Over the past five years, Nigeria’s mobile money transactions have increased over 30 times to N42 trillion, mainly due to Chinese enterprises’ cheap offers and transfers.
Based on statistics from the Nigeria Inter-Bank Settlement System (NIBSS), N1.37 trillion worth of mobile transactions were made between January and July 2020, and N41.54 trillion worth of mobile transactions occurred between January and July 2024.
The Central Bank of Nigeria (CBN) has granted licenses to 17 non-bank mobile money providers; nevertheless, the expansion of these companies is primarily being pushed by Chinese fintech companies, specifically Opay and Palmpay.
According to the worldwide telecom trade association GSMA, “Opay and PalmPay are the most well-known non-MNO-led mobile money providers and have gained significant market share in Nigeria since receiving their MMO license.”
They did this by capitalizing on the mobile boom in Nigeria, initially providing free and quick transfers, but as they became older, giving much-reduced transfers. They earned even more trust during the botched CBN naira redesign and restricted withdrawal policy in 2022.
Little Beginnings
Telnet (Nigeria) Limited served as an incubator for PayCom Nigeria Limited, the mobile money platform that gave rise to OPay in 2010. It was purchased by Yahui Zhou, a Chinese billionaire, in 2018 and rebranded as OPay.
Launched later, PalmPay debuted in Nigerian markets in 2019 following the completion of a $40 million seed round funded by Transsion, a Chinese mobile phone manufacturer. Preinstalling PalmPay on Transsion’s mobile brands, Tecno, Infinix, and Itel, was a component of the investment.
Market Entry Methodology
After Opera’s acquisition, OPay became a fantastic app, winning many Nigerians’ hearts. The company operates several services, including affordable ride-hailing. Its monthly active users reportedly increased from approximately 100,000 in April 2019 to five million a year later (to 30 million in June 2023).
During its peak, the company expanded its agent network to over 500,000 agents and offered 10 million weekly rides across 18 cities. By July 2020, it stopped offering its other services to concentrate only on fintech.
With the help of Transsion’s hegemony in the smartphone industry, PalmPay quickly expanded its user base, which currently numbers 35 million. In 2023, leading worldwide technology market research company Canalys said that in the third quarter of 2023, Transsion and Xiaomi were responsible for 85% of smartphone shipments into Nigeria.
PalmPay’s CEO, Greg Reeves, stated in 2019, “On channel and access, we’ll be pre-installed on all Tecno phones. You will find us in Tecno stores and outlets. So we gain an immediate channel and a competitive advantage in each market we operate in.”
PalmPay expanded its reach into urban and rural regions by investing in a vast agent network of over 500,000 agents.
“These fintech companies approached market penetration with an aggressive strategy. Most importantly, embrace the agent network model, which allows agents to recruit others for all of these operators with very good incentives, particularly Moniepoint,” Victor Olojo, former national president of the Association of Mobile Money and Banking Agents of Nigeria (AMMBAN), previously told journalists.
Cheap and Free Transfers
OPay and PalmPay used similar customer retention tactics: free and inexpensive transfers.
Up to June 2023, OPay offered free transfers. After the third transfer of the day, they instituted a basic charge of N10. Using a similar tactic, PalmPay charged N10 for transfers after years of providing them for free.
Both fintechs accomplished this through funding. OPay has raised $570 million, and PalmPay $400 million. The first factor contributing to their success is their financial stability. Olojo stated, “Top players need to have abundant resources.”
Leveraging Failed Naira Redesign
In 2023, OPay described how its IT investments provided it an edge when Nigerians wanted cashless terminals. The company stated that it was able to expand capacity more quickly than traditional banks because of its flexible IT network.
He made this statement amid a naira shortage, nearly bringing the economy to its knees. The CBN declared in 2022 that bigger denominations of N200, N500, and N1000 naira notes would be released together with a withdrawal strategy to promote cashless transactions.
Many transactions failed due to traditional banks’ inability to manage the spike in demand during the policy’s introduction. As a result, OPay and PalmPay were able to bridge the gap.
By March 2023, both apps were the most downloaded financial apps in Nigeria, and by October 2023, OPay was the most downloaded app overall.
Lendsqr founder Adedeji Olowe said, “They made payment methods easier, faster, and better, and people began relying on them for everyday things.”
Increasing Financial Inclusion
An increase in microtransactions was made possible by both fintechs, allowing for more cashless transactions. According to Nosa Oyegun, vice president of product and innovation at Kuda, as the cashless issue arose, microtransactions increased dramatically.
As a result of these fintechs’ expansion, more people were enrolled in the financial system, promoting financial inclusion. According to GSMA, “MMOs have successfully onboarded unbanked users using lower know-your-customer (KYC) requirements.”
“Financial inclusion is the key to the future. We want to reach out, especially to the last man, to those who do not even own a smartphone,” said Chika Nwosu, managing director of Palmpay Nigeria. “Using technology to support financial inclusion is our main goal.”
The rise in global transactions has also been attributed to Nigerian mobile money transfers. According to Mats Granryd, director-general of the GSMA, development in Senegal, Ghana, and Nigeria drove most of the $1.4 trillion increase in total transactions in 2023.
