Author: Ifeoluwa Ogunbufunmi, Banwo & Ighodalo
As the world braces for a “new normal” in the face of the global pandemic – COVID-19 – financial technology companies (“FinTechs”) have proved that “digital” is the new look for the financial sector in Nigeria.
On March 30, 2020, Nigeria’s President Muhammadu Buhari issued a lockdown order directing the closure of all businesses (except for essential services providers) and the cessation of all movement in Lagos State, Ogun State and the Federal Capital Territory for an initial fourteen days (until April 13, 2020), followed by a further twenty-one-day extension until May 04, 2020 (the “Lockdown”). Following the recent announcement by President Buhari on April 27, 2020, there will be a phased and gradual easing of the Lockdown and a curfew from 8pm – 6am from May 04, 2020. Some states in the country (which are not covered by the Lockdown) have also implemented state-wide lockdowns, as precautions and in view of the rise in confirmed cases in some states.
Given the current situation, retail banking is now being run differently and the services which FinTechs offer have proved invaluable.
Simplified payment options availed to Nigerians by FinTechs, including mobile banking, Unstructured Supplementary Services Data (“USSD”) services and digital lending, have made these unprecedented times a little more bearable. The ability to perform banking transactions for personal and business activities through a mobile device or a computer (without physically being within the four walls of a bank) has also encouraged compliance with social distancing measures required during COVID-19. This also allays concerns on physical cash being a conduit for COVID-19. Already, online payment transaction volumes are witnessing surges, as consumers are confined to their homes during the Lockdown and turning to digital banking platforms.
These times have also shown that traditional banks and other financial institutions need to consider increased investment in middle and back-end operations to deliver a better customer experience, working with FinTechs to improve data retrieval and provide a more agile and reliable front-end experience.
Nigerian FinTechs are also implementing community-based initiatives in these times – from free advice, to cancellation or waivers of transaction fees, to donations to non-profit organisations, communities and hospitals and even the creation of customer-centered products. Digital lending platforms in Nigeria such as Carbon, Branch and Kiakia have communicated loan rescheduling options to their eligible customers (typically those with a history of prompt loan service), given that many of these customers are small and medium scale enterprises who have arguably been the worst hit in these times.
PalmPay, one of Nigeria’s fast-growing mobile payments companies, has suspended all transfer charges from its e-wallet to other PalmPay users and Nigerian banks. This FinTech has also established a ₦100,000,000 COVID-19 Support Fund (the “Support Fund”), to provide support to relief organisations in combatting the pandemic in the country. In addition, the Support Fund also qualifies every PalmPay customer for a ₦100,000 payout should they be diagnosed with COVID-19. Kuda, a Nigerian digital bank, has also launched a COVID-19 Fund in partnership with the Lagos Food Bank, a non-governmental charity, to distribute free food and other essentials across Lagos State. Some FinTechs are also in partnership with state governments to drive social investment programmes for the elderly and vulnerable in society.
COVID-19 has opened the door to a world of new possibilities and it has become evident that companies that survive this season will take hold of new opportunities and might become market leaders of the future. FinTechs in Nigeria seem to be leading this march.
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