Technology Nigerian Fintech and Vanity Metrics: Devil is in the details, veracity of claims

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The world of technology business has mostly been built on numbers. The bigger the numbers are the more attractive startups are to investors. Most investors hardly look the way of ones with small or what they see as insignificant metrics, is the prevailing notion. So it has become common for companies all over the world to exaggerate their metrics about their performance.

Generally, one of the cardinal rule an entrepreneur learns while creating a startup is the importance of key performance indicators (KPIs) that tells how the business is doing. A business metric is a quantifiable measure that is used to calculate the progress or performance of a goal from a given perspective.

Vanity metrics, a type of business metrics employed by many companies – refers to performance numbers or hollow numbers that look nice on the surface but hold little substance in terms of the reality. In the Nigerian tech ecosystem this is employed in many ways like the number of merchants, downloads, raw pageviews, monthly active users or engagements, cost of getting new customers and revenues and profits.

In a tweet on Monday, Victor Asemota, Africa Partner at Alta Global Ventures and a tech columnist for the Guardian alluded to it: “I try hard in my articles not to quote figures about Africa because most of them are not empirical. They are at best estimates based on extrapolation. Extrapolating works when things follow a rule but it hasn’t been my African experience. People laugh when I say Nigeria isn’t 180 million (people).”

The opposite of vanity metrics is actionable metrics – stats that tie to specific and repeatable tasks a company can improve and to the goals of the business.

It is not just Nigerian tech companies, vanity metrics is largely how the legend of Silicon Valley in the United States was built. In their case, companies fudged numbers from users, time spent to pictures uploaded among others. These numbers gave early startups a larger-than-life perception in investors estimation and went on to garner them billions of dollars along the way. The Nigerian e-commerce space which has largely underwhelmed many analysts expectations, was at some point awashed with bogus user adoption and transaction numbers.

In a world where companies are expected to grow fast at all costs or face the alternative – imminent death – it could lead to the sacrifice of revenue and margins transparency. Nigerian fintech space which has held sway in the area of most of investments to tech companies in the country, are not left out. Many quote numbers to show their growth.

These companies are emboldened by the fact that there are no real requirements on what companies share or which metrics to use. Until Carbon – former Paylater – no fintech startup in Nigeria has had the boldness to make their audited financials public.

Early this year, a fintech startup which secured millions of dollars in funding quoted support for 26 banks, 100,000 merchants, and 3 million customers. This is despite receiving a provisional license from the Central Bank to be a switch in April 2019. Interestingly, Paystack which is adjudged the industry leader has only 40,000 merchants. How this startup was able to ramp up 100,000 merchants in a shorter period remains a mystery.

“We do a disservice to entrepreneurs when we celebrate their potential before they’ve accomplished anything real,” tweeted Rebecca Enonchong, founder and CEO of AppsTech. “They start to believe they’ve made it and lose their edge. Vanity metrics vs. Business metrics. Let’s encourage potential but celebrate real business achievements.”

Aside from fintech startups, the entire financial services sector have seen a fair share of vanity metrics. Diamond Bank before the merger have claimed to have about 11 million customers on Y’ello account platform with MTN, a number that obviously helped Access Bank to decide to put up $200 million to buy the beleaguered bank. But post-merger, according to a source, it was found out that just less than a million of the Y’ello customers had connected BVN and MTN was automatically registering users as soon as they dial *719# without express consent.

“It doesn’t end with fintechs, Glo claims to have the second largest telco customer base of 46,594, 981 and yet industry traffic data consistently put them behind Airtel in airtime purchase and call density,” a top executive in the financial sector who wanted anonymity to speak freely, told BusinessDay. “In the light of the fact that many fintechs use these numbers to raise funds from investors, mostly outside Nigeria, and as an industry expert and insider we know many of these stories are not true. There is a high chance that it would backfire on the entire industry and cast everyone as fraudulent.”

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