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The financial services industry in Nigeria has seen its share of reforms and growth in the past two (2) decades. However, In terms of size, the industry accounts for 3% of GDP and only an estimated 33.9 m adults ^[1], representing less than 36% of the adult population, are financially included. This is well below the average for its emerging market peers; 75% for Kenya and 70% for South Africa. Kenya tops the list of African countries with ease of access to financial services due to the high uptake of mobile money. Based on this, I’m going to highlight three (3) areas where a disruption would be ideal in this industry.  

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1) ACCESS TO CREDIT

Access to credit contributes to economic growth and is a key component for tackling poverty.  Credit enables businesses expand, increase efficiency and compete in local and international markets. The financial service industry is a highly regulated industry dominated by big banks in most countries, however, these days we see finance riding an entrepreneurial wave in countries like USA, Kenya, fueled in part by frustration with the big banks.[2] In 2012, Kenyan mobile network operator Safaricom and Commercial Bank of Africa (CBA) launched a mobile platform enabling users to save and borrow money on their mobile phones. In 3 years, the service, M-Shwari, has made CBA the largest bank in Kenya by customer numbers. By March 2015, M-Shwari had deposits of Ksh.153bn (US$1.5bn). CBA says it processes an average of 50,000 loans per day on M-Shwari.[3] Imagine a typical business person gaining access to capital at good interest rates without going through the complex process for credit application in a traditional bank in Nigeria. That would be ideal!  

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"Crowdfunding platforms such as Kickstarter and gofundme  have removed the need for  financing from traditional banking institutions. As a result, there are more open systems where more people can access different types of financing" - Racheal Botsman

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2) PAYMENT PROCESSING

Financial technology (Fintech) services enable payments securely and conveniently on web and mobile channels. Regular payments such as pension payments, insurance premium payments and much more can all be enabled on web and mobile channels. There are a number of players in this industry in Nigeria; PAGA, Interswitch, etranzact and more recently PayPal, an international payment company. In spite of the current players, there is still a huge opportunity within this industry because the payment processing opportunities are huge from processing e-commerce  and m-commerce payments  to enabling payments for crowd sourcing platforms.

3) FINANCIAL ADVISERS 

I’m quite financially literate but with work and family demands, it can get really difficult to get the required financial advice I need to make some critical financial decisions. Honestly, I have made some effort to contact financial advisers but that always required making a phone call or visiting an investment office. How about an online financial adviser, with an automated system for giving customized financial advice to young and upcoming professionals? Hmm…too forward thinking. I think not.  Check out Betterment. The opportunities for disruption are indeed huge but with every opportunity comes a note of caution.  A strong security system is a must-have in this industry. And that’s just putting it lightly. PayPal’s Regional Director for Africa and Israel. In an interview with Ventures Africa, revealed that while PayPal has attracted millions of Nigerians to its platform, trust remains its greatest hurdle[4] Clearly, a business model that can provide a high level of security for processing payments or provide credit with a simple and convenient product will be successful in this industry. So really, it’s not a question of how this industry will be disrupted. It’s a question of when. Every industry can be disrupted with the right product. If you are an incumbent in this industry, you had better be disrupting yourself or someone else will. Tomie    

References

[1] EFInA. The landscape of financial inclusion and Microfinance in Nigeria

[2]M.Aspan. Why Fintech Is one of the most promising industries of 2015

[3] Business daily Africa.http://www.businessdailyafrica.com/Corporate-News/CBA-now-biggest-retail-bank-with-10-million-customers--/-/539550/2643994/-/hi7k99/-/index.html

[4] E. Okpamen. Has PayPal gained the trust of Nigerians? (June 2015)