According to Intelligence by Techpoint, there are over 250 fintech startups in Nigeria, and they keep increasing daily. For context, that is ten times the number of commercial banks in the country.
Over the past six years, these startups have driven growth and innovation in Nigeria's financial sector, attracting hundreds of millions of dollars in funding to the industry. In 2021 alone, Nigerian fintech startups raised almost $800 million.
While the number of startups in the space has grown, many argue that most players in the sector are replicas of previously successful businesses. But with less than half of the adult population having bank accounts and an insurance penetration rate of 2%, there is room for growth and partnerships between fintechs and businesses in other industries could be the key to unlocking this value.
Already, a few startups appear to be towing this line. ETAP, a startup that offers micro car insurance, partnered with telecommunications provider, MTN, to enable the telco’s subscribers to use the app without data or draw from their data balance.
The potential of this partnership is enormous. MTN is the largest telecommunications player in Nigeria, with approximately 81 million subscribers. Getting that many people to discover ETAP could drive massive adoption for the one-year-old startup and improve Nigeria's car insurance rates. The startup has also partnered with car distributor, CFAO Motors, to offer insurance to its customers.
ETAP is one of many fintech startups that have explored partnerships as a growth strategy. Flutterwave partnered with MTN in 2021 to enable businesses that integrated Flutterwave in Cameroon, Côte d’Ivoire, Rwanda, Uganda, and Zambia to receive mobile money payments. It has also partnered with a payment service bank, 9PSB.
What are the benefits of partnerships?
As crucial as partnerships are to a business, it is important to know some of their advantages before deciding to go into one. Here are four benefits of a business partnership.
The saying “people buy from who they trust” is common in business circles, but when dealing with consumers' finances, it assumes even more significance. Most people, for instance, are comfortable transacting with a bank but may be sceptical about transacting with a fintech. However, a partnership between a bank and fintech could make them more trusting of the fintech.
Every business wants to make or save more money, but sometimes, you need to spend money to make money. Even with the astounding amounts of money raised by fintech startups, many lack the resources to pursue growth in some areas. However, by partnering with another company, fintech startups can unlock more resources.
Access to more customers
One of the most significant benefits of partnerships between businesses is the access to a customer base that one or both parties in the partnership did not have previously. Take the example of ETAP mentioned above; even with a great product, it would have to spend significant money on marketing to put its product before potential customers. But with its partnership with MTN, millions of Nigerians could discover it.
Access to a partner’s expertise and network
A larger budget may not be all the value a partner brings you. Sometimes, it could be another partner, an investor, or a community that needs your product or service. While you may be unable to get into these places on your merit, having a partner vouch for your product could make all the difference for your business.
Furthermore, fintech startups often require licences to operate, which might be difficult or expensive to obtain. In such a situation, fintech startups can leverage the licence of more established players to offer their services until they can afford theirs.
Components of a successful partnership
We’ve established that a partnership could hold great benefits for your business, but numerous business partnerships have failed or even sped up the demise of a business. Therefore, knowing what a successful partnership looks like is crucial.
A successful partnership would bring value to all partners. Before getting into a partnership with another business, evaluate all aspects of their business to ensure that you can provide any value to them and vice versa. Only then should you reach out to begin talks. Value alignment could be that you both offer different services to similar demographics. In this case, you can promote each other’s services without your users getting agitated.
Adeyemi Adegbayi, an Investment Analyst at TLCom Capital, points out that a partnership should be symbiotic.
“I think the most important thing when considering a partnership is understanding how it can be symbiotic and communicating this to the potential partner. This entails understanding how they operate and their pain points, so you can become a ‘value-add partner’.”
The best partnership has all parties wholly invested in its outcome. Before making a partnership official, get all decision-makers at your prospective partner company to agree on what the partnership should look like. Without their buy-in, you would struggle to have them fulfil their end of the bargain. You could do a test run of the partnership for a few weeks and make a decision based on how valuable the test was.
Join fintech experts to learn more about the power of partnerships at The Fintech Summit 2022
At The Fintech Summit holding on Saturday, November 26, 2022, Techpoint Africa will gather players in the Nigerian fintech industry for robust conversations about the state of the industry, trends, and the future of fintech in Nigeria. Visit www.fintech.techpoint.africa to register. For sponsorship and partnership details, please send an email to [email protected].