Nigeria’s FinTech landscape, once overwhelmingly populated by niched startups, is evolving away from its early tendencies. A growing number of firms in that space are now offering multiple services. The trend in this direction is clear.
While observers of this space have been speaking about this for a couple of years, there’s now a formal survey to back it up. A report from Disrupt Africa, a media company covering startups on the continent, says as much.
The report, which is based on data from 576 FinTech companies, notes that the growth in startups offering multiple services is happening across Africa. It appears to be pronounced in countries with bigger FinTech industries.
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Nigeria leads the way, with more than 27.3% of FinTechs providing bundled services. That’s higher than the continent-wide average of almost 25%. For context, only 15% of FinTechs in Africa offered multiple services in 2019.
Expanding By Branching Out: Some Examples
Many of the top startups on the financial technology scene have grown by reaching out into complementary niches. Examples that come to mind include Paystack, Flutterwave, Kuda, and Cowrywise.
In 2020, Paystack, which provides payment services to businesses, launched Paystack Commerce. It’s an e-commerce platform that helps businesses sell physical and digital products. The platform comes with an online storefront, order management, inventory management, and payment pages.
This happened just two months after Flutterwave, a rival payment processor, unveiled the Flutterwave Store, which lets merchants set up an online store with them for free.
Kuda, Nigeria’s first fully digital bank began life as an online loan-providing platform. Then in 2019, it obtained a banking license from the CBN, which let it offer a whole ensemble of financial services.
Cowrywise, another well-known FinTech, provides a bundle of services—savings/personal finance, and investment opportunities with several money market funds. It also plans to introduce US stocks and bonds to its range of offerings.
Perhaps the largest example, in terms of ambition and scope, is the Chinese-backed company, Opay. It came into the Nigerian market with its bill payment and money transfer services and quickly moved into food delivery, content hub, and ride-hailing. It’s since dropped its super-app ambitions, having been hit hard during the COVID-19 pandemic.
Why FinTechs Are Diversifying Their Offerings
Tom Jackson, co-founder of Disrupt Africa (which put out the report referenced earlier), says the diversification seen with FinTech is happening because of their need to expand. It makes sense that they would do this by going into verticals that are complementary to their initial core services.
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Customers also want the comfort of having all their transactions done in one place. This informed OPay’s pursuit of the super-app model, as well as the moves by Flutterwave and Paystack to provide e-commerce atop their payment solutions.
Diversification can also be informed by the need to protect margins. If the existing aspect of a business does not perform as well as expected, that business may expand into other, more profitable niches to mitigate declining earnings.
Sometimes this strategy is as much a way of dealing with risk as it is about boosting earning power. Nigeria’s business environment isn’t the most stable in the world. Startups weighing their options could determine that having a diversified pool of products protects them from the severe swings of the local economy.
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