How Eyowo’s bid to become a fintech giant hit the rocks

Eyowo had big dreams of becoming a fintech giant, and for a while, that dream was within reach.

Softcom, a popular Nigerian startup founded in 2017, was once considered the dream workplace. The software development agency threw colourful end-of-year parties and flew employees to South Africa and Dubai on work retreats. It felt like the example of a modern Silicon Valley startup.

Initially a B2B company, it had prominent clients like Coca-Cola, MTN, and the Nigerian government. However, in 2019, it shifted its focus from its client-side business to building consumer-facing products.

That strategic shift resulted in Eyowo, one of Nigeria’s earliest digital banks. Hailed by many former employees as a game-changer, Eyowo scored an early win as the platform of choice for Tradermoni, a controversial collateral-free government loan to two million small business owners in 2019.

Five years after that big win, Softcom’s fortunes turned, with three rounds of layoffs, persistent delays in salary payment, and a revocation of Eyowo’s banking licence in 2023.

Without a banking licence, Eyowo, with its promise of “making life better for everyone,” began scrambling to secure a banking partnership so its customers could get their deposits. While that involved many missed timelines, many customers began accessing their funds this week.

Eyowo’s cofounders declined to comment on any part of this story.

Four ex-Softcom employees blamed Eyowo’s troubles on a lack of experience in core banking and the company’s inability to change its strategic thinking to become consumer-facing.

A glitchy goodbye for Eyowo

“Eyowo’s licence revocation could have been avoided if the startup had hired professionals to handle regulatory compliance,” one person with knowledge of the business said.

The same person claimed the CBN visited Eyowo to start a conversation and give recommendations months before the licence was withdrawn. TechCabal was unable to verify these claims independently.

“It was a great product, but it was hard to keep up with the disappointments,” another ex-employee shared.

One such disappointment was that the company’s founders, Yomi Adedeji and Omoseinde Olubayo, neglected payment discussions until the last minute.

As a result, the startup was cut off from its cloud service provider four times for defaulting on payments, leading to service outages. These outages often sent the marketing team into overdrive. “The frequent disruptions eroded trust,” an ex-employee said.

The company’s management and marketing team also had different growth and marketing strategies perspectives. While the founders preferred sponsoring events, the marketing team argued that these events added little value to the company and starved the team of funds for more effective campaigns.

In 2021, Eyowo sponsored Marlian Fest, a concert by Nigerian artist Naira Marley and also sponsored Ake Festival, a book and arts festival, one year later.

“They were waiting for virality, for that one big moment,” one person said of the management’s marketing approach.

Softcom’s golden age

“It was like a family, It was churchlike,” one former employee of Softcom’s work culture.

Among former employees, the consensus was that the leadership team was supportive. One-on-one check-ins were the norm, and a flat organisational structure contributed to the sense that the company’s leadership was accessible.

The company shared some of its yearly profits with employees and sponsored team bonding sessions to Dubai in 2017 and South Africa in 2018. In 2019, Softcom’s best-performing employees were treated to an all-expense-paid Dubai vacation.

“We felt like we were going to change the world,” one former employee said.

Softcom did change the world with its business solutions.

Its enterprise business—which built bespoke websites and applications for top companies—was its cash cow.

Through its Useforms app, a software with similar capabilities to Google Forms, the company carried out trade visibility research for MTN. Softcom also made learning management systems for Covenant University, National Open University, and Delta State University.

The company also catered to FMCG companies, offering services like the “Eyowo rewards”—a raffle draw system that let customers win cash prizes by dialing customized USSD codes. One employee claims one of those contracts with Coca-Cola was worth ₦850 million *($578,584), and another with Honeywell was worth ₦65 million. TechCabal was unable to independently verify those figures.

Softcom’s most lucrative deals were from government contracts, two former employees claimed. It built a website for the Consumer Protection Commission (CPC) and was involved with Npower, a government-backed empowerment scheme to solve youth unemployment.

But things changed quickly when the startup lost N-power as a client. The loss of that contract may have convinced Softcom to focus on Eyowo as its next lucrative venture. In 2020 the company began a restructuring process that included a downsizing of its workforce in preparation for Eyowo X, the new and consumer-facing iteration of its fintech app.

The complexities of a consumer-focused fintech

This shift from being a software maker to a B2C fintech startup required a change in strategy. Softcom’s previous business model required less customer interaction and focus on scaling.

But Eyowo operated in a different landscape that demanded frequent customer engagement. But both founders approached Eyowo with the Softcom mindset, leading to a chain of questionable decisions and unrealistic expectations, two persons familiar with the company said.

“They should have treated Eyowo as a separate product without shuttering Softcom,” one former employee said.

Alongside Eyowo X, it launched three other products: Kwik Sell, an inventory and stock management software, Usepass, an event management and ticketing system, and Useforms, a software with similar capabilities to Google Form.

The company began conversations to raise $10 million for all four products in 2021, said sources directly involved. Ultimately, those fundraising conversations were unsuccessful.

As Eyowo struggled to raise funds, it was burning through monies it had earned from the Softcom era and it soon ran into cash flow problems.

“Former employees only began noticing when there were delays in salary payment in December 2021,” one person said.

Towards the end of 2022, the company laid off about 20% of its 200 employees.

“They didn’t cut costs early enough,”the same person said.

Understanding the cash burn at Eyowo

One of Eyowo’s customer acquisition strategies was giving out free debit cards to its users when it launched. The company received over 17,000 requests for those cards in the first month alone, absorbing costs that most fintechs and banks typically pass on to customers. Eyowo’s transfers were also free.

An employee claims it took almost a year after pausing their software business to build Eyowo and three additional products, with each product having a dedicated team building it, contributing significantly to cash burn.

Eyowo’s struggles culminated with the revocation of its licence in 2023. While the Central Bank gave broad-ranging reasons why microfinance bank licences could be revoked, a person close to the matter claimed Eyowo’s licence was revoked because it stopped offering loans to customers, contravening a regulatory requirement for microfinance banks.

The licence revocation meant users could not send or receive money from their accounts. While Eyowo explored a partnership with Providus Bank to allow users to withdraw their funds temporarily, some users had their deposits trapped. One former employee claimed one customer visited Eyowo’s office with a gun demanding his trapped funds.

This week, Eyowo shared that all customers can now access their deposits, and two people told TechCabal that they have successfully withdrawn their deposits.

What remains up in the air is where Eyowo goes from here. The company insinuated it has regained its licence and there are talks about a possible rebrand as “Entrepreneur Bank.”

Ultimately, while many ex-employees and customers are sympathetic to Eyowo’s cause, the company could improve its communication, they claim.

For now, the company has begun paying back customers with trapped deposits in the bank. Ex-employees are hoping they also get their back pay next.