Global Courant
One of the biggest news from the Nigerian startup scene last week was that Kippa closed his banking agencies company and laid off 40 employees. At its core, Kippa is an accounting and finance startup serving small businesses. But in September last year the time had come obtained a Super Agent license and started using KippaPay. In the same month, Kippa raised $8.4 million. This move put it in competition with major players such as Opay and Moniepoint. These two account for 57% of agents in the Nigerian market, according to TechPoint. Yet there was a seemingly clear case for Kippa to enter the market: it had a springboard of 500,000 merchants using Kippa for accounting and inventory management.
So the closure of this industry came as a surprise to most people. And now there is a broader conversation about the future of agency banking in Nigeria. Kippa CEO Kennedy Ekezie believes the future of agency banking is bleak. On Thursday, October 19, he replied to a post on
It’s not because of the dominance of the competition; these players will ultimately make the same decisions. We can decide to do this now, or kick the van into the street, brother.
— Kennedy Ekezie (@KennedyEkezie) October 19, 2023
An expensive undertaking
Kippa’s decision to withdraw is mainly due to profitability, according to Ekezie. “Our projections have changed significantly over the past six months due to changes in macroeconomic conditions in Nigeria,” he said told WeeTracker. KippaPay’s struggle had three causes: the struggle of small businesses, the devaluation of the naira and the evolution of the market. “Over the past two quarters, the cost of doing business in Nigeria has increased significantly, and in the past three months, 9% of our customers have closed their businesses,” Ekezie said.
Nigeria’s GDP contracted to 2.51% in the second quarter of this year due to inflationary pressures and a tough fiscal regime. The naira has fallen nearly 40% in the official market since the CBN’s secret devaluation in June. This dire situation has put pressure on several small businesses, including POS agents.
In July, the Lagos chapter of the Association of Mobile Money and Bank Agents In Nigeria (AMMBAN) submitted a proposal controversial rate increases due to rising operational costs. Many consumers, as well as fintech operators, opposed this move. a Facebook post The official OPay account stated: “Any agent charged too much will be blacklisted and may face legal consequences.” But they weren’t the only ones under pressure: Kippa also tried to raise prices in June to boost margins, but backed away when the market resisted. “We tried to increase our prices to ₦35 to grow margins when the devaluation started. But the amount of backlash to the price hike and the threat of user churn made us go back to ₦25,” he says. told TechCabal. And that brings us to the next point: agency banking is said to be stagnating.
A shrinking market?
Agency banking is becoming a saturated market in Africa. According to GSMAthe number of global mobile money accounts per active agent fell from approximately 113 in March 2017 to 85 at the end of 2021. In 2022, the number of active mobile money agents in Sub-Saharan Africa grew by 39%. During that period, the number of active accounts and the value of transactions grew by 21% and 15% respectively. This means that the number of agents is growing faster than the number of customers.
The POS agent model has never been the ultimate goal for the Nigerian fintech. Beyond profits, its fundamental benefit is that it supports the distribution of financial services. But that large distribution gap has narrowed over the years.
I don’t know why we always snatch backwardness from the jaws of progress. The POS agent model was a temporary model intended to assist in the distribution of financial services, but is now also being used for all kinds of illegal activities. We are now using technology to hold people hostage.
— Osaretin Victor Asemota (@asemota) June 25, 2023
Agency banking today somewhat mirrors the story of airtime top-up cards by telecom companies in the previous decade. In both cases, agents looking for new sources of income opened kiosks or umbrella stands in the hope of accumulating marginal profits in lump sums. Recharge card agents helped spread the penetration of smartphones through these cards. But now their market activity has declined as banks and fintechs have become distributors of airtime and mobile data.
Cash is king in Nigeria but there is a race to dethrone it. And that dethronement would make banking as we know it disappear. That is why the former CBN governor has taken measures such as launching a CBDC, restricting OTC withdrawals and even enforcing artificial cash shortages. The latter provided a short-lived victory and people have returned to their money-making lifestyle. But the CBN is not alone. Fintechs and telecom companies are doing everything they can to make digital payments a lifestyle. Top agency banking distributors such as Opay, MoniePoint, Paga and PalmPay have stepped up sales of their POS models in their native medium: a way for businesses to receive payments. Meanwhile, telecom giants like MTN and Airtel are looking to recreate their success in the Nigerian market. Every major player is aiming for a time when cashless transactions become normal.
