Why We Invested in the Financial Service Innovators Association (FSI): Accelerating Fintech Innovation in Nigeria

By Ameya Upadhyay and David Madden

Fintech is booming in Africa right now. In 2018, a third of all venture capital invested in Africa went to fintech and, last month alone, $360 million was invested just in Nigerian payment-focused ventures. This is not surprising. Even though mobile money is thriving around Africa, financial services are still underdeveloped—making for an enormous market largely untapped and ripe for innovation.

One of the major challenges facing fintech startups in Africa is the nature of the regulatory environment. Around the world, startups operating in the finance industry are required to comply with complex rules and regulations, mostly created with traditional banks in mind—which can eat up resources and make innovation very difficult.

This is especially the case in Nigeria where, historically, the central bank has responded to innovations with caution, and for good reason. The central bank is responsible for the overall stability of the country's financial system—it needs to ensure that everyone’s money is safe, so it plays a delicate balancing act between protection and innovation.

At the same time, most Nigerians aren’t part of the formal financial system—only about 40 percent of adults have a bank account. Financial technology could play a critical role in addressing financial inclusion in Nigeria, but to really harness the potential of fintech, it is essential that the regulatory environment proactively supports ground-up innovation.

With these challenges in mind, Flourish has supported the launch of the Financial Service Innovators Association (FSI), which is focused on building a bridge between the startup and developer community, established financial services companies, and the Central Bank of Nigeria (CBN).

There are a number of ways in which FSI will do this. Most importantly, FSI will be launching an industry sandbox, a collaborative digital platform that will make it easier for startups and developers to test their ideas and products. Unlike a regulatory sandbox, this platform will not be run by the regulator or enable live testing with real customer accounts. However, this sandbox will include some important Nigerian financial APIs, such as those offered by the Nigeria Inter-Bank Settlement System (NIBSS). This is significant because most of the APIs that will be included are currently only available for licensed entities.

Secondly, FSI will run workshops and events and offer training and mentoring to help the fintech community take advantage of the sandbox.

Thirdly, FSI will facilitate engagement between startups and the Central Bank of Nigeria, organizing programs that help entrepreneurs and developers navigate the regulatory terrain and help the CBN understand and respond to opportunities that startups see.

We think that FSI is uniquely positioned to help advance Nigeria’s fintech ecosystem. The initiative is the result of a two year collaboration between local leaders and experts to identify the best ways to support the industry. FSI is an independent organization, but critically it has the support of the Central Bank of Nigeria, as one of the founding trustees. FSI is also being supported by NIBSS.

One of the key people behind FSI is Iyinoluwa “E” Aboyeji, a serial entrepreneur behind two of the most successful startups in Nigeria, Andela and Flutterwave. Aboyeji understands intimately both the opportunities and challenges of fintech and how to build platforms that enable Nigeria’s talent to thrive. FSI’s Executive Director, Aituaz Kola-Oladejo, has more than 15 years of experience in the industry and was most recently leading NIBSS’s initiative to empower fintech startups.

Flourish is not the only one to recognize the potential of FSI, which is also being supported by Enhancing Financial Innovation and Access (EFInA), a financial sector development organization that promotes financial inclusion in Nigeria and is funded by the UK Government’s Department of International Development (DFID) and the Bill and Melinda Gates Foundation. There’s a tremendous opportunity for fintech to help improve the financial health and prosperity of all Nigerians. We hope that FSI can be the catalyst for this opportunity.