The Fintech Series: Cowrywise as a wealth manager

The global financial crisis was an extreme worldwide financial crisis. Originating in the United States, the ripple effect spread globally. In its wake, the Asset Management industry took hits. Shrinking portfolios, low returns on investments and low confidence were the order of the day. That has turned around in recent years and the industry is seeing technologically driven innovation that seeks to challenge the normal methods used in carrying out activities in this space and the delivery of financial services.

Financial Technology (Fintech) outfits have been leading this innovation in recent years, and are looking poised to dominate the industry in the coming years.

Asset management is how a variety of securities or assets owned by investors are managed. Wealth management, however, is the financial management services involving retirement planning, estate planning, investment management, etc. offered to high/ultra-high net worth individuals.

Some of the more prominent Financial Technology platforms in Asset Management space in Nigeria are Cowrywise, PiggyVest and Farmcrowdy. Our focus for this purpose of this week’s SWOT Analysis will however be on Cowrywise.

Cowrywise is a wealth management platform that provides online investment and savings products, amongst other things, to Nigerians, with a level of access in asset management that would otherwise have not been feasible to the average Nigerian.

Founded in 2017 by Razaq Ahmed (CEO) and Edward Popoola (CTO), Cowrywise is pioneering the race for the ubiquity of financial access in investment and savings in Nigeria, participation possible with as low as N100. Cowrywise has built up a mobile app with uncomplicated intuitive UI, for this purpose, that has attracted about 150,000 users in just a few years. Cowrywise has since inception, been added to the investment portfolios of YCombinator and Microtraction.

The UK-DFID-backed accelerator, Catalyst Fund, who added Cowrywise to its portfolio at the turn of 2020, has recently stated that the Asset under Management (AUM) of Cowrywise has been growing 20% a month, surpassing eight million dollars and is poised to capture a sizable portion of the 20% YoY growth of Nigeria’s $80 billion investable asset market.

Secured with Meristem Trustees, and with a host of savings, circles, mutual funds features, and a growing and interested financial markets participation, Cowrywise has set its sights “…to boost active retail participation in the capital market to 10 million Nigerians by 2025”.

Let us now consider what made this brand achieve the strides that it has since inception and why it feels bullish about what its future holds while considering the feasibility of its ambition.

STRENGTHS

1. Product Design

The design of the Cowrywise app has been described by users of the app, who matter the most when it comes to product design, with 3S’s: superb, seamless and simple. Users of the app and the products in it describe their experience on the app as very intuitive. If Cowrywise did not have to do any form of a campaign to sell its product, the product design of the app is just okay to promote the brand. Fortunately, they are doing that, which brings us to the next point.

2. User Experience and Engagement

“Ope from Cowrywise” is a thing. Ope is many things is one. Ope is your financial adviser, accountability partner, email buddy and troll. And the good news is millennials and gen Z, who are the main demography of Cowrywise users, love a good trolling experience. Ope is Cowrywise personified. Users of the Cowrywise app have testified to the great customer engagement they have experienced from the Cowrywise brand in its entirety.

An analysis conducted shows that an average of 3 tweets monthly SPECIFICALLY commended Cowrywise’s impressive user engagement and experience on Twitter, over the past 1 year. This is not to mention other countless indirect and subtle commendations it receives from users of the app daily.

Cowrywise thinks that “Employee Experience = User Experience”. This explains why all employees of Cowrywise spontaneously become an evangelist of the brand on their social media platforms brand.

As Joseph Adafin, a critic of FinTech products in Nigeria, says on Cowrywise’s user experience and engagement, “I guess they are doing much organically, without spending so much on influencers or other social media ‘see me’ campaigns. The real strength is the product and it is selling itself”.

3. Skilled Team

Apple does not fall far from the tree. If Cowrywise is achieving results, then its team composition has to be doing something right. From developers to product specialists to campus ambassadors, the Cowrywise team composition is one filled with individuals who know their onions and are given the required environment to grow and thrive. Personal testimonies by the employees on social media attests to how the enabling environment Cowrywise creates has ensured that their staff grow in expertise at an astronomical rate.

4. Zero Fees

The Cowrywise business model is one with the aim of democratising wealth management services. This cannot be achieved without removing the bottlenecks that stand in the way of people having access to wealth management services, one of which is the fees that come with it.

Annual fees, withdrawal fees (early and otherwise), maintenance fees, savings charges are fees that comes with having access to having an expert manage your wealth. Cowrywise removed that and that has accelerated the acceptance that they have experienced since its launch in 2017.

WEAKNESSES

1. Skewed Demography

Users of Cowrywise are majorly Gen Z’s and millennials. While this demography is the most tech-savvy of the Nigeria population, they are not necessarily the demography with more wealth. Cowrywise will experience astronomical growth in its AUM and overall if it can restructure its product offering and channel of dissemination to appeal to the older generation as they are the generation with access to more funds. A roll-out of SMS features will be a gamechanger.

2. Requires Internet

The use of the Cowrywise app and its products requires a smartphone and enabling internet connection. An attempt to drive financial inclusion to the unbanked and underbanked, who are in these categories in the first place as a result of these requirements, will be futile. Again, there is a limit to the rate at which Cowrywise AUM can grow with this feature, and financial inclusion initiatives will be limited, except a USSD initiative is launched and adopted.

OPPORTUNITIES

1. Wider Untapped Target Market

Cowrywise’s major target population are youths who are largely under-served by conventional banks and Nonbank Financial Institutions, bringing digital savings and investment products to young people across Nigeria via a well-designed intuitive app. While Cowrywise might have achieved significant stride in capturing this population, the market is far from being captured. A more aggressive campaign can be launched by Cowrywise to increase its rate of adoption by said target market while expanding its infrastructure and capabilities to cater to the increase in users it will experience,

2. Increasing Smartphone Usage

According to Statista, the number of smartphone users in Nigeria is currently put at 25 million to 40 million. This number is forecast to grow to more than 140 million by 2025 – 5 years from now. As this number grows, so does the target market of Cowrywise. Cowrywise has an opportunity to be proactive by preparing teens who may not currently have a smartphone but are soon to join the smartphone population.

THREATS

1. Regulation

The existing regulatory framework in Nigeria’s capital market neither provides clarity on the role of Fintech nor state the standard registration and compliance procedure. For example, some Fintech Company registers with SEC while others with CBN.

New technology, new products and new distribution brings not only a wealth of opportunities but also new regulatory exposure. But the existing framework creates uncertainty of how regulators might treat certain Wealthtech products. While regulatory enactment might not keep up with the pace of Fintech innovation, the existing regulatory regime may stiffen innovative development.

2. Cyber-crimes

Given the nature of their operations, fintech companies are prime targets for cybercriminals. Network security, data breaches or even a denial-of-service attack – as well as damage and rectification costs following these incidents – should be a major concern for fintech companies. Cyber-attacks are currently on the high and major Fintech companies from inception allocate huge budgetary votes for cybersecurity in order to protect their data integrity and confidentiality.

While some threats relate to protecting customer data itself, the major one relates to the huge cost associated with protecting the data. If this cost is not properly managed, it could cripple the Wealthtech Company.

3. Fierce Competition

The wealth management digital products available in Nigeria currently are numerous and the number is fast growing. As new fintech startups are springing up to offer wealth management products, conventional deposit money banks and asset management firms who already command clout from their years of existence, are also beginning to launch digital products offering wealth management services. Should these existing brands push their products leveraging the clout that they already command, Cowrywise’s dominance in the space may be threatened.

4. Poor Population

While Cowrywise may decide to be bullish about its marketing campaign and product offerings, there is only so much that can be achieved in terms of the adoption of wealth management products in a nation described as the poverty capital of the world. While

Nigeria is not the most populous country in the world, it has the largest population of people living in extreme poverty – 86.9 million Nigerians (c. 50%) – in the world overtaking India, a country of 1.36 billion people – over 6 times the population of Nigeria. Even with the most innovative strategies that Cowrywise can implement to grow its number of users and AUM, the prevalence of poverty will serve as a glass ceiling to the growth of Cowrywise in Nigeria.

Cowrywise as a WealthTech brand has had a good run starting up in the FinTech space, its continued dominance and survival is hinged on solidifying its base on its strength identified above while fixing its weaknesses, and being proactive about taking advantage of the opportunities that present itself while protecting itself from positions and events that can threaten its existence.



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