Top digital business banks in Nigeria: which is right for your business?

The digital banking revolution has only just begun. For long enough, SME banking in Nigeria was in a pitiful state: clunky digital products, exorbitant fees, and prohibitive lending practices.                                                                                              

Also, the stress that comes with opening a business account with conventional banks can be draining. For these reasons, many small scale businesses get discouraged from opening a business account with traditional Nigerian banks.

Digital banks are already developing a strong portfolio of retail products, and accumulating a business client base was just a matter of time. Now, they are extending those services beyond core business banking offerings to accounting and operational features.

Digital business banking are challenger banks specially designed for growing businesses, providing a range of digital business solutions for business needs.

Like digital banks, these banks give you 24/7 online banking with superior benefits, like virtual accounts, payment gateway and an option to earn interest on your hard-earned money.

As a digital business bank user, your bank account exists entirely online. All of it. From your data trail to your paperwork, and your money. Your relationship with your digital banks starts and stays online.

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This also means that you access self-service for your account online, too. You usually don’t need to check things off with a person in the real world or provide hard copies of documents (a bonus of which enables you to bank paper-free).

Expectedly, many new digital business banks have launched to ride at full speed this business banking wave and bring more nifty product features to businesses. Little wonder, within the last 10 years, electronic payments have risen in leaps and bounds in Nigeria.

Methodology

For this report, I compared six digital business banks across four categories. The six digital business banks are Wallets Africa, Prospa, Moniepoint, Leatherback, Brass and Lenco. And the four categories are securities, features, user reviews and ratings.

For clarity purposes, there’s a difference between a digital bank and a digital business bank. Because it’s easy to assume they are both the same. So, let’s make some didistinctions

How a digital bank differs from a digital business bank

A digital bank is a financial institution that operates exclusively online or through digital channels, such as mobile apps and websites, without any physical branches.

Digital banks offer a range of financial products and services, such as checking and savings accounts, loans, credit cards, and investment opportunities, that can be accessed and managed entirely online by individuals.

Meanwhile, digital business bank is a financial institution that caters specifically to the needs of small and medium-sized enterprises (SMEs) and offers business banking services entirely online.

Digital business banks offer a range of financial products and services, such as business checking and savings accounts, business loans, credit lines, payment processing, and accounting software integration, that are tailored to the needs of business owners and entrepreneurs.

While both digital banks and digital business banks operate online, the key difference between them lies in their target customers and the specific products and services they offer.

However, a number of both banks might cater to both individual consumers and businesses.

Meet the startups

Here are the startups behind the digital business banks under review:

Wallets Africa

Wallets Africa was founded by John Oluranti Oke and Joseph Benson-Aruna in 2018. The startup has raised a total of $1.6M in funding from investors like 9Yards Capital, Microtraction, Samurai Incubate, Endeavour and many more.

Prospa

Prospa was founded in October 2019 by Frederik Obasi, Chioma Ugo, and Rodney Jackson-Cole. The Lagos based neo-bank has raised a total of $3M in funding and is backed by investors like YCombinator, Musha Ventures, The Todd and Rahul Angel Fund, and Global Founders Capital.

Moniepoint

The platform was founded by Tosin Eniolorunda in 2015 and has grown to become one of the leading fintech startups in Nigeria. In 2022, Moniepoint raised a Series B round worth $50B with investors like British International Investment, Lightrock, Novastar Ventures and QED Investors.

Leatherback

The UK-based cross-border payments platform which is licensed in the United Kingdom, Nigeria, Ethiopia, and Canada was founded by Ibrahim Toyeeb in 2019. In 2022, Leatherback raised a Pre-Seed funding round worth $10 million with participation from Zedcrest Capital.

Brass

The Nigerian fintech bank was founded in July 2020 by Sola Akindolu and Emmanuel Okeke to tackle the banking challenges faced by SMEs. In 2021, Brass secured a funding round of $1.7M.

Lenco

The YC backed startup was founded in 2021 by Andrew Airelobhegbe, Godstime Asine and Impact Airelobhegbe. Lenco has raised a total of $2M in funding over 3 rounds. Their latest funding was raised in 2022 from a Seed round. Some of their investors are YCombinator, Techstars, First Circle Capital, Leonis Investissement and True Capital Management.

Features

Digital banks have set the bar for nifty banking features on personal accounts. Business customers now expect the same perk. Challenger banks provide a customisable and expanding array of features that strike a chord with business customers.

After analysing the ton of features that digital business banks can offer, we decided to select the following features as the yardstick to measure the banks: credit, interest rate on savings, cross border transactions, expense tracker or management tool, virtual card, payroll automation, invoicing and POS.

So, here’s how the platforms rank based on the features they offer their customers:

Instead of banking with a single institution, most business owners opt to create an ecosystem of integrated financial products, consisting of offerings from challenger banks, incumbents, and non-financial services providers (to some extent).

Underpinning this trend is that most SMEs cannot find one provider that offers services for all their business needs. So they take the DIY route and assemble custom portfolios of financial tools.

Security

Security is a massive cause for concern when payments go digital. Many people still believe that digital banking is not safe. This is why digital banks are raising the bar in terms of the security systems used to protect customers' funds.

These enhanced security features are enough to make consumers feel safer and more confident while carrying out online transactions.

PCI DSS Level 1 is the highest level of compliance and payment security standards merchants can comply with to securely store, transmit, and process credit card information.

Most digital banks have or work with a bank that has an MFB licence issued by the Central Bank of Nigeria. Also, having funds insured by the NDIC gives users an extra layer of confidence in the challenger bank.

Two-factor authorisation helps identify genuine account holders. It needs your password or PIN and a card reader or mobile phone that generates a single-use pass code.

Here are the security measures put in place by the six digital business banks.

Market share

Lenco has 5k+ downloads, while Leatherback has 50k+ downloads. Meanwhile, Wallets Africa and Prospa each have 100k+ downloads respectively. Moniepoint has amassed the largest market share with 500k+ downloads. This is likely because of Moniepoint's wide reach, distribution network, and deep pockets in Nigeria.

Brass is probably understated because their users are mainly web users. Also, ratings tend to be lower as a platform scales. So, the chart indicates that Wallet Africa is really underperforming.

Users experience

Evaluating the user experience on an app can be somewhat challenging and subjective due to a number of reasons: the needs of the user, the skilfulness of the user to navigate apps and the number of downloads so far.

However, ratings and reviews are good measures to feel the market pulse of what current users think about the application when they use them.

From the chart, you can see how well all the apps perform. On both Android and iOS devices, Prospa outperforms every other app in terms of reviews. It is closely followed by Lenco, which does well on both operating systems, although it doesn’t have many downloads.

The onboarding process of all the financial platforms was easy and could be done within a few minutes. To sign up, most of the apps requested you submit your bio-data, email address and BVN.

Final thoughts

Moniepoint leads the pack in terms of downloads. Since it launched in 2015, the digital business bank’s longevity and its major stake in driving the agency banking business helped the startup gain a lot of traction. The Fintech company’s deep valuation pocket also gives a sense of security.

For the features offered by the startups, your choice will be dependent on your needs as a business. Another factor to consider is if you prefer using an all-in-one digital banking solution that caters to your business and financial needs or using a mix of different digital platforms.

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