1
Understanding the Value Proposition for Fintech in Nigeria & Deepening Fintech Services to Enhance Financial Inclusion
Presented by:
Ladi Asuni Associate Director
Technology Advisory & Digital Transformation
KPMG
November 2018
EFInA Fintech Challenge Fund RFP 9 Launch Event
2 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Content
1. Market Context
2. Dimensions of Financial Exclusion
3. Emerging Fintech Ecosystem
4. Deepening FinTech Services
5. Conclusion
Market Context
4 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The customer demography and technology adoption landscape in Nigeria is rapidly evolving…
Sources: https://internetworldstats.com (2017) ; NIBSS E Fact Sheet (June/March 2018)
~18K ATM (18 per 100,000 Adults)
~185K Active POS Terminals (185 per 100,000
Adults)
>25m Active Facebook Users
>25m Smartphone Users. Estimated
to reach 40m by 2020
63m 63m active monthly internet
connections
>150m active mobile
subscribers
Dimensions of Financial
Exclusion
6 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The Financially Underserved in Nigeria
Literacy
• 38% are within the formal
employment segment.
• 62% are within the SMEs /
informal segment.
Working Population
E Commerce Adoption
Approximately 1.8 million
insurance policyholders
Insurance
Geographic distribution • 30% live in rural areas.
• 70% live in urban areas (mostly
in the South West region).
Access to Mobile
Access to Credit <5% have access to credit
facilities (from Bank and
other formal).
33+ Million Undeserved
• ~29 million active cards (including duplicates)
• <300,000 active e-commerce shoppers (80%
transact on mobile)
• 21% have no formal education
• 44% have secondary & above
• 35% have at least primary school
education
$ • 7.8+ million pension accounts
• Total Value of Pensions: 7.5+ trillion
• <N350bn in funds under
management for retail segment
Investment • 25+ million smart phones
• 20+ million feature phones
Sources, Nigeria Bureau of Statistics, CBN, NIBSS, Efina, ViewsWire, Konga/ Jumia Report, PENCOM
33+ million adults are formally banked with BVN. A significant portion are however underserved without access to services such as
credit, insurance, capital markets and investment management services.
7 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The Financially Unserved in Nigeria
Literacy
• Mostly unemployed or self-employed
• <4% in formal/ informal employment
• ~84% have income below N20,000 per annum
• ~16% earn up to N200,000 per annum
Working Population
E Commerce Adoption
No access to insurance
Insurance
Geographic distribution • 23%19.3 in urban areas
• 77% in rural areas- predominantly
in the North West and North East
Access to Mobile
Access to Credit No access to credit
70 Million Unserved
No e-commerce adoption
• >40% have no formal education
• 60% have at least primary school
education.
$ No access to formal
investment products
Investment • >50 million feature phones
• Utilize basic feature phones
Sources, Nigeria Bureau of Statistics, CBN, NIBSS, Efina, ViewsWire, Konga/ Jumia Report
~70 million adults are financially excluded and depend on informal means to meet the financial service needs
8 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Financially Excluded Demography
Adult Population
%
75k
350k
1.2m
11.5m
52m
42m
Source: Euromonitor, KPMG Analysis (2017)
10
7m
illio
n p
eop
le
Based on income classification of Nigeria’s adult population Banked Adult Population
UHNI/ HNI
>N46m
Upper Affluent
>N18m – 46m
Mass Affluent
>N4.6 – 18m
Middle Class
>N2.2m – 4.6m
Floating Middle Class
>N0.8 – 2.2m
Bottom of the Pyramid
<N0.8m
Most excluded
segments of the
population are the
lower income
segments
75k
350k
1.2m
11.2m
20.2m
9 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Financially Excluded Demography
• 97% of the financially
excluded earn less than
N800,000 annually (lie in
the bottom of the
pyramid segment)
• Women constitute about
55% of the unbanked
adults, hence, the focus
by some banks and
multilateral agencies on
financial inclusion for
women
• Over 75% of the
financially excluded
population are in rural
areas concentrated in the
North
• 35.2% of the financially
excluded own mobile
phones 1. CBN Financial Inclusion target by 2020 (70%)
PROFILE OF THE FINANCIALLY EXCLUDED
Akwa
Ibom
Abi
a
Ana
-
mbr
a
Bauchi
Bayelsa
Benue
Borno
Cross River
Delta
Ebonyi
Edo
Ekiti
Enug
u
FCT
Gombe
Imo
Jigawa
Kaduna
Kano
Katsina
Kebbi
Kogi
Kwara
Lagos
Nasarawa
Niger
Ogun Ondo
Osun
Oyo
Plateau
Rivers
Sokoto
Taraba
Yobe Zamfara
Adamawa
North West
38.2% North
Central 13.2%
South West 9.8%
South 11.9%
South East 8.5%
North East
18.3%
M: 45% F: 55%
Banked
38.3%
Formal Other
10.3%
Informal Only
9.8%
Financially
Excluded
41.6%
10 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Well-served (~2m) Financially Underserved (~31m)
o Access to bank account(s)
o Access to payments & savings
o Access to credit
o Access to securities and investment
products
o Access to insurance
o Access to pension
o Access to bank account(s)
o Little or no credit
o Little or no access to securities and investment
products
o Little or no access to insurance
o Little or no access to pension
o Limited access to smart phones
Financially Unserved (~67m)
o Financial illiteracy
o Lack of access to valid identification
o High levels of poverty
o Depend on informal means to meet their
financial needs
Key Stats
• ~1.2m investors in securities
• ~1.8m insurance policy holders
• ~2.5m have credit with Banks
• ~7.8m Pension account holders
with AUM of +N7.5tr 0%
10%
20%
30%
40%
Payments Savings Credit Insurance Pension
Percentage of Adult Population with Access to Financial Services
2010 2012 2014 2016Data Source: EFInA Access to Financial Services in Nigeria 2016 Survey
Significant Market Opportunities in Financial Services
11 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Access to Credit in 2017
• 2.3 million customers accessed credit (of up to N16trn) from the Banking sector - 2% of the adult
population.
• 95% (2.2m) had loan values of under N1 million (Avg N55,000 and 1% of total loans)
• 0.1% (<4,000) had loans >N1billion (Avg N4bn and 83% of total loans).
Up to N1.0m 1%
>N1m - N10m
2%
>N10 - N50m 2%
>N50m - N100m
1% [CATEGORY
NAME], [PERCENTAGE]
[CATEGORY
NAME], [VALUE],
[PERCENTAGE]
>1N1b 83%
Up to N1.0m 95.0%
>N1m - N10m 3.8%
>N10 - N50m 0.7%
>N50m - N100m
0.1%
>N100m - N500m
0.2%
>N500m - N1b 0.1%
>1N1b 0.1%
% Distribution of Borrowing Customers % Distribution of Loan Amounts
2.3million
Customers
N16 trillion
Credit
Emerging FinTech
Landscape
13 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Players from various industries are competing for the future of Financial Services
Institutional FS Players • Trust, Security
• Competence in: regulation, products, processes
Tech Giants and Emerging E Commerce • Dominant player in their respective digital market segments
• Convenience (integrated experience)
• Big Data Analytics – Customer behavior insights
FinTechs • New approach: usability
Telcos • Competence in mobile, network of agents/ distributors, big data
analytics etc.
• Exploiting Payment Service Bank licensing opportunity
* *
Travel Insurance
14 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
FinTechs are leveraging emerging technologies to deliver financial services in more convenient ways than traditional financial services
Blockchain
Cyber Security
RegTech
Platforms
Data Analytics & Artificial Intelligence
Retail Lending Payments &
Transfers
Investment and
Financial Mgt
Insurance
En
ab
lers
FinTech Themes
They are driving the disaggregation of financial services value chain by offering niche services across various
themes
15 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The FinTech Ecosystem in Nigeria
Investment Management
Personal Finance Digital Bank Payments & Transfers Insurance
Alternative Financing
Blockchain/ CryptoCurrency
FinTechs are driving the disaggregation of financial services value chain by offering niche services across
various themes and with the aim of improving access to financial services
Deepening FinTech Services
“The utmost challenge before Financial Institutions is to address the
constraints of poor connectivity, non-existence of credit history, diverse
profile of consumers and to scale up operations in unbanked sectors”
17 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
FinTech Development Challenges
Collaboration
Enabling regulation Investment
Intellectual Property (IP)
protection
War for
Talent
Consumer & data
protection
Identity
management
Fintech adoption will be mostly impacted by availability of reliable and accessible infrastructure in
urban and rural areas
Financial Literacy
18 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Globally, regulators identify the need to enable and support emerging Fintech ecosystem
Regulators need to ensure the stability
of the financial services system as a
whole by managing any emerging
bubbles and potential systemic risks.
Exploring efficiency improvement
opportunities for general industry utilities
such as (KYC, AML, credit scoring, digital
identity management etc.)
Regulators are stimulating
competition through licensing of
new entities and regulations (e.g.
challenger banks, payment
service banks, open banking).
FinTech provides new opportunities to
expand the reach of financial services
to the underserved or excluded
population
Increase
financial
inclusion
Improve
Efficiency
Ensure stability Stimulate
Competition
Motivation
for
supporting
FinTech
19 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Emerging Fintech Regulatory Challenges
Financial System
Risks
Money
Laundering
Consumer
Protection
Cross Border
Transactions
Cyber Security
& Data Privacy
Compliance
Monitoring &
Reporting
Conclusion
21 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Bank FinTech Collaboration - What a good partnership looks like
Extensive
networks
Start-ups
Robust
infrastructure
Brand
reputation
Launch
capabilities
Willingness to
invest Disruptive ideas
Latest
technologies
Entrepreneurial
mind-set
New business
models
Distribution
channels
BanksG
Source: Alex Ball
Regulation and Consumer Protection
22 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Key imperatives for deepening FinTech services to enhance financial inclusion
Customer-centric products
Employ advanced customer research techniques and design thinking
approach for solution development
Ecosystem Collaboration
Develop strong ecosystem partnerships and collaboration that will help to
drive the required distribution and scale
Knowledge of Risk & Compliance
Develop baseline knowledge of risk issues (e.g. data, security, fraud,
regulatory, consumer protection) and entrench good risk governance and
management practices from the start.
Dare to explore unchartered areas!!!
Thank You!
© 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (‘’KPMG International’’), a Swiss entity. All rights reserved.
Printed in Nigeria.
The KPMG name and logo are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").
Ladi Asuni Associate Director
Technology Advisory & Digital Transformation
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