How partnerships can help when building a fintech startup
In accordance Intelligence by Techpoint, there are over 250 fintech startups in Nigeria and they continue to increase daily. For context, that is ten times the number of commercial banks in the country.
Over the past six years, these startups have driven growth and innovation in Nigeria’s financial sector, attracting hundreds of millions of dollars in funding to the industry. In 2021 alone, Nigerian fintech startups raised nearly $800 million.
While the number of startups in the area has grown, many claim that most players in the sector are copies of previously successful businesses. But with less than half of the adult population having bank accounts and an insurance penetration rate of 2%, there is room for growth, and partnerships between fintechs and companies in other industries could be the key to unlocking this value.
Already, a few startups seem to be toeing this line. ETAP, a start-up offering micro car insurance, is partnering with telecommunications provider MTN to enable the telco’s subscribers to use the app without data or deduct their data balance.
The potential of this partnership is enormous. MTN is the largest telecommunications operator in Nigeria, with approximately 81 million subscribers. Getting so many people to discover ETAP could lead to massive adoption of the one-year-old startup and improve Nigeria’s car insurance rates. The start-up has also partnered with car distributor CFAO Motors to offer insurance to its customers.
ETAP is one of many fintech startups that have explored partnerships as a growth strategy. Flutterwave partnered with MTN in 2021 to enable businesses that integrated Flutterwave in Cameroon, Ivory Coast, Rwanda, Uganda and Zambia to receive mobile payments. It has also partnered with a payment service bank, 9PSB.
What are the benefits of partnership?
As important as partnerships are to a business, it’s important to know some of their benefits before you decide to enter into one. Here are four benefits of a business partnership.
Increased credibility
The saying “people buy from whom they trust” is common in business circles, but when it comes to consumer finances, it takes on even greater meaning. Most people, for example, are comfortable doing business with a bank but may be skeptical about doing business with a fintech. However, a partnership between a bank and fintech can make them more trusting of fintech.
More resources
Every business wants to make or save more money, but sometimes you have to spend money to make money. Even with the astonishing amounts raised by fintech startups, many lack the resources to pursue growth in some areas. However, by partnering with another company, fintech startups can unlock more resources.
Access to more customers
One of the most important benefits of business-to-business partnerships is access to a customer base that one or both parties to the partnership did not previously have. Take the example of ETAP mentioned above; even with a great product, it will have to spend significant money on marketing to put its product in front of potential customers. But with the partnership with MTN, millions of Nigerians could discover it.
Access to a partner’s expertise and network
A bigger budget may not be all the value a partner gives you. Sometimes it may be another partner, an investor or a community that needs your product or service. While you may not be able to get into these places on your merits, having a partner vouch for your product can make all the difference to your business.
Furthermore, fintech startups often require licenses to operate, which can be difficult or expensive to obtain. In such a situation, fintech startups can leverage the license of more established players to offer their services until they can afford theirs.
Components of a successful partnership
We’ve established that a partnership can bring great benefits to your business, but a number of business partnerships have failed or even hastened the demise of a business. Therefore, it is crucial to know what a successful partnership looks like.
Value adjustment
A successful partnership will provide value for all partners. Before entering into a partnership with another business, evaluate all aspects of their business to ensure that you can provide them with some value and vice versa. Only then should you reach out to start the conversations. Value alignment could be that you both offer different services to similar demographics. In this case, you can promote each other’s services without your users getting excited.
Adeyemi Adegbayi, an investment analyst at TLCom Capital, points out that a partnership should be symbiotic.
“I think the most important thing when considering a partnership is to understand how it can be symbiotic and to communicate this to the potential partner. This involves understanding how they operate and their pain points, so you can become a ‘value-creating partner.’
Mutual purchase
The best partnership has all parties fully invested in the result. Before making a partnership official, get all decision makers in your potential partner company to agree on what the partnership should look like. Without their buy-in, you’d struggle to get them to fulfill their end of the bargain. You can do a test run of the partnership for a few weeks and make a decision based on how valuable the test was.
Join fintech experts to learn more about the power of partnership at Fintech Summit 2022
At the Fintech Summit to be held on Saturday 26 November 2022, Techpoint Africa will bring together players in the Nigerian fintech industry for robust conversations on the state of the industry, trends and the future of fintech in Nigeria. Visit www.fintech.techpoint.africa to register. For sponsorship and partnership details, please email [email protected].
