Increased Funding Affirms Growth Opportunities


Friday, October 08, 2021 / 12:30 PM / CSL Research / Header Image Credit: The Guardian

According to a Business Day report, eight (8) Nigerian-based fintech companies attracted about US$500 million in nine months. The companies are Flutterwave, which raised US$170 million in March 2021, Opay raised US$400 million in May 2021, of which a major part was for Nigeria. Kuda Bank raised US$25m in March and US$55 million in August 2021, Prosper Fintech Limited raised US$3.8 million in March this year, Bankly raised US$2million in September 2021, CapitalSage Technology Limited raised US$4 million in August 2021 and two companies for which complete information wasn't available.

Fintech valuations have remained very high in the nine months of 2021 as investors continued to see the space as attractive. According to CB Insights, Q2 2021 was the largest funding quarter on record globally. Across 657 deals, global venture cash-backed Fintech companies raised a record US$30.8bn in Q2 2021, 30% growth over Q1 funding record. A modest 2% deal growth quarter-over-quarter and a 29% increase y/y accompanied this impressive funding growth. Funding activity grew in nearly all FINTECH subsectors except for wealth tech and capital markets tech. The digital lending, banking, and SMB FINTECH sectors saw the most pronounced deal activity growth quarter on quarter.

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Fintech firms are filling the gap between financial services companies and customers by disrupting key financial services segments digital payments (Paytech), digital insurance (Insurtech), banking (BancTec), wealth management services (Wealthtech), and regulations (Regtech) and creating space for selling financial products. Big technology firms such as Apple, Facebook, Amazon, Google, and Alibaba have also entered the financial services space, enhancing innovation and competition. Nigeria's fintech industry continues to evolve on the back of technological advancements and demographic support, as about half of the population is less than 25 years of age. Besides, the prevailing financial exclusion has resulted in low access to complex financial products for the masses.

Nigeria's fintech landscape comprises about 210-250 fintech companies, key stakeholders (i.e., banks, telecom companies, and the government), enablers and funding partners (i.e., universities and research institutions, investors, incubators, technology, and consumers).

Nigeria's significantly under-tapped digital payments industry is poised for significant growth. A myriad of factors across industry fundamentals, positive country demographics and regulatory support have formed the base of expected accelerated growth for the fintech industry in Nigeria. This expectation has received much attention from investors which has led to significant investments as existing players look to position for future growth. Nigeria's fintech industry has seen funding rounds from various global investors since 2014, either through equity or grants. Fintechs in Nigeria raised over US$500m between 2014 and 2020 and with reports of over US$500m raised in 2021, the industry has attracted c.US$1bn. Increased funding, high valuations and successful exits point to the fact that digital engagement of customers which intensified during the pandemic is here to stay.

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