A Gui de to t he
Payments and Fintech
Landscape in Nigeria
INTRODUCTION
i
Introduction
The year 2018 has been an interesting one for FinTech startups
in Africa. From major funding announcements to ground
breaking events to new policy directions, the space has clearly
been a busy one.
A quick search made me realize that most of the information
out there is largely fragmented and difficult to understand. I
couldn’t find a single source that gives a clear picture of
activities within the space.
Across the continent, over $560million was invested in tech
companies in 2017. Of the $114million reportedly raised by
tech companies in Nigeria, 75% of it went to FinTechs.
This ebook is my attempt to give a basic overview and
breakdown of the different areas within the electronic
payment and FinTech ecosystem in Nigeria. It also includes a
list of some active players in the different categories. I have
similarly tried to highlight the different regulatory licenses
required to operate at different levels, especially in the light of
the new PSP (Payment Service Provider) and PSB (Payment
Service Bank) guidelines recently released by the Central Bank
of Nigeria.
So far in 2018, Nigeria FinTechs have raised over $95million
according to publicly available data. If you have been
following the startup ecosystem in Nigeria, you are probably
inundated with news about FinTechs and their activities on a
daily basis. This media attention can be largely attributed to
these major investments.
Considering the quality of companies and founders in the
space, and the opportunity to build a massive company with
both social and economic return potential, I believe this
attention and investments are rightly deserved.
With this background and the preponderance of payments and
FinTech startups springing up daily, one would have thought
that most of the basic information required to make sense of
the space will be readily available on the first page of a Google
search.
I recently discovered that’s not the case when I had a
discussion with a key ecosystem player who expressed his
frustrations in accessing clear information on FinTech related
activities and licenses in Nigeria.
A few weeks before then, a former boss and mentor had also
called to discuss a similar topic. I remember I’ve had friends,
budding FinTech entrepreneurs, bankers, corporate
executives, investors and other stakeholders ask one or two
questions in trying to understand the electronic payment and
FinTech landscape.
The overview and categorizations in the subsequent pages are
strictly informational and by no means exhaustive. Do not act
on the information herein without thorough examination of
the particular situation. Reading this e-book will not make you
a FinTech expert or “thought-leader” overnight :).
I hope this gives you enough context and clarity to better
understand the space.
Have a great read and happy FinTeching.
Segun Adeyemi
PAYMENTS & RELATED CATEGORIES
Ecosystem Players & Stakeholders
PAYMENTS & RELATED CATEGORIES
1
Payment Solution Service Providers (PSSP)
These are companies that have been licensed by the Central Bank of Nigeria (CBN) to
provide the underlying infrastructure, end-to-end electronic payment solutions, systems and
services to stakeholders within the financial services space.
Until the newly proposed tiered payment system providers (PSP) licensing structure, the
PSSP along-side the Switching license has been the goto license for players in the fintech
space because it gives the most flexibility in terms of scope of what can be done.
PSSP provides the
underlying
infrastructure,
end-to-end electronic
payment solutions
The companies that operate here typically have direct integration into the card schemes
(Visa, Mastercard & Verve) and a deeper relationship with banks and some have systems
integrated directly into the core banking systems.
A recent report claimed that only 7 companies have been granted this license in Nigeria.
Obviously, companies such as Interswitch hold PSSP license.
Payment Gateways Providers
They are mostly
facilitators between the
merchant’s customers
and the actual payment
processors
These are mostly facilitators between the merchant’s customers and the actual payment
processors, these companies can also be referred to as merchant aggregators.
In some cases, these companies are also the payment processors or they connect to the
different payment processors to process web/mobile transactions on behalf of merchants.
This is the most active space as both the payment processors themselves, banks and other
payment startups who offer additional value-added services to merchants, play in this space.
Our payment gateway product Amplifypay falls under this category. For this category, before
the recently proposed PSP licensing structure, there was no clear regulatory requirement and
most players in this category are essentially required to meet certain security measures that
enables them to collect and transmit card details to the end processors.
The global security standard from a compliance standpoint is the Payment Card Industry
Data Security Standard (PCI DSS) that a provider’s systems need to be certified for regularly,
to operate at this level. All the payment companies that acquire merchants fall under this
category, either they process themselves or transit to an end processor.
Some players here include Webpay (By Interswitch); Amplify; Paystack; Ravepay (By
Flutterwave); VoguePay, GTPay, etc
PAYMENTS & RELATED CATEGORIES
Bill Payments Platforms
and E-wallets
Companies that provide mostly consumer-facing platforms
(web/mobile/bot) for airtime and data purchase, fund
transfers, bills payment, merchants payments, and the likes.
Depending on the scope of operation, a PSP or a mobile
money/e-wallet license from the CBN might be required to
operate as a biller.
The biggest players here are the companies that provide
these services on the background for the banks to vend
because almost all the banks in Nigeria enable their
customers to carry out these transactions from the
bank’s digital platforms (mobile / web app, ATM, bot, USSD,
keypad).
In some cases, the banks vend the bills themselves while in
other cases they connect to other third party providers.
Some major third party consumer facing platforms that play
in this space include Quickteller, Remita, Paga, Nairabox,
Kongapay, VTpass, Wallets.ng, Tingg (Cellulant), Kudi.ai
(bot), etc.
Mobile Money Operators
These are companies that have been licensed by the CBN to
operate the full spectrum of cash deposit and withdrawals,
issue debit cards, bills payment, merchants payment, funds
transfer, and other financial services on their mobile phone
by leveraging on the telecommunication infrastructure.
There’s a lot of potentials here because of its ability to
increase financial inclusion in the country but the impact has
been largely undermined due to regulatory issues that
prevent the telcos from taking the leading role in Nigeria
which is contrary to the situation in most countries where
mobile money has been largely successful.
The proposed establishment of Payment Service Banks (PSB)
by the CBN seek to enable telcos and other players such as
bank agents, retailers to play a deeper role in providing
financial services to the public.
As expected, some telcos have announced plans to obtain the
PSB license and launch their mobile money service before
the end of Q2 2019.
Some of the licensed and active mobile money operators
include Paga, Cellulant, Fetswallet, Teasymobile, Fortis
Mobile Money, Kongapay, etc.
2
PAYMENTS & RELATED CATEGORIES
Disbursement / Settlement
Service Providers
These are companies that offer payout and bulk
disbursement services. Many companies here are either
processors / switching companies connected directly to the
banks or are aggregators that do disbursements through
NIBSS settlement systems.
The key players here include major processors like
Interswitch, Unified Payments, e-Tranzact and also
aggregators like Chams, Upperlink, etc
Card Brands/Schemes
Operating in Nigeria
These are the companies that own and operate the debit,
credit and prepaid card brands that are issued by the banks
and other card issuing financial institutions. The two biggest
global card brands, Visa and MasterCard are popular in
Nigeria and Verve card is similarly popular. Only CBN
licenses banks are allowed to issue cards in Nigeria.
Switching companies are not allowed to issue payment cards
so that they don’t prioritize their card over others.
Next Generation PoS /
Merchant Services
These includes solutions that leverage technologies like NFC,
QR Codes, USSD, etc and companies that offer other valueadded services to merchants that are built on-top of or
around payment.
Some companies here include Spacepointe, Loystar,
PayAttitude (by Unified Payments), mVisa, mCash (by
NIBSS), Paypad, etc.
Software Application Providers /
Payment Infrastructure Service
Providers
These include system integrators and pure IT companies that
build software and other IT infrastructure for the general
electronic financial services ecosystem.
Some of these companies are also Payment Terminal
Application Developers for the PTSPs.
Some of the companies in the categories highlighted above
also fall into this category such as Interswitch, Remita,
Chams. Others include Computer Warehouse Group, Inlaks,
Parkway Projects, Appzone etc.
3
PAYMENTS & RELATED CATEGORIES
4
Agency Banking
These are third party companies that provide financial services to customers
on behalf of licensed banks and / or mobile money operators in their business
premises.
The idea behind agency banking is basically to leverage on businesses that
have a deep reach and distribution in places where the banks might not be
able to or are not incentivized to setup branches.
The operating model for agency banking was also referenced in the new PSP
licensing regime meaning that going forward, companies that want to act as
agents to banks or MMOs will need to have a type of PSP license.
These are third party
companies that provide
financial services to
customers on behalf of
licensed banks
Payment Terminal Service
Providers
These are specifically the companies that have been licensed to operate all
kinds of card-present transactions (offline / PoS transactions) in the country.
When customers make payments with their cards on a PoS machine, these are
the companies that provides and maintain the PoS machines.
There’s both a software and hardware component to this and while some of
the companies develop their software internally, some outsource it to other
application development companies.
Some of the biggest PTSPs in Nigeria are Unified Payment, Interswitch, Etop,
Citiserve, Global Accelerex, Computer Warehouse Group, Itex Group,
Payone, ESL, and more.
These are specifically
the companies that
have been licensed to
operate all kinds of
card-present
transactions
PAYMENTS & RELATED CATEGORIES II
Notable Mentions & Clarifications
PAYMENTS & RELATED CATEGORIES II
5
Payment Service Providers
Integrated Payment Players
This is a new license regime that seeks to completely recategorise the licenses required by FinTechs to operate in
the e-payment space. Under this regime, payment service
providers are segmented into three licensing categories
namely Super, Standard and Basic. All existing private
switches, PSSPs, PTSPs, super agents and non-bank
merchant acquirers will require one tier of this license or
the other to operate at different capacities.
Even though there are different categories and scopes of
operation within the electronic payment space in
Nigeria, there also seems to be a lot of overlap and for
the fact that a lot of the markets do not have depth, many
payment companies in Nigeria operate across the
different value chains. Typically, most payment
companies irrespective of the market entry point, end up
becoming more integrated over time. The most fully
integrated player in the market today is arguably
Interswitch.
The amount required to play at the different tiers ranges
from a minimum of N100million ($275,000) to N5billion
($14million).
The regulator’s argument for the stringent and high
financial requirement is to protect the customers from
the imminent and increased risk from the growing
acceptance of new FinTech solutions. A statement from
the draft guideline states that it
“will properly position the Bank to adequately address the
emerging issues of FinTech with respect to cyber risks, risk
management framework, capital adequacy, better focused
regulation and oversight operations.”
This suggests that the regulation seek to protect the
interests of the bank than to provide a regulatory
framework that provides an enabling environment for
the FinTechs to thrive. The draft has led to different
debates and arguments as many stakeholders hope that
it would be reviewed to accommodate their feedback
and inputs.
Payment Service Banks
This is a recent category created by the CBN towards its
efforts in promoting financial inclusion and driving
financial access for the unbanked and the low-income
segment of the society. The license will allow non-bank
institutions such as telcos, retailers, super agents, and
other similar stakeholders to offer basic financial services
such as acceptance of deposit, payment and remittance,
operate electronic wallets, issue debit and prepaid cards
amongst other services.
However, this license doesn’t allow the companies to offer
full financial services such as credit, insurance, currency
exchange to ensure the bread and butter of the big banks
are protected to a large extent.
Also, companies that want to play in this space need
N5billion minimum share capital.
NIBSS (Nigeria Inter-Bank Settlement System Plc)
NIBSS deserves a special mention as it will be difficult to put this organisation in any of the categories listed above. NIBSS is
partly owned by the commercial banks and the CBN to operate the Nigeria Central Switch (to connect all existing and
upcoming switching companies). NIBSS operates as a Shared-Service infrastructure for facilitating payments, streamlining
Inter-bank payments and settlement mechanisms.
NIBSS is also a Payment Terminal Services Aggregator.
It acts both as a semi-regulator and a major player. NIBSS has different products across the different categories listed above
and more. A recent product worthy of mention is their mCash payment solution for online/offline merchants that leverages
USSD technology in collaboration with the banks and telcos.
BEYOND PAYMENTS
Other Major FinTech Categories
BEYOND PAYMENTS
6
The Broader FinTech Space
The payment space is the most vibrant and active of the fintech areas in Nigeria. This is as expected because Nigeria is a largely
cash based society and there’s a huge opportunity in the digitization of cash transactions. However, beyond the payment space,
there are other very active FinTech categories and companies in Nigeria that are tackling big opportunities and using technology
to solve real problems in the financial services space.
Consumer/SME Lending
This is the most space active after the
payment space and it is because of the
massive opportunity that exists as the
banks don’t seem to be doing a good
job in providing loans to customers and
small businesses.
Key Players: Paylater, Aella Credit,
Lydia, Kiakia Credit, Easyloan,
Quickcheck, Renmoney, Page Credit,
CDL, C24, Zedvance, Branch,
Invoizpaid, Social Lender, Fairmoney,
Payconnect, StartCredits, etc.
Asset Management
(Savings/Investments)
This area taps into customer’s desire
for higher returns on their investments;
an automated way to commit to and
simplify their savings; and a better
customer experience.
Key Players: Piggybank, Cowrywise,
Kudimoney, Osusumobile, Isave,
Riby.me, Farmcrowdy, Thriveagric and
the web/mobile portal of traditional
asset management firms.
Digital Insurance
Nigeria is said to have the lowest
insurance penetration rate in the world
with just about 1% of the population
being insured, it is interesting that
there is no single fully digital insurance
company in the country.
What we have seen are sites for
distribution and rate comparisons. This
is due to socioeconomic factors, large
capital requirements, regulatory
environment and some technical risk
elements that could potentially make
the insurance business less attractive
and difficult to penetrate for startups.
However, the traditional insurance
firms are paying attention and
investing heavily in their digital
platforms.
Key Players: Topcheck, Autogenius,
Visacover
Digital Banks
Cryptocurrency Platforms
Others
The first fully “digital bank” in Nigeria
(Alat) was launched earlier this year by
a Nigerian Bank and therefore can’t
qualify as a challenger bank.
The rave and uptake of different digital
currencies across the world in the
2016-2017 period did not pass Nigeria
by as we saw a number of websites and
apps that allows Nigerians easily store,
trade and learn about cryptocurrencies.
Even though digital currencies have
taken a bearish trend recently, there
are still some active players in the
market.
There are other fintech companies
worthy of mention that might not fit
into the categories described.
Other attempts have been services that
seek to serve specific areas of financial
services. This is the case with the credit
companies and asset management
companies mentioned above. It is
expected that many of these companies
have plans to become a fully digital
bank as they grow.
Some of such companies include
ReachApp (personal finance), Imeela
(crowdfunding)
Key Players: BitKoin Africa, NairaEx,
Key Players: Alat, Kudimoney
The next section is a directory of the active and most visible FinTech
companies in Nigeria based on different categorizations.
FINTECH SNAPSHOT
FINTECH SNAPSHOT
SAVINGS / INVESTMENT
PAYMENTS PROCESSORS /
GATEWAYS
7
DIGITAL BANKING
kolopay.com
Ziroo Pay
DIGITAL STOCKBROKING
PLATFORMS
FINANCIAL INCLUSION
MERCHANT / BUSINESS
SOLUTIONS
TECHFIN
CRYPTOCURRENCY
TANJALO
INSURANCE COMPARISON
CONSUMER PAYMENT
APPS
LENDING
REMITTANCES
FINT
MOBILE MONEY / AGENCY
BANKING
PTSP
EASYLOAN
ABOUT AUTHOR
8
About Author
Segun Adeyemi is the CEO of Amplified Payment Systems
Ltd., a leading FinTech company building next generation
payment solutions for banks, businesses and consumers
across Africa.
He has a degree in Economics with years of experience in
FinTech, business and product development, strategy and
finance.
Prior to cofounding Amplified Payment, Segun had stints as
a growth executive in a leading Nigerian tech company and
as an investment analyst in Union Capital Markets Ltd.
Segun has attended several FinTech related training and
seminars and spoken at FinTech conferences and across
Africa and beyond.
With contributions from
Henry Mascot | Florence Dairo
This e-book is NOT for sale.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide
accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one
should act on such information without appropriate professional advice after a thorough examination of the particular situation.
(c) December 2018