The total value of Automated Teller Machines (ATM) transactions within the first quarter of 2019 was ₦1.5 trillion, aside from funds transfer and bills payment over the ATMs, a bulk of these funds end up in the informal sector.
Interestingly, one of the objectives of the Central Bank of Nigeria’s cashless project which started in 2012 was the reduction of the high cash usages outside the formal economy. This reduction ensures effective economic growth.
The Nigerian financial system has seen more fintech startups in the last couple of years, and most of them offer savings and loan services. As it is, the current trend is that some of these new players are now offering investment opportunities to their customers.
Cowrywise is joining the league of fintech startups adding investment opportunities to its platform.
Although the company started as a savings platform with the belief that most Nigerians understand the concept of saving, CowryWise co-founder and CTO, Edward Popoola reveals that the company has always seen itself as a wealth management company.
In a recent chat with Techpoint, Edward reveals the reason for adding investment opportunities to the platform was to ensure that funds stay within the formal economy.
And for people outside the formal economy, Edward reveals that CowryWise is looking forward to offering investment services to them through different channels using their basic ID. This supports PiggyVest co-founder, Joshua Chibueze’s call for an efficient national identification system towards deepening the nation’s financial inclusion drive.
In the long run, efforts by CowryWise and other fintech startups will ensure the success of the CBN’s cashless project.
Taking investment mainstream
Over the past, investment in Nigeria was mostly considered an affair for people with higher disposable income. As it is, this will change as platforms like CowryWise currently offering people the opportunities to invest even without in-depth knowledge of the capital market.
“We are trying to democratise access to assets management services for the masses,” Popoola affirms.
CowryWise is making mutual funds accessing to everyone irrespective of the sizes of their disposable income.
The platform is allowing its users to buy mutual funds for as low as ₦100. Simplifying investment instrument will definitely lead to more people investing which align with the Central Bank of Nigeria’s National Financial Inclusion Strategy.
According to CBN in the strategy, financial inclusion “is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at affordable costs.”
Evidently, fintech startups are removing the barriers to entry for investment in Nigeria. It’s already at the point that one doesn’t need in-depth knowledge about investment.
PiggyVest (formerly known as PiggyBank) before adding investment options to its platform conducted a survey and over 65% of the respondents wanted more investing opportunities. This aligns with CowryWise’ use of savings as a channel to take people further the financial inclusion path.
Boosting financial education
According to Edward, educating the populace about financial inclusion is key.
Fintechs are taking an active role in championing financial education as they need more people in the financial system for a better return on their investment. And considering that their market size is limited to about 38 million people — the number of issued Bank Verification Number as of June 19, 2019.
These startups have the potential to reach more people than investment houses whose activities are concentrated in the major cities.
Edward believes having more startups offering investment services is good for the industry as it will increase financial literacy in the country while serving as an opportunity to grow the investment market.
Considering the state of the economy, Edward calls on all concerned government agencies to play an active role in educating the populace on the benefit of saving and investing.
Expanding the African investment landscape
CowryWise envisions itself as a platform that will showcase the best investment products for Africans, irrespective of the originating country of the investment or that of the person investing.
“What CowryWise seems to be is the defacto wealth management platform for young Africans, irrespective of their income level.”
The relationship between the banks and fintechs
As it is, fintech is not much of a threat to Nigerian banks. Beyond serving as the backbone for the fintech startups, the banks themselves have started offering services that these startups are providing.
A case in point is collateral free loans that banks have started providing to their customers, and the banks are giving the loans at a relatively lower interest rate.
As it is, fintechs and the banks will continue to co-exist. Just as PiggyVest co-founder called for an initiative that allows easy collaboration between the two parties.
Popoola believes that both parties will survive. He affirms that the banks will definitely give startups a run for their money as they have the financial resources.
“They (the banks) can try but with an innovative fintech startup, the sky is the limit,” he says pointing out that the startups have the potential of reaching more people.
On the banking in Nigeria, Edward says there will be new players in the banking sector in a couple of years.”Some banks will have grown bigger while some will shrink.”
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Nigerian startups raised $55.4m in Q1 2020; over 99% of which came from foreign sources. Find out more when you download the full report.