Poor corporate governance affecting many startups – eTranzact CEO

Chief Executive Officer of eTranzact International Plc, Niyi Toluwalope, discusses the challenges and opportunities of fintech adoption in rural communities with JOSEPHINE OGUNDEJI

What are the opportunities and challenges for fintech adoption in Nigeria’s underserved communities?

Fintech is transforming access to financial services for underserved communities through innovations like mobile and USSD payments. Agency banking has been particularly successful, enabling individuals in underserved areas to open bank accounts, pay bills, and conduct basic financial transactions. However, as of 2023, over 26 per cent of Nigerians remain financially excluded due to infrastructure challenges and financial illiteracy.

How has the country’s payment scene transformed over the years?

Nigeria’s payment landscape has undergone a significant transformation, driven by technology and innovation. It is evolving from cash-based transactions to a digital ecosystem that includes mobile money, cards, online banking, cryptocurrencies, and contactless payments.

The rise of dynamic fintech companies, strategic collaborations among banks, fintech firms, and telecommunications providers, and substantial investment in financial technology have fuelled this evolution. Additionally, growing consumer demand for convenient banking solutions and proactive regulatory efforts have further accelerated this change, creating a robust and supportive environment for continued growth and development in the payment sector. As a pioneer fintech company in Nigeria, we have played a critical role in driving this transformation by providing innovative solutions and enabling growth through an infrastructure other fintechs can leverage on.

Funding in the Nigerian tech ecosystem has slowed. How would startups navigate this period?

The Nigerian fintech industry faced a significant funding decline last year, with a staggering 74 per cent drop in funding from 2022. To navigate this challenging period, startups can focus on strategic mergers and resource consolidation. We are already seeing successful use cases of this, such as Carbon & Vella and Mathesis Analytics & Migo, where companies are combining their strengths to continue driving innovation and resilience.

What growth stage is the country’s fintech startup scene today?

Fintech adoption is growing at a pace faster than expected, with more individuals and businesses relying on digital financial services every day. Events like COVID-19 and the 2023 cash crunch contributed to the rise in digital payments. The evidence of this is increasing transaction volumes and the surge in Bank Verification Number registrations. Notably, we have observed a substantial increase of 1.75 million BVN registrations from December 2023 to May 2024.

A key driver of this growth includes active regulatory involvement, which ensures a stable and conducive environment for fintech innovations. Additionally, the declining capital inflow has fostered consolidation and mergers among fintech companies, leading to a more robust and competitive industry landscape.

What are some of the challenges of running a startup in Nigeria?

Running a startup in the fintech space presents its unique challenges, particularly in securing the substantial capital required for business operations, navigating infrastructure constraints, and acquiring, and retaining talent. As a leading super fintech, we support startups by providing them with the critical infrastructure they need to thrive so that they can focus on innovation and growth, leveraging our infrastructure to drive their success in the market.

Can you share some of the things eTranzact has been able to achieve?

Over the years, eTranzact has been at the forefront of fintech innovation, pioneering several groundbreaking fintech offerings, like USSD and mobile banking, which have become mainstream offerings today. We became the first and only publicly listed Nigerian fintech when we raised over N2bn in capital. We have since raised over N9bn more capital during our oversubscribed rights issue in 2021. Earlier this year, we revolutionised pension verification convenience for veterans with the military pension board.

Leveraging artificial intelligence and the various government identity platforms (NIN, BVN, DL, and International Passport), we created a mobile verification platform that allows veterans to register and seamlessly verify their identities via their mobile devices, facilitating the smooth identification of retired veterans to enhance the seamless payment of their pensions.

There have been a lot of issues around corporate governance concerning Nigerian startups. How can startups do better?

Despite Nigeria’s leadership in Africa’s startup ecosystem, many startups face challenges due to poor corporate governance. As startups focus on rapid growth, they often neglect essential governance, leading to financial mismanagement and investor distrust. To address these issues, startups should prioritise implementing strong governance frameworks early on, including transparent financial reporting and clear decision-making processes.

Additionally, startup founders must balance innovation with accountability by fostering open communication with relevant stakeholders. This approach ensures sustainable growth, builds investor confidence, and strengthens the foundation for long-term success.

What are the regulatory challenges facing fintech startups in Nigeria, and how can they be addressed?

Regulatory involvement has intensified over the past two years in response to the rapid growth in the payments sector. The regulatory landscape is complex, with startups navigating multiple regulatory bodies, frequent policy changes, and facing high licensing and compliance costs. Fintech startups must prioritise regulatory compliance and engage actively with regulators to operate effectively, manage risks, and drive sustainable growth while contributing to a well-regulated financial ecosystem.