The fintech industry has received enough shockers in the last few months to last a lifetime. Let’s look at some of the recent developments.

1. CBN licensed more players
2. CBN domestic card scheme
3. Cashless policy and New Naira notes
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1. CBN licensed more players

CBN has recently granted several PSHC and PSSP licenses. Read more about this on Paymentlogue. They’ve done a great job of dissecting the topic.

But this is a good thing, right? I think so too.

What does it mean for your product? More players in the ecosystem gives you more room for flexibility. You have more options for partnerships and an increased variety in offerings.

2. CBN domestic card scheme

Omo!! Is this NIP all over again? I remember early 2012. Lol! I was a newbie digital banking product manager. Hmmm... let’s leave that story for another day o jare.

NIP eventually became a success, but I keep wondering why regulators are competing with operators. But what do I know? I’ve never been Governor of anything talk less of a whole CBN. We already have a home-grown card scheme, why not support Verve and help them achieve Mastercard and Visa status? Again, what do I know?

We’re fighting cash like we don’t know the real problems with our ecosystem. Our top problems in my opinion are –

• Underlying infrastructure e.g. open banking – we need flexibility and access to underlying payments services to deliver innovative solutions.
• Consumer behaviour – how do we influence or change consumer behaviour without education?
• Government policies – how innovation-friendly are our policies?

Back to our upcoming unity card, there’ll be growing pains of course, but will this card scheme eventually become an alpha like NIP did? I’ll wait for my ogas Adedeji Olowe and co’s predictions.

Anyway, as we were –

3. Cashless policy and New Naira notes

The war against cash has been a long one, with the most recent developments being the cashless policies and naira notes redesign by CBN in December.

Have you noticed changes in user behaviour? Has the way users interact with your product changed significantly?

One of the top areas that have been affected is agency banking; well, the CICO variant. You know, the POS guys you see under umbrellas and in kiosks all around who’s main offering is cash in/ cash out. Have you noticed a decline in those umbrellas? There are different ways to unpack this but maybe later.

There are several opportunities and advantages of restricted cash though, one is embedded finance. How can you leverage embedded finance to influence user behaviour and drive growth?

Not familiar with embedded finance? Ok. Let's make a quick segue into embedded finance (EF). Don't worry, we're not going technical. I just want us to explore EF from the perspective of how it can be a great outcome of CBN's cashless policies.

Embedded finance (EF)

Embedded finance (EF) is one of the top technologies that are shaping the future of tech because it increases the amount of time users spend on your app. EF provides payment services within non-payment apps and allows users to carry out transactions end-to-end without leaving your app. The easiest example of EF is embedded payments (in-app payments). So, you book an uber ride and the app automatically debits your pre-saved card. You didn’t need to do anything extra. Shikena. That’s the basics of it.

Forbes says: Embedded finance uses a combination of banking-as-a-service (BaaS) functionality and application programming interfaces (API) to integrate bank accounts, payments, lending, investments and other financial products directly into non-financial businesses or platforms.

Embedded Finance goes beyond payments. The goal is to serve the customer extensively, increase engagement, and create multiple streams of income without the user leaving the app.

Some great use cases of embedded finance include –

1. BNPL – buy now pay later is lending embedded in unrelated services such as ecommerce, consumer goods, health etc.
2. Inventory financing is also a great example of embedded finance. A growing use case is in supply chain management for FMCGs. (Ope Adeoye describes this excellently in our #founderswhodared chat).
3. In app credit is another great use case of EF. A lot of apps now offer digital wallets where they store value that can be used for purchases within the app. Your wallet can hold things like cashback, rewards etc. Some even for as far as integrating services such as bill payments and airtime purchase so you can spend directly from your wallet.
4. In some cases, you’ll find companies going beyond the app and offering loyalty (co-branded) cards that can be used outside of their apps.
5. Other use case of EF include insurance on consumer goods, transport and logistics provided as add-on services, healthcare etc.
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How does embedded finance help you?

Two major ways –

1. More revenue lines. By owning the customer, you become a stakeholder in the transaction chain which typically means you earn an income for the convenience you provide to your customers.
2. More importantly – data! You own the customer end-to-end. You can learn from their behaviour e.g. spending habits. You can use this data to segment your market properly, offer tailored versions of your product, build partnerships based on your consumer database, or even sell this data to advertisers!

Embedded finance has a lot to offer and when implemented right, it can help to resolve identity issues by creating digital trails which in turn improves access to credit, insurance and increase financial inclusion.

Some awesome examples of fintechs who are deeply invested in driving embedded finance in Nigeria are –

• OnePipe – Grassroots banking (inventory financing)
• Flutterwave – Fintech as a Service (account services)

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