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 firms that are starting to make online businesses more feasible.

For years, mobile payments stopped working to remove in Nigeria as they have in countries such as Kenya, where Safaricom's M-Pesa money transfers have fostered a culture of cashless payments.

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

"We have seen significant development in the variety of payment options that are readily available. All that is definitely changing the video gaming area," stated 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 problems and problems," he stated, 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 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 a total 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 nearly 190 million, rising mobile phone usage and falling data costs, Nigeria has long been viewed as an excellent opportunity for online businesses - once customers feel comfortable with electronic payments.

Online sports betting companies say that is taking place, though reaching the tens of millions of Nigerians without access to banking services stays a difficulty for pure online sellers.

British online sports betting company Betway opened its very first African service in Kenya in 2015, followed by Uganda, Ghana and South Africa. It introduced 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 federal government as an enabler, has assisted business to prosper. These technological shifts motivated Betway to start operating in Nigeria," he stated.

FINTECH COMPETITION

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

Paystack and another regional startup Flutterwave, both established in 2016, are offering competitors for Nigeria's Interswitch which was established in 2002 and was the primary platform used by services running in Nigeria.

"We included Paystack as one of our payment choices with no excitement, without announcing to our consumers, and within a month it shot up to the number one most used payment alternative on the website," stated Akin Alabi, founder of NairabBET.

He said NairaBET, the nation's second biggest sports betting company, now had 2 million routine consumers on its site, up from 500,000 in 2013, and Paystack remained the most popular payment choice because it was included in late 2017.

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

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, said the variety of regular monthly transactions it processed rose 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 every single month," stated Emmanuel Quartey, Paystack's head of development.

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

Paystack stated it allows payments for a number of wagering firms however likewise a large range of services, from energy services to transfer business to insurer Axa Mansard.

Flutterwave, co-founded by Nigerian business owner Iyinoluwa Aboyeji, is likewise backed by the Y-Combinator program 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 coincided with the arrival of foreign financiers wanting to tap into sports betting wagering.

Industry specialists state the sector creates about $1 billion a year and is most likely to grow faster than in South Africa and Kenya where the company is more developed.

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

NairaBET's Alabi stated its sales were divided between stores and online but the ease of electronic payments, cost of running stores and capability for clients to avoid the stigma of gaming in public meant online deals would grow.

But despite advances in digital payments, Kunle Soname - chairman and co-founder of Bet9ja - said it was necessary to have a store network, not least since many customers still stay unwilling to invest online.

He stated the company, with about 60 percent of Nigeria's sports betting wagering market, had a comprehensive network. Nigerian wagering stores frequently act as social centers where customers can enjoy soccer free of charge while placing bets.

At a BetKing hall deep inside the bustling Oshodi market in Lagos, lots of soccer fans gathered to enjoy Nigeria's last warm 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 sports betting 3 months earlier and bets as much as 1,000 naira a day.

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