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Nigeria’s FinTechs are solving numerous problems within and around the country’s financial and commercial ecosystems. They’re enabling users to pay for goods they’ve ordered online, settle utility bills, transfer and receive money, purchase insurance products, and make investments. And that’s just scratching the surface.

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But there are other problems that FinTechs haven’t exactly come around to solving yet. Until recently, one of those problems was finding a way to connect bank accounts to third-party apps, so that users of the former can access data from their bank account while on it.

A Problem, And Its Solution

Here’s a relevant illustration. If you want to see how well you’re doing financially, you’d probably need to check your personal finance app for that. But then the app would need access to your bank account statement if it’s going to provide you with an accurate overview of your finances.

Unless you have a way of connecting to your bank account via your personal finance app, you’ll have to go through the tedious process of downloading an account statement from your bank app and sending it to the personal finance app.

That’s one problem that API startups are starting to solve. This new breed of startups began coming on the scene just a few years ago, and they’re already making FinTechs in other domains function more effectively.

Let’s get back to the example we just cited. With an API serving as an intermediary between your personal finance app and your bank account, you can ‘fetch’ your account information from within the personal finance app, in a matter of seconds (no document downloads needed).

There’s more to APIs than the instance we’ve referred to here. To get a broader idea of what’s possible with FinTech APIs, let’s take a few steps back to understand what an API actually is, and how it works.

What’s An API?

The word ‘API’ is an acronym for Application Programming Interface. It’s an intermediary that enables ‘communication’ between different applications.

There’s a familiar example of this, in the way that your mobile applications work. When you use one of them, that application links up to the internet and sends data to a server. The server collects the data, deciphers it, executes the required action, and sends the data back to your phone. Your application interprets it and shares the information you wanted with you.

That communication between your application and the server is possible because of APIs.

With FinTech APIs, the scope of operations narrow down to connecting bank accounts to third party applications. These third-party applications may be lending apps, insurance apps, edtech apps, personal finance apps, money transfer apps, and any other platform that may need to connect with their user’s bank account for any number of purposes.

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Let’s refer to a real-life scenario, with one of Nigeria’s leading APIs. Okra, an API startup founded in 2020, serves a client base that’s mostly made up of other tech-driven companies (including other FinTechs). Its API solution enables lending apps to access their potential customer’s bank account, allowing them to evaluate the creditworthiness of that prospective borrower.

Here’s another example. Businesses that offer services through their apps can rely on Okra’s API to connect with their customer’s bank accounts, make direct debits, and receive payments. In both these examples, access is subject to the customer’s permission.

Other services powered by APIs include account verification (for KYC purposes), viewing account history, and accounts reconciliation.

Meeting A Widespread Need, And Attracting Investors

As we’ve already hinted, the top FinTech APIs in Nigeria has only been around a short while.

Take Okra, for instance. Founded in 2020 by Fara Ashiru Jituboh and David Peterside, it aimed to deliver useful linkages between financial institutions and third-party applications, for the benefit of people who are customers of both these parties. Its potential role in Nigeria’s FinTech space was underlined by the confidence of its early investors, from whom it raised $1 million in a pre-seed round.

Okra isn’t the only player in this nascent niche. Mono, a startup that helps businesses access financial data and direct bank payments, was also launched in 2020. Its founders– Abdul Hassan and Prakhar Singh –had seen the opportunity to build their API when they observed that there was a paucity of connectors that solved the bank-third party platform intermediation problem.

Another startup that’s gotten involved in this arena is OnePipe. It’s been around since 2018 and has recently attracted interest from investors, who see that it could play a major role in a future where open banking is entrenched. It raised $3.5 million late in 2021 and aims to deploy this funding to strengthen and expand its operations.

API FinTechs have arrived on the scene of an industry that’s sorely felt their absence. And the speed with which their solutions have been snapped up is telling– within a couple of years, the top API FinTechs have made clients of some of the country’s leading companies.

The investors who have backed all three startups mentioned here believe that the solution they provide is crucial to the future of Nigeria’s (and Africa’s) financial system. It’s still early days, but the signs thus far (including the high demand for their services) indicate that they may be right.

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This article was first published on 6th March 2022

ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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