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    Understanding the Value Proposition for Fintech in Nigeria & Deepening Fintech Services to Enhance Financial Inclusion

    Presented by:

    Ladi Asuni Associate Director

    Technology Advisory & Digital Transformation

    KPMG

    November 2018

    EFInA Fintech Challenge Fund RFP 9 Launch Event

  • 2 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Content

    1. Market Context

    2. Dimensions of Financial Exclusion

    3. Emerging Fintech Ecosystem

    4. Deepening FinTech Services

    5. Conclusion

  • Market Context

  • 4 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    The customer demography and technology adoption landscape in Nigeria is rapidly evolving…

    Sources: https://internetworldstats.com (2017) ; NIBSS E Fact Sheet (June/March 2018)

    ~18K ATM (18 per 100,000 Adults)

    ~185K Active POS Terminals (185 per 100,000

    Adults)

    >25m Active Facebook Users

    >25m Smartphone Users. Estimated

    to reach 40m by 2020

    63m 63m active monthly internet

    connections

    >150m active mobile

    subscribers

    https://internetworldstats.com/ https://internetworldstats.com/ https://internetworldstats.com/

  • Dimensions of Financial

    Exclusion

  • 6 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    The Financially Underserved in Nigeria

    Literacy

    • 38% are within the formal

    employment segment.

    • 62% are within the SMEs /

    informal segment.

    Working Population

    E Commerce Adoption

    Approximately 1.8 million

    insurance policyholders

    Insurance

    Geographic distribution • 30% live in rural areas.

    • 70% live in urban areas (mostly

    in the South West region).

    Access to Mobile

    Access to Credit

  • 7 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    The Financially Unserved in Nigeria

    Literacy

    • Mostly unemployed or self-employed

    • 40% have no formal education

    • 60% have at least primary school

    education.

    $ No access to formal

    investment products

    Investment • >50 million feature phones • Utilize basic feature phones

    Sources, Nigeria Bureau of Statistics, CBN, NIBSS, Efina, ViewsWire, Konga/ Jumia Report

    ~70 million adults are financially excluded and depend on informal means to meet the financial service needs

  • 8 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Financially Excluded Demography

    Adult Population

    %

    75k

    350k

    1.2m

    11.5m

    52m

    42m

    Source: Euromonitor, KPMG Analysis (2017)

    1 0

    7 m

    ill io

    n p

    eo p

    le

    Based on income classification of Nigeria’s adult population Banked Adult Population

    UHNI/ HNI

    >N46m

    Upper Affluent

    >N18m – 46m

    Mass Affluent

    >N4.6 – 18m

    Middle Class

    >N2.2m – 4.6m

    Floating Middle Class

    >N0.8 – 2.2m

    Bottom of the Pyramid

  • 9 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Financially Excluded Demography

    • 97% of the financially

    excluded earn less than

    N800,000 annually (lie in

    the bottom of the

    pyramid segment)

    • Women constitute about

    55% of the unbanked

    adults, hence, the focus

    by some banks and

    multilateral agencies on

    financial inclusion for

    women

    • Over 75% of the

    financially excluded

    population are in rural

    areas concentrated in the

    North

    • 35.2% of the financially

    excluded own mobile

    phones 1. CBN Financial Inclusion target by 2020 (70%)

    PROFILE OF THE FINANCIALLY EXCLUDED

    Akwa

    Ibom

    Abi

    a

    Ana

    -

    mbr

    a

    Bauchi

    Bayelsa

    Benue

    Borno

    Cross River

    Delta

    Ebonyi

    Edo

    Ekiti

    Enug

    u

    FCT

    Gombe

    Imo

    Jigawa

    Kaduna

    Kano

    Katsina

    Kebbi

    Kogi

    Kwara

    Lagos

    Nasarawa

    Niger

    Ogun Ondo

    Osun

    Oyo

    Plateau

    Rivers

    Sokoto

    Taraba

    Yobe Zamfara

    Adamawa

    North West

    38.2% North

    Central 13.2%

    South West 9.8%

    South 11.9%

    South East 8.5%

    North East

    18.3%

    M: 45% F: 55%

    Banked

    38.3%

    Formal Other

    10.3%

    Informal Only

    9.8%

    Financially

    Excluded

    41.6%

  • 10 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Well-served (~2m) Financially Underserved (~31m)

    o Access to bank account(s)

    o Access to payments & savings

    o Access to credit

    o Access to securities and investment

    products

    o Access to insurance

    o Access to pension

    o Access to bank account(s)

    o Little or no credit

    o Little or no access to securities and investment

    products

    o Little or no access to insurance

    o Little or no access to pension

    o Limited access to smart phones

    Financially Unserved (~67m)

    o Financial illiteracy

    o Lack of access to valid identification

    o High levels of poverty

    o Depend on informal means to meet their

    financial needs

    Key Stats

    • ~1.2m investors in securities

    • ~1.8m insurance policy holders

    • ~2.5m have credit with Banks

    • ~7.8m Pension account holders

    with AUM of +N7.5tr 0%

    10%

    20%

    30%

    40%

    Payments Savings Credit Insurance Pension

    Percentage of Adult Population with Access to Financial Services

    2010 2012 2014 2016 Data Source: EFInA Access to Financial Services in Nigeria 2016 Survey

    Significant Market Opportunities in Financial Services

  • 11 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Access to Credit in 2017

    • 2.3 million customers accessed credit (of up to N16trn) from the Banking sector - 2% of the adult

    population.

    • 95% (2.2m) had loan values of under N1 million (Avg N55,000 and 1% of total loans)

    • 0.1% (N1billion (Avg N4bn and 83% of total loans).

    Up to N1.0m 1%

    >N1m - N10m

    2%

    >N10 - N50m 2%

    >N50m - N100m

    1% [CATEGORY

    NAME], [PERCENTAGE]

    [CATEGORY

    NAME], [VALUE],

    [PERCENTAG E]

    >1N1b 83%

    Up to N1.0m 95.0%

    >N1m - N10m 3.8%

    >N10 - N50m 0.7%

    >N50m - N100m

    0.1%

    >N100m - N500m

    0.2%

    >N500m - N1b 0.1%

    >1N1b 0.1%

    % Distribution of Borrowing Customers % Distribution of Loan Amounts

    2.3million

    Customers

    N16 trillion

    Credit

  • Emerging FinTech

    Landscape

  • 13 © 2018 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    Players from various industries are competing for the future of Financial Services

    Institutional FS Players • Trust, Security

    • Co