Things I expect to see this year in the Nigerian technology space in 2024 (Part 1)
Because predictions are so old school.
Happy Humpday. Welcome back, and thanks for being here.
Good luck to our Super Eagles, as they take on Bafana Bafana in the AFCON Semi-Finals⚽️
“When you see a cloud rising in the west, immediately you say, ‘It’s going to rain,’ and it does. Hypocrites! You know how to interpret the appearance of the earth and the sky. How is it that you don’t know how to interpret this present time?”
[Luke 12:54, 56 NIV]
In 2021 and 2022, I channeled my inner Prof. G, and Deji Olowe, and publicly took a stab at predicting how the Nigerian technology space would play out.
As is the nature of predictions, most of these were wrong. However, some of them were notably spot on. Before we go into my 2024 expectations, I’ll highlight some of my misses and toot my horn about the accurate ones.
Big Misses
Paystack will acquire Softcom/Eyowo. - The fact that it didn’t happen, and will likely not happen, does not mean my thesis was not sound. It's exactly like Deji Olowe’s Visa + Interswitch thesis - It makes sense, but it's not my money that’ll fund the acquisition, so yeah.
An IPO happened - Shoutout to VFD.
Spot on
There will be a major local acquisition in 2021, and a low-key merger - Piggyvest Acquired Abeg and Flutterwave acquired Disha.
Tech Crunch will hire a Nigeria Journalist - Tage has been kicking it with them since February 2021.
An entire dev team of a major bank was hired by a leading local player in 2021.
Increase in IPO signaling from Futterwave and TeamApt with strategic foreign executive hires, and rebrands.
A local crypto exchange pulled off a scam/hack on customer deposits.
An FX-related fraud led to a liquidity crisis in the ecosystem.
“Paystack Mafia” became a real thing.
Wallets “allegedly” drained customer’s balances.
An Exec level breakup led to a company shutdown.
Emiefele got sacked.
For 2024, I have decided not to use the term “predictions” in defining these, but rather call them my expectations based on observing trends across the globe, and how they apply to the Nigerian context.
I have broken them down into four broad themes namely.
Digital Payments and Fintech Innovation
Business Maturity and Opportunities
Ecosystem Dynamics
Regulatory trends
And will be sharing them across three posts.
Let’s get started, shall we?
Digital Payments and Fintech Innovation
1. Contactless payments go mainstream
I’ve been using Apple Pay and Google Pay for a while now, and every time I need to look for my card to pay for something physically or enter my card details online, I feel like I made a trip back to the stone age.
Last year, I experienced the Opay/Moniepoint/GTBank POS terminals that you could transfer to and get instant confirmation of payments, and I was impressed by the speed and efficiency of these.
The Lagos State Government is also doing its best to push contactless payments for transportation on its rail and waterway networks.
We have tried and failed to make QR work in this market, cardless and fingerprint ATM withdrawals won't scale, so maybe NFC payments could be the way.
With the EU Mandating Apple to open up their NFC chips for third-party payments, I expect more local players to key into this and start trialing Apple and Google Pay payment options for Online and POS Terminal payments.
2. Direct Debit finding its level in the market
Financial services companies in Nigeria love the promise of direct debit: assured income. NIBBS direct debit, like GSI before it, seems to make the same promises to businesses on better and cheaper collections (because let's face it, cards are expensive, that's why they just work).
The reality, however, is that recurring tokenised card payments seem to work better here, and have helped businesses like Piggyvest, Cowrywise, IFitness, Uber, etc. grow volumes. Whereas insurance and investment companies of yore couldn't grow with bank-owned direct debit mandates.
I’ve been using direct debit to pay my rent, phone bill, gym sub, transport fees, internet, and electricity, and also integrated it for collections in a previous role. My experience with SEPA as a consumer and business has been seamless compared to what NIBBS and the banks are offering in 2024.
Industry folks at NIBBS, Paystack, Mono, and Lendqr are understandably biased about loan repayments with Direct Debit (DD). Not only is it convenient for customers, but it also streamlines operations. Also, compared to dealing with cards, DD feels like a breath of convenience for "older people" who appreciate its simplicity.
DD can be so much more than just a loan repayment tool. While it's a great starting point, plateauing there misses bigger opportunities like lifestyle businesses, religious organisations, non- profits and NGOs, insurance and investment companies, gyms, digital savings platforms, and subscription-based services like DHL/Reds Star’s offering for businesses.
Until we tailor DD solutions to their specific needs, customers will remain stuck in the loop of cards and virtual account transfers.
DD can solve the problems of delayed invoice payments, improve payment efficiency and ultimately secure recurring revenue. It should be the payment method of choice for everyone.
3. AI chatbots and tools being tried and tested in the market
I'm skeptical of the current wave of AI chatbots and tools flooding the market. But hey, that shouldn't stop us from experimenting and learning right?
2023 was the year AI, ChatGPT, and “rizz” became top Google search terms, leading investors, operators, and commentators in a search for the next hot thing, and trying to game the system by working on AI-embedded financial services products.
A word of caution: processing customer data with AI without explicit consent treads murky legal and regulatory waters.
I also think most of the early thesis on AI-powered customer service agents will fail due to our poor literacy rates, and our culture of ‘big manism’ and low trust in technology.
One place AI-embedded financial services could succeed when employed properly is in the Robo Advisor and cashflow management space.
AI can also be properly utilised in marketplace businesses to enhance platform content quality through tasks like improved descriptions, personalised customer recommendations, image recognition, and selection optimisation.
4. Working Capital loans become real as industry players try their hands at alternative financing
MPesa, just like Nigeria’s 200 Million number, is the darling of every foreign investor and commentator, yet no one seems to reference the hidden in-plain-sight secret sauce that propelled their growth: 48-hour microloans.
This is the same reason Mobile Money works in Ghana and Francophone Africa. Despite the high costs of transactions, these companies have achieved customer lock-in by offering this service.
Flutterwave, Paystack, Selar, SeamlessHR, and PadeHCM are a few companies in the business of handling money for businesses and individuals of all sizes. They, more than most, can evaluate the financial capacities of their customers, and trial an embedded finance product aimed at bridging working capital gaps for real this time.
Enough lip service, more players need to join LAPO, Pennee, and others in the arena to provide this service. The data and customer risk analysis already exists within the above-mentioned companies, Stripe and Shopify already offer it globally.
Use AI, give it a try. Structure these loans around seasonal events that affect your customer’s business such as the Chinese New Year and the current global shipping crisis, and let us enable more real SMB growth in the country. (If anyone needs help structuring and designing a credit product like this, a few folks and I are available to do so)
5. Real Insurance growth
The latest Insurance report estimates that we have grown the insurance pool in Nigeria from about 2 million customers to 3.1 million over the last 5 years. The poor numbers and the slow increase exemplify the difficulties in driving mainstream insurance acceptance in Nigeria.
With inflation outpacing all economic indices, more Nigerians need to grapple with the reality of just how expensive being unfortunate costs and how to better protect themselves from unfortunate events.
These companies need to do more work in terms of collaboration, fractionalisation, and possibly rebuilding their risk models to make insurance more attractive to consumers. Insurance has always been a business of subsidy. Time to readjust. You are all now properly capitalised to take on more risk.
A few things I am reading
Thanks for reading, see you tomorrow for part two.