Last week, we discussed how insurtech provided an opportunity for fintech founders in Nigeria. In the report, we analyzed the notable competition in the fintech space, and how moving into other fintech verticals can provide an opportunity for fintech startups.
Today, we will examine the treasury and financial management sub-space in Nigeria and how much opportunity it provides for founders across the country.
ICYMI: There are 144 fintech startups in Nigeria. The fintech market is made up of 38% of payments, mobile money, and digital banking; 23% of lending; 15% of savings, investments, and crowdsourcing; 13% of infrastructure and business services; 8% of cryptocurrencies; and 3% of insurtech.
Fintech activity in Nigeria began with payments and expanded into other areas, following the evolution of fintech in other economies. Currently accounting for 15% of all banking revenue in the nation, payment solutions are expanding. Beyond this, the focus of fintech activity can shift to a greater extent to asset and financial management.
Treasury and financial management represent an unexplored opportunity for those who can use technology to deliver affordable financial services in Nigeria. Although the SME market is still underdeveloped, a few firms are beginning to gain ground in this space.
A Lingering Opportunity
Cash flow is the lifeblood of every firm. The crucial functions of managing current and future cash flows, making sure there is enough working capital to meet financial responsibilities, and investing assets for future operations fall to the treasury and finance teams.
Strategic finance, risk management, and cash management form the three pillars around which treasury teams are organized. Recent months have seen a surge in asset management fintech startups, including FreshBooks, Wave, Zoho Invoice, Kippa, and Expensify, offering users the opportunity to efficiently manage their finances.
Before the emergence of startups focused on SME-based financial management, Nigerian small businesses had trouble keeping track of their everyday transactions. Accounting involves a systematized method of identifying, recording, measuring, classifying, verifying, summarizing, analyzing, and interpreting financial information, as well as communicating it.
To ensure that the goals of internal control are being met, an inexperienced or misinformed small business owner will go through this procedure to determine their profit or loss for a given period, as well as the worth and nature of a firm’s assets and liabilities.
Unfortunately, despite the surge in SMEs in Nigeria, treasury and financial management-focused startups are still lacking in the country. According to McKinsey, fintech activities in savings and investments, lending, and payments have increased in recent times. But the same cannot be said of asset management.
Facing a New Vertical
Several Nigerian SMEs will appreciate models that can offer passive and active portfolio management. Unfortunately, many small businesses rely on manual reconciliation. Several reports have noted that small businesses in Nigeria fail as a result of their inability to manage assets.
In the current economic environment of rising interest rates, fintech innovators have a chance to provide small companies with greater returns on idle capital. It is a great approach for established players to gain trust through asset management on the path to controlling larger financial flows to offer cash returns to businesses in addition to fund insurance, quick liquidity, and automated portfolio management.
Treasury and financial management company founders must connect a variety of ERPs, bank accounts, cards, general ledger totals, and balance sheet totals in real-time to succeed in the expanding industry.