A new report by PwC Nigeria has revealed that the COVID-19 pandemic is expected to have a disproportionate impact on Nigerian financial technology (FinTech) companies, depending on which segment each of them operates in.
As the report clarified, every company in the Nigerian FinTech space will be adversely impacted by the pandemic. However, the degree of the impact depends on what services each of them offer.
FinTechs that are most affected
The report stated that FinTechs whose core businesses entail lending and offering payment services are bound to be the worst hit by COVID-19. Interestingly, the majority of the FinTechs in Nigeria play in these two segments.
As the report explained, FinTechs operating in the loan segment will be affected simply because a significant number of their clients will be unable to fulfill their loan obligations. This is due mainly to the economic fallouts of the pandemic, which triggered a recession that ultimately resulted in many employees losing their jobs. A part of the report said:
“The payments segment will be impacted by the decline in global FinTech investments, which could hinder capital required for physical upgrade or expansion of digital infrastructure and services. For the digital lending segment, the impact of the lockdown measures on business activities, employers, employees, entrepreneurs, and other entities could affect the ability of lending clients to pay back short-term loan obligations as at when due.”
But are some opportunities
That said, the situation is not all gloomy and hopeless. As the report pointed out, the pandemic and subsequent lockdown measures that were imposed by the government, helped to shift most transactions online. Recall that a lot of banks shut down their branches, even as customers resorted to e-banking services to meet their financial needs.
The report noted that FinTechs are in a good vantage point to take advantage of the current situation. In other words, as social distancing continues to be a norm (even as bank customers are encouraged to use online mediums), FinTechs can take advantage of the situation by facilitating easy online payments whilst increasing their profitability in the process.