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How Fintechs can Attract Funding

What makes a Fintech Attractive



‘Fintechs’ have formed a booming industry in Nigeria and many of their products touch our lives daily.

Just last year 2019, in two separate rounds, Chinese investors put US$220 million into two Nigerian Fintechs (OPay and PalmPay) while Interswitch confirmed its US$1 billion valuation after Visa took a minority stake in the company and so many others. Earlier this year 2020, Flutterwave raised a US$35 million Series B round funding. Yet many other Nigerian Fintechs continue to struggle with attracting funding from investors.

You might be wondering why these particular Fintech companies were valued so highly, even higher than existing brick and mortar banks, asset management companies, or insurance companies that have been in existence for decades. Are these valuations real or imaginary?

In this article, we will be discussing some factors that increase a Fintech’s ability to attract funding from Investors.

What makes a Fintech Attractive to Investors

When it comes to funding, the main factors that determine the attractiveness of the  Fintech for funding are  different from that used for traditional financial institutions  and the Fintech’s ability to attract funding are based on the following factors:

  1. Problems Solved and Growth Stage

The foremost factor is the nature of the problem that is being solved by the company, whether it’s a disruptive solution to a major problem or just an incremental improvement in an existing solution that may not affect the existing Fintechs in a big way. For example, Interswitch has grown to a valuation of US$1bn with over 15 million users, due in part to it changing the models of electronic circulation of money as well as the exchange of value between individuals and organizations on a timely and consistent basis. This technology-aided service was quite new and solved a major problem at the time Interswitch launched in 2002. The growth stage of the Fintech also determines the amount and sources of the funding it should target. Startups (in this case Fintechs) are limited in their ability to attract high levels of funding from most formal funding institutions as stated in our previous post. 

  1. Total Available Market (TAM)

The nature of Fintechs makes them easily scalable across countries. For example, in the past, banks or mutual fund companies would need an extensive infrastructure of offices, branches, distributors, and agents to be able to reach and service their customers. The new-age mobile-enabled Fintechs are accessible to clients across the countries that they are licensed to operate in and hence can rapidly scale up the business. This allows them to cover a very large TAM within a relatively short time frame. For example, Flutterwave launched in 2014 with services already available in over 5 African countries with plans to set up shop in other African countries and even China. This is definitely larger than the number of countries served by most traditional bank start-ups. The company is also a partner to more than 50 banks in Africa and has processed about 100 million transactions amounting to over $2.5 billion. The lesson here is that Fintechs that operate internationally are more attractive to investors.

  1. Lower Distribution and Setup Costs

The more successful Fintechs have business models that can leverage the power of networks and are themselves very lean, with much lower infrastructure and setup costs. These costs can reduce as the size of the business grows and customers may benefit from this. In the fintech world, companies like Lidya, Flutterwave, and Interswitch have a wide footprint across the world without having the need to open offices in each location. So this is an important factor that every aspiring Fintech should consider.

  1. Lower Operational Costs

In line with lower infrastructure and manpower, successful Fintechs have much lower marginal costs, as the business models are tech-enabled, rather than with transaction-linked high variable cost.

  1. Revenue Models

Fintechs can work on revenue models that leverage the power of a large number of customers and transactions that network effects enable. It is important to understand what is the revenue model and how are they going to eventually make money, be it directly from the user or indirectly via advertising. A model that is just based on generating users without a clear understanding of how it will be monetized may not be successful in the long run.

  1. Cross-Selling

Due to the typical platform nature of a Fintech offering, it’s also easy to continuously keep adding features and products to the initial minimum viable product. Cross-selling opportunities become apparent with the benefit of data-supported insights about consumer behavior and patterns from their use of the tech. This makes it easy to continuously expand the scope of the offering with relatively small effort. An example of this can be the Nigerian fintech, PiggyVest which originally started as an online savings platform, and then began to offer direct investment opportunities to users in addition to savings.


Fintech founders must understand how investors rate them to prepare a fund attracting strategy focused on these 3 factors:

  • The nature of the problem that the Fintech solves (it should be something that wasn’t possible earlier and now made possible purely due to a breakthrough in technology) and the growth stage of the Fintech.
  • The ability to rapidly scale up within and across countries without having the need to set up physical presence and infrastructure.
  • The lower cost due to lean structures that no longer need vast physical IT infrastructure and manpower required by conventional banks.

Do you agree with us and are you still struggling to attract investors for your Fintech? We can assist you to get the funding you need.

Call us today on +234 (0) 815 8300 37, 0817 908 5185


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