Hybrid Banking Model Bridges ‘Much Needed’ Last-Mile Service Delivery Gap for Nigeria’s SMEs

Nigeria’s current financial system can be tough to navigate for millions of merchants who live in remote communities and have no access to reliable banking solutions.

The lack of a strong banking system is why agency banking has gained popularity in the West African nation, playing a significant role in closing the financial inclusion gap as traditional banks extend financial services to the last mile using authorized agents or merchants.

Equipped with point-of-sale (POS) machines, these agents are able to serve people in remote areas where banking activities are nonexistent, making the nonbank-led model one of the most popular, cost-effective services in the local banking industry today.

But for many small- and medium-sized enterprises (SMEs) in remote areas that are embracing digital services for the first time, there is a dire need for a banking solution that combines digital tools with much needed last-mile service delivery, according to Tosin Eniolorunda, CEO of FinTech firm TeamApt.

It’s a challenge that the Lagos-based FinTech firm has taken on with its hybrid business product, Moniepoint, that blends tech with a robust, nationwide offline distribution network that gives merchants access to a bank account, and access to a POS machine to run their business and accept debit card payments.

“At the root of the solution is a bank account, but the direction [we’re taking], however, is not just to open an account. It’s more oriented towards running your business, making payments, and getting access to capital,” Eniolorunda explained in an interview with PYMNTS.

The product has been particularly useful to merchants juggling multiple businesses — for example, a poultry farm, a feeding station and an agency business, he said — and can use the tech-enabled all-in-one business solution to centralize all their operations in one place and easily put in a request for a quick loan or overdraft facility when needed.

And so far, they appear to have achieved significant growth, with Moniepoint providing financial solutions to almost 200,000 active small businesses since its launch in 2019, while processing over $6 billion in monthly transactions.

Earlier this month, the Nigeria firm announced the relaunch of the product as a full-service, regulated business-to-business (B2B) bank, further enabling Nigerian SMEs to manage their operations, payroll as well as protect their businesses with affordable premiums.

Navigating Complex Ecosystem

The digital banking space, according to Eniolorunda, is facing massive macroeconomic headwinds, from currency volatility and the ongoing war in Ukraine, to rising interest rates impacting the flow of capital, all of which make it crucial for merchants to ensure they’re running a solid and efficient business.

For TeamApt, he said that while it might be challenging to control the trajectory and impact of these global events, doing business outside of Nigeria will lead to foreign exchange gains and provide a hedge against some of these trends.

“If we’re able to provide services for people beyond the shores of Nigeria, while providing our service in Nigeria, it will enable us to counter the effects of some of these macros,” he explained, adding that they are working on products that will facilitate the importation of foreign exchange for businesses in the country.

And as these factors continue to reshape the global economy, Eniolorunda said the digitization tailwind will continue to grow stronger as merchants increasingly take advantage of the convenience, low costs, and easy access to credit it provides for their business operations.

The emerging markets firm also has merger-and-acquisition plans moving forward, targeting inorganic acquisition opportunities in the region while growing organically in their home base of Nigeria.

Overall, Eniolorunda said the goal is to expand to the largest markets in the region and to be known worldwide as the digital business operating system for African businesses, following in the footsteps of popular payment systems like Square in the U.S., India’s Razorpay or StoneCo in Brazil.

“These are companies that have done similar and grown to be quite known to be big players in their regions to be big players and [similarly], we want to be the biggest player providing this business for small to large merchants in Africa.”

Sign up here for daily updates on all of PYMNTS’ Europe, Middle East, and Africa (EMEA) coverage.