Despite Regulatory Crackdowns, Nigerian Fintech App Users Remain Confident
Despite regulatory crackdowns, Nigerian fintech app users remain confident
On August 17, a court in Abuja ordered the Central Bank of Nigeria (CBN) to freeze for 180 days the bank accounts of four startups that enable Nigerians to invest in foreign securities.
The apex bank's crackdown may result in significant unintended consequences for the companies, but most importantly, it jeopardizes what is arguably their most valuable asset — customer trust.
The global finance industry is based on trust. And trust is even more critical in Nigeria, where over 80 million citizens live below the poverty line. The majority of Nigerians are likely to be skeptical about storing their hard-earned Naira for an extended period of time with a digital-only company.
Furthermore, the fintech platforms impacted by the CBN's decision are Trove, Risevest, Bamboo, and Chaka
Apart from offering attractive investment returns on financial products, the startups have invested in developing a customer trust and loyalty bank. This has been accomplished primarily through the years-long provision of consistent financial literacy and transparent communication, primarily via emails and Telegram channels.
Each fintech company has thousands of members in its own Telegram community — Risevest (+12,000), Chaka (+5,000), and Trove (+3,000) — where inquiries and queries are answered in real time and opportunities for further education are provided to their users.
The news of the embargo on their bank accounts would normally have whipped customers into a frenzy, and it did for a brief moment. Some users expressed their shock on social media, while others attempted to withdraw their funds, demonstrating a natural human instinct to fight or flee when confronted with a crisis or an unexpected situation.
However, the majority of users have continued to use their accounts, owing to their trust in the companies, which communicated the suspension to customers quickly while assuring them that their funds were secure.
“I received an email from Risevest prior to reading in the news that their accounts had been suspended. As a result, I was already at ease knowing that my money was secure,” Motunrayo Koyejo, a software engineer and Rise Vest user, explained to TechCabal. “I'm not sure I'd have this much confidence if I hadn't received that email.”
While the suspension only applied to four retail trading apps, there is a risk of contagion; a situation in which a crisis affecting one company spreads to other players in the industry.
Stephanie Osaji, who uses Cowrywise for savings, said she was "frightened, thought about my funds, and wondered what would happen to my money" if the platform were to abruptly shut down.
“To be completely candid, I considered withdrawing my funds. I recall logging into the app and checking the date of my next withdrawal due,” Osaji explained. “However, I convinced myself that they would figure it out on their own. That is, Nigerian startups almost always figure things out.”
Mosopefoluwa Okeowo, another Cowrywise user, told TechCabal that she believes fintech startups will always find a solution. “I completely believe in them.”
This level of consumer confidence takes years to develop. Communicating with customers and stakeholders during the earliest stages of a mishap is critical for reestablishing their trust.
Nigerians embrace investment technology in the face of economic uncertainty
Payments specialists and digital banks have increasingly defined Africa's thriving fintech ecosystem.
However, a slew of wealth management startups have emerged in recent years, the majority of which make it easier than ever for Nigerians to invest in foreign stocks and assets.
Investing in stable financial assets appeals to a large proportion of the country's millennials, who want to hedge their future wealth against the volatile Naira in the face of broader economic uncertainty.
With a minimum investment of 1,000 (approximately $2), anyone with a smartphone and access to the internet can register on Chaka and browse over 11,000 publicly traded shares on the Nigerian Stock Exchange (NSE) and US stock exchanges.
Additionally, savings and investment apps offer higher rates of return on deposits. In comparison to the less than 5% interest rates offered by Nigerian banks on fixed deposits, Rise Vest guarantees a 10% annual return on its fixed-income offering.
“I believe that saving money with banks is safer, but one receives little or nothing in return,” Koyejo explained. “That is not an option in the current economic climate. I'd rather invest with Rise Vest and keep my money. I have no immediate plans to use the money I have invested.”
