The fintech industry has redefined financial services through technology, simplifying transactions. It has influenced the approach of banks to financial services.
Since the introduction of the cashless policy, the FG has issued numerous guidelines that have built the Nigerian FinTech ecosystem, while recently being signed by the FG as an act of parliament.
Notwithstanding the above, these regulations and laws do not adequately address the numerous
challenges the ecosystem faces.
The Fintech industry is known for its advantageous opportunities. But notwithstanding, there is no good sector without its problem.
Read Also: Fintechs Encouraging Financial Inclusion in Nigeria
The Fintech Industry: Problems Faced By Them In Nigeria.
- FRAUD
With Nigeria being ranked third globally in cyber crimes, Fintech companies are prone to cyber fraud, and
their systems are consistently under attack. This is also enhanced by their dependence on a huge volume of
personal and proprietary data. It makes it vulnerable to attack and possible improper use.
- UNCLEAR REGULATIONS
This is a major problem that threatens the growth of the sector. Innovators not only remain uncertain about the future of their innovations but the regulator is also perceived as being uncertain about technological innovation.
Currently, there is a lack of a single source of truth for Fintech regulations and requirements. A very good example is the CBN guidelines for mobile money services in Nigeria. Also the CBN and SEC
regulations.
- ACCESS TO DATA
Data is a tool needed by Fintech companies to drive engagement and innovation. The unavailability
of access to data remains a huge problem for Fintech in Nigerian capital markets.
This makes it difficult to identify potential customers, develop applications to meet the specific needs of investors, and monitor competition.
The efficiency of every Fintech company is therefore dependent on access to data and its ability to
transform it into products and services. Its absence constitutes a huge challenge for fintech companies whose efficiency relies on data in this era of big data and analytics.
The Fintech Industry: Other Problems
- LACK OF TRUST
Despite the innovative products offered by fintech companies, some customers still prefer to conduct
financial transactions with Nigerian banks. They consider them safer than fintech platforms, despite
being faster.
Non-Banking Financial institutions are not perceived as strong institutions the way banks are. This provides fintech companies with low market confidence and no clear sense of what the fintech industry or firms stands for.
- POPULATION AND WEAK DIGITAL INFRASTRUCTURE
For a viable Fintech ecosystem in the Nigerian capital market, it is very important to have a supportive digital infrastructural architecture.
The country still has a rather low penetration of mobile, high-speed broadband, and infrastructure to facilitate smooth connectivity across all channels.
Some fintech has to incur heavy expenditures to generate power, procure cloud infrastructure, or run
data centers. By so doing, they pass these costs to the final consumers.
Notwithstanding, this is the efficient telecommunication services required to extend financial inclusion to rural populations are being hampered by the cost of expansion to those areas.
- BARRIER TO ENTRY
Under the guidelines for mobile money services in Nigeria, anyone applying for a mobile money license
from the CBN must provide evidence of having a minimum of a certain amount in its shareholders’ fund.
This serves as a huge discouragement to Fintech startups from applying for a mobile money license.
CONCLUSION
The challenges described above are what Fintech companies go through in doing business daily. For them to maximize their potential in the Nigerian capital market, the CBN and FG must realize their roles in regulating the space.
They must continuously review their policy toward enabling the ecosystem to blossom. Moreover, they must eliminate thoughts of uncertainty when dealing with Technological innovations.
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