Nigerian Financial technology (Fintech) start-up Piggybank.ng, this week, announced that it has raised a seed funding of $1.1 million in order to grow its online savings business. This sum was gotten from a group of almost exclusive Nigerian investors, led by Olumide Soyombo, Co-Founder of Leadpath.
“Today’s announcement allows us to expand and capitalise on the many opportunities that the market presents us with. Our growth so far has been stimulated almost entirely by peer-to-peer advocacy and our investment in the highest quality customer service, so we know the market is there, and the product has been built, modified, tested and ratified by users,” said Joshua Chibueze, Co-Founder and CMO of Piggybank.
The success of piggybank’s fundraising from local investors could also open opportunities for other Nigerian startups, who will not have to travel to US or Europe to raise seed funding. Just like Piggybank, they can get the necessary funds needed by being in Lagos, Nigeria. This successful fundraising also shows that there is a lot of wealth in Nigeria, which can be channelled to start-ups as opposed to focusing on just agriculture, real estate and infrastructural development.
According to Piggybank.ng, the fund raised will be used for license acquisition and product development. They secured a micro-financing license from the Central Bank of Nigeria (CBN) and they are also hiring talents for their marketing department, product and tech departments.
Prior to raising this seed funding, Piggybank founded in 2016 by Somto Ifezue, Joshua Chibueze and Odunayo Eweniyi were able to increase its users by 3000 percent in one year of operation despite the economic challenges that Nigeria faced last year. It also recorded 20 – 35 percent month on month growth in user traction over 12 months. The piggybank community was able to save $5 million and this was the major reason why it was able to get the investors with ease. Piggybank was able to achieve all these by lowering its operational costs such as marketing cost and rent. It also only relied on peer-to-peer recommendations such as Piggybank Stories, and grassroots social media campaigns. The success of Piggybank is among the numerous success stories that have been recorded by several Fintech companies who were able to raise millions of dollars of seed funding from investors.
Nigeria, a cash-driven economy, is responding well to the growing opportunity in FinTech. This is seen in how transactions from mobile money in the country grew to $142.8 million in 2016 from $5 million recorded in 2011. This growth in FinTech penetration in the country has been attributed to an increase in the number of smartphone users in the country. A recent report published by Jumia revealed that the number of Nigeria’s mobile subscribers has reached 162 million, and the number of its internet users has climbed to 97.2 million representing penetration rates of about 100 percent and 83 percent respectively.
Nigeria now boasts of over 60 Fintech companies, including Paga, Interswitch, etranzact, Remita, Paystack, Kongapay and Piggybank.ng. Fintech companies have made access to financial services very easy and most commercial banks in Nigeria are also integrating Fintech into their operations to capture more of the online market. Banks such as Guaranty Trust Bank, United Bank of Africa, Zenith Bank, Ecobank, Wema and First Bank have taken advantage of this innovation. Fintech has helped beef up the conventional mode of carrying out transactions by financial service providers by using technology to make people do what they need to do when they need to do it without having to go through stress.
However, the recent trend in increasing saving culture in Nigeria has brought one of the major functions of banks to be done by Fintech companies such as Piggybank. In order not to lose customers to fintech companies, last year, Wema Bank decided to launch its own fintech service known as Alat. Since the launch of Alat in 2016, the bank has recorded growth in the number of accounts opened. Although this growth cannot be compared with that of piggybank, which didn’t spend money on radio and television jingles. Alat now operates as a separate digital bank, with its own full range of services.
And because of the growth of financial tech in Nigeria, there is a rising fear among traditionalists about the potential for FinTech firms to take over the Nigerian financial sector, by becoming the largest financial service provider in the country.
How Piggybank works
Piggybank.ng enables users to put away funds that they don’t immediately have the need for. Piggybankers can save as little as $1 a day and then set a specific date when they want to withdraw their savings. Savings drawn outside of the agreed date attracts a 5 percent early withdrawal fee. Piggybankers can earn an average of about 6 percent yearly on automated savings or 10.95 percent yearly through a fixed deposit product known as Safelock. They are also allowed to withdraw funds for free once per quarter.
Some of Piggybanks achievements:
- Piggybank.ng and Olivine Technologies were announced as the winners of the accelerator.
- They won SME100 Awards for Fintech Contributions (Under 25) and Startups Night, Zurich. They were also nominated for the Apps Africa, Best Fintech Solution in Africa.
- In 2017, they were selected for an international accelerator program known as BlackBox. This made them the first Nigerian startup ever selected into the program.