By Alexis Akwagyiram and Didi Akinyelure

LAGOS, June 25 (Reuters) - Online sports betting is expanding in soccer-mad Nigeria largely thanks to payment systems developed by homegrown innovation firms that are starting to make online businesses more feasible.

For years, mobile payments failed to take off in Nigeria as they have in nations such as Kenya, where Safaricom's M-Pesa money transfers have fostered a culture of cashless payments.

Fear of electronic fraud and sluggish web speeds have actually held Nigerian online customers back but sports betting firms states the new, quick digital payment systems underpinning their sites are changing mindsets towards online transactions.

"We have actually seen substantial growth in the number of payment solutions that are offered. All that is absolutely altering the video gaming space," said Seun Anibaba, CEO of Lagos State Lotteries Board, video gaming regulator in Nigeria's business capital.

"The operators will go with whoever is faster, whoever can link to their platform with less concerns and problems," he said, adding that taxes from sports betting in Lagos State rose 30 percent to 40 percent in 2017 from 2016.

That growth has actually been matched by a rise in web payments, according to data from the Nigeria Inter-Bank Settlement System (NIBSS), which is owned by the reserve bank and certified banks.

In 2016, there were 14 million web payments worth an overall 132 billion naira ($420 million). Transactions leapt to 29 million worth 185 billion in 2017 and in the first quarter of 2018 there were nearly 10 million worth 61 billion.

With a young population of almost 190 million, increasing cellphone use and falling data expenses, Nigeria has long been seen as an excellent chance for online services - once consumers feel comfortable with electronic payments.

Online gaming firms say that is occurring, though reaching the 10s of countless Nigerians without access to banking services remains a difficulty for pure online sellers.

British online wagering company Betway opened its first African company in Kenya in 2015, followed by Uganda, Ghana and South Africa. It introduced in Nigeria in January.

"There is a steady shift to online now, that is where the market is going," Betway's Nigeria supervisor Lere Awokoya stated.

"The growth in the number of fintechs, and the government as an enabler, has assisted the service to thrive. These technological shifts encouraged Betway to start running in Nigeria," he said.

FINTECH COMPETITION

sports betting companies capitalizing the soccer craze worked up by Nigeria's participation in the World Cup say they are finding the payment systems developed by regional startups such as Paystack are proving popular online.

Paystack and another local startup Flutterwave, both established in 2016, are offering competition for Nigeria's Interswitch which was established in 2002 and was the main platform used by businesses running in Nigeria.

"We added Paystack as one of our payment options without any fanfare, without revealing to our customers, and within a month it shot up to the primary most secondhand payment option on the site," stated Akin Alabi, founder of NairabBET.

He stated NairaBET, the country's second most significant wagering firm, now had 2 million regular clients on its website, up from 500,000 in 2013, and Paystack remained the most popular payment choice because it was included late 2017.

Paystack was set up by 2 Nigerian computer system science graduates, Shola Akinlade and Ezra Olubi, who received early phase financing in Silicon Valley's Y-Combinator programme.

In December 2016, it raised $1.3 million from investors consisting of China's Tencent and Comcast Ventures in the United States.

Paystack, based in the mad Ikeja district of Lagos, said the variety of monthly deals it processed increased from about 8,000 in early 2016 to more than 900,000 as of June 2018.

"In early 2016 we were processing about $3,000 a month. Today we process well over $11 million each and every single month," said Emmanuel Quartey, Paystack's head of development.

He said a community of developers had actually emerged around Paystack, producing software application to incorporate the platform into sites. "We have seen a growth because community and they have carried us along," said Quartey.

Paystack stated it allows payments for a number of wagering companies however likewise a vast array of services, from energy services to transfer business to insurance provider Axa Mansard.

Flutterwave, co-founded by Nigerian business owner Iyinoluwa Aboyeji, is also backed by the Y-Combinator programme in addition to endeavor capitalists Greycroft Partners and Green Visor Capital and the Omidyar Network. It raised $10 million in 2015.

FOREIGN INVESTMENT

Shifts in Nigeria's payment culture have coincided with the arrival of foreign financiers wanting to tap into sports betting.

Industry experts say the sector produces about $1 billion a year and is likely to grow faster than in South Africa and Kenya where the organization is more established.

Russia's 1XBet and Slovakia's DOXXbet have actually both established in Nigeria in the last two years while Italy's Goldbet was ahead of the trend, taking a half stake in market leader Bet9ja when the Nigerian firm introduced in 2015.

NairaBET's Alabi said its sales were split in between shops and online but the ease of electronic payments, expense of running stores and capability for clients to prevent the stigma of gaming in public implied online deals would grow.

But despite advances in digital payments, Kunle Soname - chairman and co-founder of Bet9ja - said it was crucial to have a store network, not least since numerous clients still remain hesitant to spend online.

He stated the company, with about 60 percent of Nigeria's sports betting wagering market, had an extensive network. Nigerian sports betting stores often act as social hubs where customers can view soccer complimentary of charge while putting bets.

At a BetKing hall deep inside the dynamic Oshodi market in Lagos, lots of soccer fans gathered to see Nigeria's last warm up game before the World Cup.

Richard Onuka, a factory employee who earns 25,000 naira a month, was fixated on a television screen inside. He said he began gambling 3 months earlier and bets as much as 1,000 naira a day.

"Since I have been playing I have not won anything however I believe that one day I will win," said Onuka. ($1 = 314.5000 naira) (Reporting by Alexis Akwagyiram and Didi Akinyelure in Lagos; editing by David Clarke)