OPay and Palmpay, two digital banking systems that are owned by the Chinese government, are at the top of the point-of-sale (PoS) market in Nigeria. Together, they have more than a million mobile banking agents.
Intelpoint’s Nigeria Financial Services Report shows that OPay, a fintech company that got its start in 2018 when it bought a local payment platform, is now the leader in the PoS market with 563,262 dealers.
In a recent statement, PalmPay claimed that it had expanded its agent network to 500,000. The 2023 State of the Industry Report on Mobile Money from the GSM Association says that there are more than 2 million banking and mobile money providers in the world.
The implication is that OPay and Palmpay together make up at least half of the Nigerian agency banking business. Moniepoint, which has 322,266 users (according to data from Intelpoint), and MTN, which has 264,000 users (according to data from the company), make up the top four market winners.
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Analysts claim finance runs OPay and PalmPay
Some experts say that funding is the biggest reason why OPay and PalmPay are so popular.
“Their success can be explained first by how strong their finances are. Top players need a lot of cash. Since the Chinese invested in OPay and Palmpay and Moniepoint was able to get a number of funds from the international venture capital market, they are able to break into the market and work in other African markets, according to Victor Olojo, the national president of the Association of Mobile Money and Banking Agents of Nigeria (AMMBAN).
PalmPay is a financial technology company owned by Transsion Holdings, which makes top-selling smartphone brands like TECNO, Infinix, and Itel. In 2019, the holding company raised almost $400 million in an initial public offering on China’s tech-focused stock market, Star Market. Transsion’s value went up to $3.95 billion after the share sale, making it one of the most popular companies on the Star Market.
The share price of the company was $139, which was a 2,719.4% jump from its selling price of $4.93 per share in 2019.
PalmPay was launched in 2019 with an initial investment of $40 million, and the app came pre-installed on 20 million Infinix, TECNO, and Itel smartphones. In August 2021, it also raised $100 million in a Series A round of funding, bringing its total funding to $140 million. In both rounds of funding, Transsion was the main backer.
OPay was founded in Hong Kong. So far, it has raised $570 million and is worth more than $2 billion. Opera’s corporate share round was the most recent funding for the company. The $400 million raised in Series C in 2021 is still the most money ever given to a banking company whose main focus is Nigeria and Africa.
OPay has a lot of money, so they can bet on new goods and services that their competitors might find too risky.
“I think it’s safe to say that OPay and PalmPay have shown that US venture and business models don’t necessarily work or scale in this part of the world,” said Jude Dike, CEO and co-founder of GetEquity.
He thinks that the models of the two companies put range over depth. In other words, they will spend money on ideas that help them get more customers and worry about the quality or value of their deals. It requires taking risks to find what works and then sticking with it.
Before July 2020, OPay worked like a super app where people could use many different services, such as ride-hailing, transportation, and fintech. It said in July 2020 that it would stop doing ride-hailing and transportation and instead focus on financial technology (fintech).
This decision to focus on fintech may have been a big reason why it was able to raise a record $400 million in series C funding from investors led by Softbank Vision 2 Funds and including Dragon Ball Capital, Sequoia Capital China, Source Code Capital, Softbank Ventures Asia, Redpoint China, and 3W Capital.
Peter Oriaifo, the principal at Oui Capital, a venture capital firm that focuses on Africa, says that OPay and PalmPay’s business plans are not much different from what most fintech companies in Nigeria are already doing. He said that the only difference is in how much they are ready to bet and that the strategy is the same as what US companies are doing.
Oriaifo asked, “How else do you spend more than $570 million to do what indigenous players have done with less than 1/5th of the money raised?”
Opay-Palmpay transfers are free
OPay’s payments to other banks were free until June 19, 2023, when the company started charging N10 after the third transfer each day. Since 2020, PalmPay has made transfers free, and N10 was added after the third transfer only recently. Annual savings on PalmPay now earn 20% interest.
Our high-interest savings choice is good for our clients and businesses. Kelvin Olumese, the senior marketing manager for PalmPay Nigeria, said, “It gives our users access to high yield returns and helps them move towards financial independence. It also leads to more customer deposits and transactions on our platform, which bring us money.”
The main benefit of OPay and PalmPay is how fast money transfers are, which became a selling point when the Central Bank of Nigeria announced its currency redesign plan early this year. After there wasn’t enough naira, a lot of people used mobile transfers and other ways to pay with their phones.
In July 2023, 25 million people used PalmPay. Sofia Zab, the chief marketing officer for PalmPay Global, says that most people who use the PalmPay app on their phones are making purchases. There are more than 25 million people who use mobile money, and 500,000 mobile money brokers and 300,000 businesses serve them.
“All of these people have business plans that are bold and work well on their own. It’s not like banking hall waiting. Fintechs came in a strong way. Olajo of AMMBAN said, “The most important thing is to adopt the agent network model, in which agents can recruit other agents for all of these operators with very good incentives, especially for Moniepoint.”
Analysts say that the growing spending in OPay and PalmPay could help fintech companies. Large purchases by both businesses would bring in new investors. Other fintech companies save money by not adding new users. The platform is chosen by the customer.
Edoka Idoko, the founder and CEO of OjirePrime, said that this was also true of regular banks. He said that after bringing millions of Nigerians into the banking system, banks are now moving to fintech platforms.
“We still have the same clients. Banks did. Idoko also said, “We welcome competition.”