By Alexis Akwagyiram and Didi Akinyelure

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

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

Fear of electronic scams and sluggish internet speeds have actually held Nigerian online customers back but wagering companies says the new, fast digital payment systems underpinning their websites are changing mindsets towards online transactions.

"We have actually seen significant development in the number of payment options that are offered. All that is definitely changing the video gaming area," stated Seun Anibaba, CEO of Lagos State Lotteries Board, gaming regulator in Nigeria's commercial capital.

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

That growth has been matched by a rise in web payments, according to information 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 very first quarter of 2018 there were nearly 10 million worth 61 billion.

With a young population of almost 190 million, increasing mobile phone usage and falling data costs, Nigeria has actually long been viewed as an excellent opportunity for online companies - once customers feel comfortable with electronic payments.

Online gambling companies say that is happening, though reaching the 10s of millions of Nigerians without access to banking services stays an obstacle for pure online merchants.

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

"There is a progressive shift to online now, that is where the market is going," Betway's Nigeria manager Lere Awokoya said.

"The growth in the number of fintechs, and the federal government as an enabler, has assisted business to grow. These technological shifts motivated Betway to begin operating in Nigeria," he said.

FINTECH COMPETITION

sports betting companies cashing in on the soccer frenzy whipped up by Nigeria's participation worldwide Cup say they are finding the payment systems created by regional startups such as Paystack are showing popular online.

Paystack and another local startup Flutterwave, both founded in 2016, are offering competitors for Nigeria's Interswitch which was set up in 2002 and was the main platform utilized by businesses running in Nigeria.

"We included Paystack as one of our payment options without any fanfare, without announcing to our consumers, and within a month it shot up to the primary most pre-owned payment choice on the website," stated Akin Alabi, founder of NairabBET.

He stated NairaBET, the country's 2nd greatest sports betting firm, now had 2 million regular clients on its website, up from 500,000 in 2013, and Paystack stayed the most popular payment choice considering that it was included late 2017.

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

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

Paystack, based in the frenetic Ikeja district of Lagos, said the number of monthly transactions 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 an environment of designers had emerged around Paystack, creating software application to incorporate the platform into websites. "We have seen a development because neighborhood and they have actually brought us along," stated Quartey.

Paystack said it allows payments for a variety of wagering companies but likewise a broad variety of companies, from utility services to transfer business to insurance provider Axa Mansard.

Flutterwave, co-founded by Nigerian business owner Iyinoluwa Aboyeji, is likewise backed by the Y-Combinator programme along with investor Greycroft Partners and Green Visor Capital and the Omidyar Network. It raised $10 million last year.

FOREIGN INVESTMENT

Shifts in Nigeria's payment culture have actually accompanied the arrival of foreign financiers wanting to take advantage of sports betting wagering.

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

Russia's 1XBet and Slovakia's DOXXbet have both established in Nigeria in the last 2 years while Italy's Goldbet was ahead of the pattern, taking a half stake in market leader Bet9ja when the Nigerian company released in 2015.

NairaBET's Alabi stated its sales were divided in between shops and online however the ease of electronic payments, expense of running stores and capability for customers to prevent the stigma of gambling in public indicated online transactions would grow.

But despite advances in digital payments, Kunle Soname - chairman and co-founder of Bet9ja - said it was necessary to have a shop network, not least due to the fact that lots of consumers still remain reluctant to spend online.

He stated the business, with about 60 percent of Nigeria's sports betting market, had a substantial network. Nigerian wagering stores frequently serve as social hubs where customers can see soccer totally free of charge while putting bets.

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

Richard Onuka, a factory employee who makes 25,000 naira a month, was focused on a TV screen inside. He stated he started sports betting three months back and bets approximately 1,000 naira a day.

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