Technology adoption tends to follow an S-curve. A few early adopters start to use new technology, and hype leads to rapid acceleration, followed by a peak where expectations become more realistic, and finally, adoption levels off.
The process usually begins with an enabling factor: a new trend, innovation, or product. This enabler gives entrepreneurs an opportunity to tinker, some of them create viable products, hype builds, funding flows into the space, the hype eventually peaks, the sector cools down, before the cycle repeats itself with a different product.
We have seen this S-curve in Nigerian technology. Blogging, e-commerce, ride-sharing, online gambling and fintech have all gone through this S-curve. Now, we take a deeper look at understanding the S-curve phenomenon.
We know nothing of the future but the experience of the past. For us, the history of modern Nigerian technology is a story of three enabling factors: the internet, payments and mobile penetration.
Following the telecoms sector privatisation, the internet became more popular in a time of 2G network and WAP-enabled Nokia phones. However, there was no robust payments infrastructure for online transactions. So, the first Nigerian businesses on the internet did not get users to pay, but instead, monetised display advertising.
Linda Ikeji started around this time and became very successful, inspiring hundreds of other blogs. The hype cycle part of the S-curve was in full swing. Many of those blogs don’t exist anymore, and only a few winners emerged in the long run, Linda Ikeji, Bella Naija, Nairaland.
Payment products soon evolved to support e-commerce, and the field began to grow. Everyone wanted to sell everything online. Rocket Internet tried to move every business online – from buying phones and clothes to land and cars – launching Jumia, Jovago, Lamudi and Carmudi. Again, the hype cycle was in full swing. According to CrunchBase, between 2012 and 2016, Konga and Jumia raised a combined $876m. It seemed like every one of Nigeria’s supposed 180 million people would soon be buying their shoes and electronics online.
One of the most active investors in the space was SPARK, which had a similar strategy to rocket, funding companies like hotels.ng, tolet.com.ng and drinks.ng. But it soon became clear that some of our expectations were too high; Konga and Jumia's growth numbers were disappointing. Konga hasn't announced a fundraising round since 2015 and has since been acquired by Zinox, reportedly at a discount. Jumia has since consolidated all its various e-commerce companies into a single brand and hasn't announced a raise since 2016.
While payments infrastructure improved enough to facilitate e-commerce, it was only a few years ago that we began to see rapid innovation in financial technology (fintech). Previous payment products were not considered user-friendly or developer-friendly. Many of them still had clunky web interfaces that redirected you multiple times before you could complete payment and required merchants to pay costly setup fees before they could collect payments on their websites.
It was in this context that some companies started to try to improve the payments process. Set up fees disappeared. Application Programming Interfaces (APIs) became more accessible for developers. Payment pages were better designed and recurring payments became a possibility. Paystack was one of the first companies to offer these features, but many others soon followed. Regulatory changes like the introduction Bank Verification Numbers and the relaxing of KYC rules for some forms of mobile banking also helped to spur the innovation in the payments space.
The payments era has brought us products like Paystack and Flutterwave. They have made it possible for products like PiggyBank and PayLater to exist or for Uber and Taxify to set up recurring payments in Nigeria without having to reroute payments through an international payments processor. The payments sector is most likely in the hype phase, some winners are starting to emerge, and you can expect the space to cool down in the near future.
Predicting the future
That being said, we must be careful of drawing rash conclusions. We are excellent predictors, except of the future, and visualising tomorrow's market or innovations is a fool's game. Fintech may not actually be in the "cool down" period of its S-curve. Loans, payments, cryptocurrency exchanges and cross-border transactions are all seeing rapid innovation, and these may become enabling factors for the next S-curve.
Other factors may drive the next innovation cycle. Smartphone penetration continues to rise, even as data costs head in the opposite direction. Big data and machine learning have exciting applications for society and the economy. History may not repeat itself, but it rhymes a lot. We may not be able to predict what the next Nigerian technology innovation would be, but a good place to start would be identifying potential enabling factors and tracing out the S-curve.