Prevention, Etc.) Act, 2015.

Under this Act, a financial institution, which may include FinTech companies, is required to verify the identity of customers carrying out electronic financial transactions; observe adequate “know-your-customer” processes; keep all traffic data and subscriber information as may be required by the NCC for a period of two years; and preserve, release or retain any traffic data or subscriber information upon the direction of a law enforcement agency.

Other notable Regulation and/or Laws include Nigeria Data Protection Regulation, 2019;[14] NCC Consumer Code of Practice Regulations 2007;[15] CBN, Circular to Banks and other Financial Institutions on Virtual Currency Operations in Nigeria;[16] Code of Corporate Governance for Banks and Other Financial Institutions;[17] CBN Risk-Based Cybersecurity Framework and Guidelines for Deposit Money Banks and Payment Service Providers, 2018; and CBN’s Regulation For The Operation Of Indirect Participants In The Payments System, 2019[18].

Nonetheless, these laws/regulations/guidelines are still inadequate in regulating the ever growing FinTech space. However, all hope is not lost as the Securities and Exchange Commission and the Central Bank of Nigeria are reportedly partnering to come up with a regulatory sandbox to enable FinTechs grow and thrive.



  • Payments

The Nigerian payments landscape has significantly evolved over the past decade. The cost of integrating online payments to a website 5 years ago was over 150k now thanks to FinTech, the cost of accepting online payments is Zero.[19] With the rapid adaptation of card payments in Nigeria, platforms like Remita, Flutterwave and Paystack are playing the lead role in making it easy for businesses to start accepting online payments with the click of a button.[20]

  • Financial Management

FinTech is changing the way we manage our money for the better. FinTech startups are introducing simple ways to manage and track your finances. Instead of relying on a pen and paper or spreadsheet, you can now use digital financial solutions to manage your finances in real-time.[21] Good examples of Nigerian startups playing in this space are PiggyBank, Cowrywise and a host of others.

  • Blockchain

Blockchain, one of the most disruptive technologies of the Fourth Industrial Revolution, is a type of distributed ledger technology that has revolutionized the FinTech industry. Since its inception,[22] the blockchain technology has evolved into something greater and powerful having an estimated market size of over 540 Million Dollars in 2018.[23] The Central Bank of Nigeria (CBN) is still unable to provide regulatory framework that will guide financial services using blockchain technology in the country.[24]

  • Banking

The major reason for all the fresh innovations we are experiencing in the Nigeria banking sector today is FinTech. With the likes of ALAT by Wema Bank & GTBank’s 737, now you can access top-notch financial services without stepping into a bank. The mobile phone has become a veritable tool for enhancing financial inclusion, in this light, FinTech helps people who are ‘unbanked’ but desire to buy or sell online have access to quick and affordable banking operations just by using a mobile phone.

  • Cryptocurrency

Lack of proper regulation for Cryptocurrency in Nigeria is the reason why it has not been recognized as a form of legal tender and the apex Bank has cautioned against investment in same.[25] For example, Bitcoin exchange sites in Nigeria are few and far between and this is, in large part, due to confusion surrounding the legality of cryptocurrency.[26] Despite this, according to data from LocalBitcoins, Nigeria came second in the world’s peer-to-peer (P2P) Bitcoin transactions in 2017 outpacing major European countries, the United Kingdom and the United States of America.[27]

  • Crowdfunding

Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.[28] This, which is somewhat similar to a hedge-fund, is usually done via social media and crowdfunding websites. GoFundMe[29] and KickStarter[30] are big names when it comes to crowdfunding.

  • Lending

FinTech has fueled the growth of alternative lenders which offer both higher yields to investors and faster, cheaper, more convenient loans for borrowers compared to traditional banks. Private lenders like RenMoney and OPay are continuing to plough hundreds of millions of naira into alternative-lending space in Nigeria making it easy for anyone to access quick loans (business or personal) when needed.[31]



In our clime, the predominant FinTech Companies are non-bank led start-ups who sometimes partner with traditional players in the financial services sector to provide a wide range of services and business solutions driven solely by innovative technology to end users. For example, non-bank led start-ups like Remita, Interswitch, Flutterwave, Paystack, Paga, and OPay have held sway in the sector.

Interswitch[32], which is one of the oldest FinTech companies in Nigeria, is one of the largest Africa-focused electronic payments and infrastructure company, with point-of-sale terminals, online consumer payment platforms and its own card, Verve. It was reported recently that VISA was about to acquire 20% shares in the company ahead of its Listing on the London Stock Exchange.[33]

However, this has not precluded traditional financial institutions from being active in the FinTech space. For instance, RenMoney[34] is the first microfinance bank to launch cloud technology with minimal fixed asset investment in Nigeria to provide simple money solutions and soft loans to individuals and small businesses.[35]

Also, WEMA Bank in 2017, launched ALAT as Nigeria’s first fully digital bank and in March, 2018, the digital bank launched its virtual dollar card for online international payments and quick short-term loans on its App, which is available on the Android and iOS platforms.[36]



Despite the apparent benefits of FinTech to the Nigerian financial services sector, there is still lot of work to be done, as several challenges persist which are yet to be tackled. The disruptive nature of FinTech solutions initially created challenges for the industry, as practitioners in the financial system regarded it as a competition rather than collaborators or enablers. Also, non-Banking Financial Institutions (NBFIs) are not perceived as strong institutions the way banks are.

The existing framework in Nigeria neither provides enough clarity on the role of FinTech companies nor clearly articulates what is expected of them in terms of registration requirements and compliance. There is currently the lack of a uniform regulatory and/or statutory requirement for FinTech companies. For instance, some FinTechs obtain licenses from CBN while others obtain theirs from the SEC. This leads to a lack of clarity of the types of licenses to be obtained for specific FinTech products.[37]

For a viable FinTech ecosystem in the Nigerian Capital Market, it is imperative to have in place, a supportive digital infrastructural architecture. The country still has a rather low penetration of mobile, high-speed broadband and IoT infrastructure to facilitate smooth connectivity across all channels. Some FinTechs have to incur heavy expenditure to generate power, procure cloud infrastructure or run data centres, and access internet broadband to power their solutions, thereby passing these costs to the final consumer.



FinTech is an emerging field yet to be properly regulated in Nigeria. Thus, there is a need for the industry players, regulators and government to come up with a comprehensive legislation and/or regulation that would sufficiently provide the dire needed uniform legal/regulatory framework for the smoot operations of fintechs. A business in an emerging field can only develop if there are structures put in place to support it and shield it from the harsh realities of a third-world economy like Nigeria’s. However, despite the overt challenges, some Fintech companies have been able to thrive so there is no contradicting that with proper infrastructure, this sector would be able to witness vigorous economic growth in the coming years.



[1] Central Bank of Ireland, “What is “FinTech” and how is it changing financial products?”,


[3] In a Paper presented at the FinTech First Drive Training held during the Nigeria FinTech week, from the 28th-31st October, 2019 at the Chartered Institute of Bankers of Nigeria.

[4] Ibid.

[5] Julia Kagan, supra

[6] Fintech Futures, “Fighting a (losing) Battle Against Fraud”, Banking Technology Magazine, May 2018 Issue

[7] CBN Guidelines on Mobile Money Services in Nigeria, 2009

[8] Clause 5, CBN Guidelines on Mobile Money Services in Nigeria

[9] Clause 6, CBN Guidelines on Mobile Money Services in Nigeria

[10] CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, issued in April 2016, available at < %20in%20nigeria.pdf>

[11] The USSD (Unstructured Supplementary Service Data) technology is a protocol used by the GSM network to communicate with a service provider’s platform. It is a session based, real time messaging communication technology, which is accessed through a string, and starts normally with asterisk (*) and ends with a hash (#).

[12] This Guideline was published vide a circular on the 17th of April, 2018 and it came into force on the 1st of June, 2018.

[13] Clause 5, Regulatory Framework for The Use of Unstructured Supplementary Service Data (USSD) For Financial Services in Nigeria.

[14] This Regulation was made by the National Information Technology Development Agency in 2019 vide powers provided under the NITDA Act of 2007. FinTech companies which collect and use customers’ data must comply with NITDA Regulations.

[15] There is a 2018 draft of this Regulation seeking to revise this extant one but it hasn’t gone past the reading stages at the Federal Legislature. The Regulation provides that all Licensees must take reasonable steps to protect customer information against improper or accidental disclosure and ensure that such information is securely stored.

[16] The circular was published on January 12, 2017.

[17] FinTech companies, in contemplation of the Banks and Other Financial Institutions Act, is a Financial Institution and are thus mandated to abide by the code regulating Financial Institution, especially the constitution, power and liability of the board or Directors’.

[18] The Regulation was published vide a circular signed by the Director, Payment System Management Department on October 10, 2019

[19] Konstantinos Tsanis, “FinTech Strategies in the GCC: Developing a Growing FinTech Ecosystem – A GCC Perspective”

[20] Enioluwa Adeoluwa, “How FinTech, is impacting business growth in Nigeria”,

[21] “Impact of FinTech on Business Growth”

[22] Blockchain was originally developed by Satoshi Nakamoto, whose identity is still unknown, in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.

[23] BlockChain Technology in Nigeria – How It Drives Business Growth,

[24] Ken Nwogbo, Nigeria Sits At Outskirts of Blockchain Technology, The Guardian,

[25] Central Bank of Nigeria’s Press Release on Virtual Currencies, February 28, 2018.

[26] Is Bitcoin Legal in Nigeria? BTC in Nigeria Explained, January 22, 2019

[27] BlockChain Technology In Nigeria – How It Drives Business Growth,

[28] Tanya Prive, What Is Crowdfunding And How Does It Benefit The Economy, Forbes

[29] It is a for-profit crowdfunding platform that allows people to raise money for events ranging from life events such as celebrations and graduations to challenging circumstances like accidents and illnesses.

[30] Unlike GoFundMe, it maintains a global crowdfunding platform focused on creativity and merchandising.

[31] Enioluwa, Ibid

[32] Founded in 2002 by Mitchell Elegbe.

[33] Visa to Snap Up Stake in African Fintech Unicorn Interswitch, Proshare.NG, November 11, 2019

[34] Originally registered as a Micro-Finance Bank but now arguably operates as a FinTech organization.

[35] FinTech Companies in Nigeria: The Top 10,

[36] ALAT by Wema Launches Quick Loans and Virtual Dollar Card,—Services/ALAT-by-Wema-Launches-Quick-Loans-and-Vi/38777

[37] The Future of Fintech, “Fintech Roadmap Committee of The Nigerian Capital Market

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