Anyone telling you that we have to wait for the Fintech era to begin in Nigeria is wasting time. It is already here with us.
Paga, the mobile money company, which has evolved as an omni-channel fintech company in Nigeria recorded N156 billion in transaction value, according to its CEO, Tayo Oviosu via a tweet:
The company has more than 5 million customers and recorded 9.5 million transactions in 2016.
When you note that each of these transactions bring revenue, you can deduce that this company may be more profitable than some 3rd tier banks in Nigeria. If we assume that Paga earns 3% on the transactions, then the company took home N4.68 billion in income and profit could be excess of N2 billion after taxes, etc in 2016.
What does this tell us?
It tells us that Paga may be more profitable than some banks in Nigeria. While we wait for the banks to publish their complete 2016 statements, if we use the 2015 numbers, Paga made more money than FCMB and Wema Bank.
Of the 10 banks that released their results, five posted sharp decline in profits, a major departure from the consistent rise in profits posted by almost all the banks in the country after the 2010 banking crisis.
The reports on the NSE website showed that Ecobank posted a PBT of N40bn in the 2015 financial year; Union Bank, N18.1bn; FCMB, N2.5bn; Fidelity Bank, N14bn; and Wema Bank, N3.046bn.
This is the future, and what the risk from fintech poses to Nigerian banks.
If you compare Paga to most insurers, there is no chance. It’s income will dwarf theirs. Consider UnityKapital Assurance Plc, which as reported by Daily Trust, made a gross premium income of N2.68 billion in 2015. But in the insurance industry, UnityKapital is even mid-tier. When you move down the ladder, Paga may be doing better than most. Insurers like IEI Plc are making loses and barely get to a billion naira in income.
Even the top tier may not be far away from Paga’s numbers: Lasaco, one of the top-tier insurers, had a a gross income of N5.1 billion in 2015.
Our prediction is that the trajectory will continue like this across our financial industry. The reality is that banking and insurers will shrink as dis-intermediation destroys value where most become dump pipelines – allowing fintechs to make money while they earn marginal value. And they do that even when carrying most of the infrastructure costs.