By Alexis Akwagyiram and Didi Akinyelure

LAGOS, June 25 (Reuters) - Online sports betting is flourishing in soccer-mad Nigeria mostly thanks to payment systems established by homegrown innovation companies that are starting to make online businesses more practical.

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 promoted a culture of cashless payments.

Fear of electronic scams and slow web speeds have actually held Nigerian online customers back but wagering firms states the brand-new, quick digital payment systems underpinning their sites are altering attitudes towards online transactions.

"We have seen significant growth in the variety of payment services that are available. All that is absolutely changing the video gaming area," stated Seun Anibaba, CEO of Lagos State Lotteries Board, video gaming regulator in Nigeria's commercial capital.

"The operators will choose whoever is faster, whoever can connect to their platform with less problems and glitches," he stated, including that taxes from sports betting wagering in Lagos State increased 30 percent to 40 percent in 2017 from 2016.

That development has been matched by an increase in web payments, according to data from the Nigeria Inter-Bank Settlement System (NIBSS), which is owned by the central bank and licensed banks.

In 2016, there were 14 million web payments worth a total 132 billion naira ($420 million). Transactions jumped 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, rising smart phone use and falling information costs, Nigeria has actually long been seen as a great chance for online businesses - once customers feel comfortable with electronic payments.

Online gambling companies state that is taking place, though reaching the 10s of millions of Nigerians without access to banking services remains a difficulty for pure online merchants.

British online sports betting company Betway opened its first African service in Kenya in 2015, followed by Uganda, Ghana and South Africa. It released in Nigeria in January.

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

"The growth in the variety of fintechs, and the government as an enabler, has assisted the organization to grow. These technological shifts motivated Betway to begin operating in Nigeria," he stated.

FINTECH COMPETITION

sports betting firms capitalizing the soccer frenzy worked up by Nigeria's participation in the World Cup say they are discovering the payment systems produced by local startups such as Paystack are showing 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 primary platform used by businesses running in Nigeria.

"We added Paystack as one of our payment alternatives without any fanfare, without announcing to our clients, and within a month it soared to the primary most used payment choice on the website," said Akin Alabi, founder of NairabBET.

He said NairaBET, the nation's 2nd greatest sports betting company, now had 2 million regular clients on its site, up from 500,000 in 2013, and Paystack remained the most popular payment option given that it was included late 2017.

Paystack was established by 2 Nigerian computer technology graduates, Shola Akinlade and Ezra Olubi, who got early phase financing in Silicon Valley's Y-Combinator programme.

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

Paystack, based in the frenetic Ikeja district of Lagos, stated the number of month-to-month transactions it processed rose from about 8,000 in early 2016 to more than 900,000 since June 2018.

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

He said a community of designers had emerged around Paystack, developing software to incorporate the platform into websites. "We have actually seen a development in that community and they have actually carried us along," said Quartey.

Paystack stated it enables payments for a number of wagering companies but likewise a broad range of companies, from energy services to transport companies to insurer Axa Mansard.

Flutterwave, co-founded by Nigerian business owner Iyinoluwa Aboyeji, is also backed by the Y-Combinator programme as well as investor 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 corresponded with the arrival of foreign financiers hoping to take advantage of sports betting wagering.

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

Russia's 1XBet and Slovakia's DOXXbet have actually both set up in Nigeria in the last 2 years while Italy's Goldbet led 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 however the ease of electronic payments, cost of running shops and ability for consumers to avoid the stigma of gambling in public implied online transactions would grow.

But in spite of advances in digital payments, Kunle Soname - chairman and co-founder of Bet9ja - said it was important to have a shop network, not least since numerous customers still remain unwilling to invest online.

He said the business, with about 60 percent of Nigeria's sports betting wagering market, had a comprehensive network. Nigerian wagering shops often function as social centers where consumers can see soccer free of charge while putting bets.

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

Richard Onuka, a factory worker who earns 25,000 naira a month, was fixated on a television screen inside. He stated he started gambling three months earlier and bets approximately 1,000 naira a day.

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