The Impact of Fintech on Financial Inclusion in Nigeria

The fintech industry in Nigeria has helped to expedite financial inclusion. To this end, over 20 million new bank accounts have been opened via traditional banks and fintech companies since 2020, bringing the total banked population in Nigeria to 63% while also accelerating the financial inclusion strategy of the CBN by 20%.


It is undoubtedly fascinating to see how Fintech has improved and is creating strategies for improving financial inclusion in Nigeria. A glance at the Nigerian banking system would reveal that the traditional way of banking is generally through conventional local banks, which are either commercial, community micro-finance, or savings banks. However, over the last ten years, the tide has shifted.


Fintech, the abbreviated word for financial technology, is the process of offering financial services mainly through technological media and devices. These economic engagements include payments, savings, insurance, investments, e-commerce, etc. Recently, fintech has also ventured into modelling lifestyles like booking flight tickets and taxi rides, as well as the health sector to request medical services and the educational sector, to mention a few.


Historically, the drive behind Fintech’s recent explosion in Nigeria is the cashless policy introduced by the Central Bank in 2012 aimed at cutting the amount of cash available in circulation while encouraging the use of payments via electronic means. Additionally, the covid-19 pandemic has forced many businesses to forge ways to reach their customers without physical meetings. Thus, technology through digital means has become the only viable solution to transactions by proxy. Hence, local banking systems had no choice but to conform to and employ fintech-cashless means to service their operations with customers while retaining the conventional banking process to remain and stay competitive in business.


This trend implies that a door has been flung open for Fintech to become the framework, allowing several companies to sprout in the last decade, rendering services that rely heavily on technology as a means of doing business to contribute to financial inclusion.


Studies have shown that the pace of Fintech in the Nigerian scene is astronomical and looks to hold for a very long time. Even though the prospects look interesting, questions have been asked about how this wave affects businesses and their products/consumers.


How will Fintech impact the financial sector with financial inclusion, propelling it to a level worthy of world performance considering the rate of acceptance by both old and new startups and the customers themselves? 


The Financial Inclusion Strategy by the CBN?


It is impossible to talk about the contribution of Fintech to financial inclusion in Nigeria without looking carefully at the CBN’s strategies that kick-started the process’s explosion in the first place.


The CBN strategy is to implement a national financial inclusion such that the unbanked (customers yet to be financially serviced) be reduced from 43.6% in 2010 to 20% by 2020.


With this in mind, it has partnered with other stakeholders to implement some modalities to meet the target. It aims to increase the total number of people in the formal sector from 36.3% in 2010 to 70% by 2020.


The financial inclusion rate in Nigeria stands at 39.2 million, of which 46.3% of the adult population was financially unbanked in 2010. Further research showed that 54.4% of this unbanked population were women, 73.8% were younger than 45 years old, 34.0% had no formal education, and 80.4% resided in rural areas.


Some of these strategies include:

  1. Recreating the current Know Your Customer (KYC) so that the regulations can be as simple as possible allows individuals who do not entirely meet formal verification criteria to be incorporated into the banking system.
  1. Devising and implementing a framework that regulates agent banking to provide an opportunity for the unbanked to be served with banking services in every part of the country.
  1. Creating a Financial Literacy Framework that banks would use to sensitize customers about available financial products and services would also target the sustainability of such product usage.
  1. Implementing an exhaustive Consumer Protection Framework to protect clients’ interests and retain confidence in the financial sector.
  1. Continued pursuance of mobile payment systems and other cashless policies to reduce costs and increase the ease of financial services and transactions
  1. Implementation of Credit Enhancement Facilities/Programs to inspire micro, small, and medium enterprises (MSMEs) to grow to achieve the CBN’s target of 80% inclusion.

How has Fintech helped the unbanked get banked?


Some areas where Fintech has and is still helping to bank the unbanked are enormous. They include;


Deposit Money Banks (DMBs)

To serve 20 million clients, there are 21 deposit money banks today, working through an interlinking web of over 6,000 branches and operating around 10,000 ATMs.

Nigeria presently has an adult population of 84.7 million, with 43.6% of this unbanked. The indication is that there is a sizeable yet-to-be-banked adult population.

This offers an excellent basis for funding for deposit money banks through savings, which generates profit for operators of this service, like commercial banks and other institutions modelled towards financial inclusion.


Microfinance Banks (MFBs)

Microfinance banks are closest to the less formal set of unbanked Nigerians, like the artisans, market women, traders, and daily income earners. These banks serve as an easy point for getting small loans. As against commercial banks, whose loan facilities are hardly designed for petty earners and artisans, initiating fintech utilization will help render services more to this unbanked category.


As of July 2021, 866 microfinance banks in Nigeria serve only a tiny 3.8% of the adult population, amounting to 3.2 million clients. The records showed that 65% of clients used savings facilities, 14% used credit facilities, and the remaining 4% used ATM cards.

The fact that MFBs are closer to the low-level and low-income earners means that it is easier to serve the unbanked via Fintech-implemented services, which in the long run contributes to financial inclusion through this inclusion strategy. 


Microfinance Institutions (MFIs)

The creation of microfinance institutions has also helped to reach the unbanked in the most remote areas of the country by providing services that commercial and MFBs cannot offer to them because of their terrain. Although Microfinance institutions have provided ATMs to these areas as well as small loan facilities to help low-level income earners and artisans get access to financial inclusion strategies, which has helped to improve the economic life in the rural areas. Yet, the argument is that microfinance institutions (MFIs), comprising financial NGOs, financial cooperatives, self-help groups, trade associations, and credit unions, are not regulated by the Central Bank of Nigeria.


In Nigeria, over 600 MFIs are currently being monitored by the CBN. Perhaps funding, more participation, and technical assistance will go a long way to improving the performance of MFIs.



Already establishing that the Nigerian financial market is highly untapped and underserved, insurance companies that underwent a recapitalization exercise in 2007 only serve a meager 1% of the unbanked population. With a better inclusion of the insurance sector in fintech model implementation, banks can serve a more significant percentage of the unbanked population as against the conventional way of carrying out insurance procedures in Nigeria.



In 2004, the Pension Reform Act initiated a Compulsory Pension Scheme (CPS), the primary model adopted by the Federal Government and other private sectors. Annual pension contributions increased from 60 to 290 billion naira between 2006 and 2010.


We have heard cases of pensioners fainting, resulting in deaths due to the long queues of people waiting to register for their monthly pension benefits. The solution could be a fintech financial strategy and implementation.


Unfortunately, of the 36 states in Nigeria, only the Federal Capital Territory and 17 state governments have implemented the Compulsory Pension Scheme and have passed bills for its implementation and adoption.


All that is needed is for pension fund administrators to expand their coverage to the unbanked market with viable target products through voluntary contributions from the Nigerian financial inclusion space’s formal and informal economic sectors.


Through Telecommunications Companies

As of today, in Nigeria, there are several telecommunication outreach programs in the country. Which serves a population of over 200 million people with mobile network operating services. These mobile operators leverage technology for their benefit.


Fintech is one instrument servicing up to approximately 85% of the market share through fintech payment applications and portals. MTN, Globacom, and Airtel are the leaders in this sector.


The sector scaled with a 38% Compound Annual Growth Rate (CAGR) in the total number of subscribers and a 27% CAGR in teledensity. This was between the periods of 2006 and 2010.

Also, the telecommunication sector has helped the unbanked by offering a financial inclusion strategy through increased fee revenues that would be generated as a result of providing payment services.


Public Institutions

Participation in Financial Inclusion by public institutions has also contributed to helping banks the unbanked through the usage of Strategic fintech inventions to do business with their clients. Public institutions include; the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), the National Identity Management Commission (NIMC), and the Nigeria Postal Service (NIPOST) use internet payment portals to track and deliver purchased products to their clients.


How far has Fintech been able to penetrate the economic environment in Nigeria?


Whether we want to look at it from the perspective of crowdfunding, peer-to-peer lending, social trading, Robo-advisor or even personal financial management, Fintech has contributed so much and has been able to reach the farthest and most unfavourable terrain in Nigeria. However, the focus of this section is its contributions to the payment segment because this is the area where Fintech has made the most progress in Nigeria.


Fintech has been able to make financial transactions without the use of cash seamless and more accessible.


Fintech has also contributed to blockchain and cryptocurrency trading in Nigeria, making it more secure and doubt-proof, even though it is relatively new and still struggling to get CBN legal backing. This is because fintech has helped customers trust transactions through blockchains by allowing room for audit and verifying the transactions retrospectively in the most cost-effective way.


In its contribution to the banking sector, innovations like mobile banking have helped customers carry out transactions from the comfort of their homes as against the time and physically demanding conventional way. Now, customers can check account balances, transfer funds, make payments, open accounts, block debit cards, and more from their mobile devices at their convenient place and time.


Fintech’s involvement in internet banking, which is close to mobile banking in terms of usage, has also opened an alternative for customers to bank in convenience and variety by using the web as a gateway.


Furthermore, fintech devices using e-wallets or digital wallets have been a revolution where users’ information can be securely stored when they make payments without the fear of their passwords being stolen. This has helped customers in rural areas get free access to payments since e-wallets do not necessarily require a bank account. Presently, there are 48% of people with bank accounts. Fintech has been providing more people with access to finance, irrespective of bank accounts. Hence, fintech contributions have been able to reach a significant number of people even in rural areas, so long as there is network coverage in those areas.


Additionally, fintech has opened a path for more accessible health care outreach, education, and business opportunities where people living in rural areas can invest in any business they choose.

Also, local money lending agents utilize fintech innovations, like when they use point of sale (POS) machines to bring banking to the bank-less areas and, thus, help to reduce the percentage of the unbanked in Nigeria.


Fintech has penetrated the economic environment in Nigeria by providing access to economic empowerment from the growth of businesses and thus contributes to nation-building. The implication is that there will be national growth regarding economic stability and security in the larger picture.


What is Fintech’s contribution to financial literacy?


From three perspectives: fintech financial literacy can be viewed from three perspectives; what it has contributed to consumer literacy; what it has contributed to operators’ literacy; and what knowledge it has provided for operators and investors.


Consumer Literacy;

Through education programs, consumers have been able to get the needed information as to what innovative programs in the financial services sector they can benefit from that emphasize Fintech. Literacy sensitization from workshops, seminars, and conferences has helped consumers become aware and learn more about happenings in the financial industry and how they can benefit.


Operator Literacy;

Organized activities like executive education programs centred around technology and innovation present high market and business growth opportunities for operators and how they can utilize them.


These programs also reveal to operators new developments in the financial sector that can enhance their operations.


Investors Literacy;

Fintech Investors Literacy is designed and channelled toward helping investors understand the industry in Nigeria and how they can benefit from investing in it, and what kind of investment methods are possible to use.


Are banks in competition with Fintech startups?


The question of whether banks compete with startup companies is one that many people ask, especially given the current trend in the growth of Fintech startups and their outreach. Banks are still here and will always be around, no doubt. 


The traditional banking method will always be part of the process. Fintech is innovative by developing new ideas that democratize how banking and financial services are delivered and used.


The financial market is huge if we consider a nation with a large population of over 200 million, with only about 48% banked. The remaining 52% of the unbanked population has to be reached one way or another. 


Financial inclusion aims to alleviate poverty and create a financially secure economy. Then there is the need to meet the CBN and World Bank goals regarding financial inclusion.


On the other hand, competition is good if we view it from the consumers’ perspective of these innovative products. In the long run, they are the real winners; after all, the benefits of financial inclusion are for them.


What is the domestic participation of Fintech in Nigeria?


According to the World Bank, the goal is to achieve universal financial access by 2020, while the Central Bank of Nigeria explained that its target is 80% inclusion by the end of the decade.


Domestic participation in Fintech is one area where a lot needs to be done. Many angel investors seek these opportunities to invest in a market as large as Nigeria’s.


Domestic startups have raised funding, and some have even become bigger than commercial banks in terms of the ranking and ratio of financial contributions to GDP.


There is a need to get enough FDI  so indigenous business people can cash in their money and grow the local economy by keeping their assets and intellectual content in Nigeria.


Also, considering the population has a high percentage of unbanked. The FDIs have enough money and financial strength to finance these fintech startups.


Nigerians must do enough to keep these investors’ investments within the local economy.

Otherwise, they will operate with foreign and local organizations but with little impact on the local economy’s growth.


Domestic companies quoted on the stock market must begin to see Fintech as a viable means of keeping their stocks within the domestic economic environment by absorbing all the resources.


There is also the urgent need to birth new indigenous companies whose goal is to improve on the existing fintech ideas and invent new ones that can be Nigerian brand names with the capacity to compete at the world level.


What are the problems faced by Fintech in financial inclusion in Nigeria?


The fintech sector, by comparison, is new and still in its early development stage. Several hurdles must be scaled if there is considerable growth in an industry that promises excellent prospects for financial inclusion.


Some notable challenges bedevilling the sector include;


1. Regulatory Issues

Regulation surrounding financial inclusion in Nigeria today is quite inadequate. The meaning is that even though regulatory bodies understand the need for growth that can be brought about by technology, they still fear that the Nigerian financial sector is not mature enough to handle the fast fintech trends in the world. For instance, the CBN recently prohibited financial institutions operating within its territory from transacting using cryptocurrency. To worsen that situation, the Securities and Exchange Commission highlighted the restriction by prohibiting unregistered companies from engaging in security trading on whatever platform in Nigeria with the aim of curtailing the dangers that could arise from abusing a system that is not yet fully understood in terms of its workings in financial inclusion.


Accordingly, there is a need for regulatory bodies to allow for demonstrations by fintech startups and financial institutions who desire to use tech as a means to do business so that corrections can be made for better product design.


Regulators must understand that there will be risk factors before any great product can be devised and Nigeria should not be exempt because other developed parts of the world are Fintech-inclined.


Customer Low financial literacy Level

The high level of illiteracy in financial awareness ultimately culminated in the high number of unbanked and underserved customers. Customers, especially the low-income earners and artisans, instead use more unconventional means of financial transactions than formal ones because of the perceived lengthy and too much paperwork associated with using the legal system. Hence, there is a need for sensitization through workshops, seminars, conferences, summits, and executive education programs to help awaken the financially illiterate to the benefits of Fintech in financial inclusion.


Distrust by consumers 

Like with every sector of the Nigerian economy, there is always that general attrition in the participation of innovations, especially when it has to do with finance and fintech as a sector is not an exception. The standard behaviour of the consumers of financial services in Nigeria, especially those in rural areas, is usually a resistive one because of the fear of being short-changed. They would instead stick to the old, crude, conventional ways they are used to. It often takes a lot of sensitization and persuasion to convince this unbanked category to accept innovations.


Who can blame them when fintech regulation is limited, thereby risking the confidentiality of information security?


Perhaps the recently approved CBN license categorization for payment service operators will go a long way in regulating the activities of fintech operators, making room for better operations that can build prospective consumers’ trust.


Increase in Cyber Attacks due to Digitization

While it is agreed that Fintech has opened a new market for improvement in financial payments and transactions, it has also created a loophole for cyber attackers to exploit to steal the personal information of consumers of their products.


Many banks have signed contracts with fintech companies to maintain the databases of their customers. The security of this process is no longer solely in the hands of the banks. As such, there is a double problem of attack from hackers. These digital attacks through cyberspace threaten financial stability as a single attack can make service through the system unavailable for several days, which takes vigorous work to run again.


All these are some of the problems facing the fintech sector towards financial inclusion in Nigeria. 


It would help if the regulatory bodies developed a framework for monitoring cyber risk management at financial institutions using technology and laws that will duly prosecute cyber criminals and serve as a deterrent to others.


There is also a need to educate businesses and consumers, especially the lower level of fintech consumers, about the need to take responsibility for the protection of personal financial information. 




Fintech’s contribution to financial inclusion in Nigeria has exploded over the last decade. It has not only improved the usual way of rendering financial services, but it has also created new inventions that have made financial activities more accessible and faster. However, because the trend is new, there is a high level of attrition in customer patronization, especially among those unbanked and underserved consumers. Therefore, there is a need for regulatory bodies to do more to bring synergy between the operating companies and their interactions with the customers. Furthermore, sensitization of prospective consumers of these fintech services should be of high priority considering the disinterest of many due to distrust of the system.


Finally, technology is the future. As such, Nigeria cannot afford to be left behind if it is to meet World Bank and global goals and improve its economic security.





Read the original publication at Vazi Legal..

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