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Flutterwave’s acquisition of Disha and a Quick Thought on Nigeria’s Financial Inclusion Drive



Flutterwave’s acquisition of Disha and Quick Thought on Nigeria's Financial Inclusion Drive

According to news reports, Flutterwave, a digital payment platform, has acquired Disha, a content creator. This is Flutterwave’s first acquisition since it was launched in 2016.

Disha, a content creator, targets global creators and influencers, providing tools to create a onepage site to curate and share links, content, portfolios and a checkout system to receive payments.

Disha was in the news earlier in the year, stating plans to shut down due to certain shortfalls with the platform’s vision and other misalignments. The acquisition amount was not disclosed. Recently, Flutterwave Inc was seeking fresh funding at a valuation of $3 billion or more, a figure that was to roughly triple its last valuation.

According to CSL Analysts in  a note, Fintech valuations remained very high in the nine months of 2021 as investors continued to see the space as attractive. According to CB Insights, following a record-breaking Q2 in the world of Fintech, investments in Fintech continued to climb to new highs in Q3 2021.

Total Fintech funding in Q3 2021 grew 161% year-on-year to reach $31 billion. The yearly sum so far of $91.5 billion is already almost double 2020’s full-year total, and there is still a quarter to go.

Funding activity grew in nearly all Fintech subsectors except for wealth tech and capital markets tech. The digital lending, banking, and SMB Fintech sectors saw the most pronounced deal activity growth quarter on quarter.

Current valuations of Fintech are becoming significantly higher than those of many banks.

These developments have led many banks with a vibrant payment system to consider either operating the payment business as a subsidiary like Guaranty Trust Bank has done or selling a stake of their payment business like FBN Holdings plans to do with First Monie.

In our conversation with the bank and also based on communications from previous conference calls, the bank has been considering selling a stake in First Monie.

Firstmonie is an official service from FirstBank through which customers in unbanked or underbanked regions can process financial requests through registered Agents and existing businesses.

Nigeria’s significantly under-tapped digital payments industry is poised for significant growth.

A myriad of factors across industry fundamentals, positive country demographics, and regulatory support have formed the base of expected accelerated growth for the Fintech industry in Nigeria.

This expectation has received much attention from investors, which has led to significant investments as existing players look to position for future growth.

The Fintech industry in the country has seen funding rounds from various global investors since 2014, either through equity or grants.

Fintechs in Nigeria raised over $500 million between 2014 and 2020 and with reports of over $500 million raised in the first nine months of 2021, the industry has attracted $1 billion.

Increased funding, high valuations, and successful exits point to the fact that digital engagement of customers which intensified during the pandemic is here to stay.

To increase the competition in that space, earlier in the month, MTN Nigeria notified the investing public at the Nigerian Exchange Limited (NGX) that it has received an approval in principle (AIP), dated 4 November 2021 from the Central Bank of Nigeria (CBN), for the license application for the proposed MoMo Payment Service Bank Limited alongside Airtel Africa for its SMARTCASH Payment Service Bank Limited.

With the CBN still struggling to cascade financial inclusion to the nooks and cranny of the country to meet a national inclusion target, efforts by Fintech such as Flutterwave to include the unbanked population not only be applauded but also encouraged.

According to the Former Director of Banking and Payment System, Central Bank of Nigeria (CBN) Dipo Fatokun, financial inclusion is access to financial services that are available to the adult population in any given economy. Such financial services include payment, insurance, pension, etc. The more the number of adults who have access to financial services, the higher the financial inclusion.

In its latest report capturing events up till 2020, Enhancing Financial Innovation and Access (EFInA), disclosed that only 64% of Nigerian adults were financially included by the end of 2020. This means that 36% of Nigerian adults or 38 million adults remain completely financially excluded.

With innovative payment solutions and investors’ appetite to bank on those driving fintech initiatives, one can safely assume that Nigeria’s financial inclusion landscape has great hope, albeit with it.

As Africa’s largest economy, Nigeria has the potential to drive consumers toward financial inclusion, yet economic instability amongst other factors has made progress uncertain.

Six in ten Nigerians (60%) live below the poverty line, with research showing that being poor, rural, and less educated are all barriers to inclusion.

According to EFInA report, banks are leading the way to financial inclusion, with nearly three in ten adults (29%) having bank accounts. Three in 100 adults (3%) have mobile money accounts and the same number (3%) have nonbank financial accounts.

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