When Tayo Oviosu founded Paga in early 2009, he believed mobile phones could bring financial services to all Africans. It meant creating a mobile app, but it was still early days in Nigeria’s financial services industry, and KYC and identification frameworks were almost nonexistent. It forced a change of plans.
Instead of an app, Paga launched PoS systems that are now extremely popular and is a prominent player in the financial services space.
“At the end of March 2024, we had processed 335 million transactions since inception, worth over ₦14 trillion ($32 billion), and we did 80 percent of that in the last five years. This last quarter was our best quarter ever,” Oviosu said.
“Last year, we grew gross profits north of 200% year-on-year. Our Nigerian business was profitable for the third year.”
Oviosu declined to share actual profitability figures.
15 years and trillions of naira processed transactions later, Paga is refocusing on a mobile app it first launched in 2020. The Paga app, which the company says has 4.5 million users (it did not disclose the number of active users), allows users to create mobile accounts, pay bills, buy airtime, and send money.
The focus on a consumer fintech app comes as digital payments is experiencing explosive growth. In 2023, an ill-considered currency redesign saw fintech startups process record volumes.
While a rising tide lifts all boats, it also creates competition and everyone wants in on the fintech action. Nigeria’s biggest banks have floated standalone fintech products and well-funded startups Moniepoint and OPay have grabbed a large share of the consumer market.
“This is not a winner-take-all market. There are different segments of the market that everyone is focused on.”
Oviosu believes Opay is his most direct competitor, but clarifies that both companies have differing approaches to the market.
“Our primary target is a slightly higher audience than Opay’s, not to say we don’t have an overlapping audience.”
Beyond market segmentation, Paga’s focus is delivering a superior customer experience.
“You won’t see a video saying people lost their money in Paga. If there is any issue, we’ll resolve your problems.”
Diversification is important for Fintech startups
Paga offers three services: agency banking; a wallet-as-a-service that allows developers to leverage the fintech’s wallet infrastructure, and the Paga mobile app.
With 50,000 agents, Paga’s agent banking business is likely sizeable, but intense competition in the agency banking space and the distribution of PoS which are heavily subsidised puts pressure on operating margins.
“Before businesses make enough to recover the payments on the devices, people will start dropping off. There is no loyalty there.”
Oviosu believes saturation in the space will kill off margins and predicts a turn to tap-to-pay as the preferred means of payment in the future.
While the jury is still out on what the future will bring, the present problem in the financial services space is the rising incidents of fraud. Between April and June 2023, Nigerian financial institutions lost ₦5.5 billion to fraudulent loan accounts, per data from a FITC report.
These incidents are causing perceptible friction between traditional banks and neobanks. Fidelity Bank—which lost ₦2 billion ($2.5 million) to fraud—restricted transfers to OPay, Kuda, Moniepoint, and Palmpay in October 2023. Several financial services experts often claim the KYC processes of neobanks are lax and are easily exploited by bad actors.
In December 2023, the regulator weighed in, standardising KYC processes for neobanks and requiring identification for all accounts.
“We made that decision with the CBN to counter fraud. We wrote a whitepaper to the industry: the banks, and mobile money providers, which led to discussions that ultimately shaped the recently revised CBN regulation.”
The discussions with regulators continue to be ongoing, with a recent directive prohibiting neobanks from onboarding new customers as authorities crack down on crypto trading.
As Paga turns to the future, it plans to launch in another African country and prefers not to be drawn into conversations about an exit.
When we press, Oviosu only shares that he prefers a strategic acquisition over an IPO.
“I think the pressures of running a public company are such that for most people, it’s hard to do that, and still stick to the long game.”
“I want to build a multibillion-dollar business that is valuable to somebody else to take and continue that vision.”
