By Alexis Akwagyiram and Didi Akinyelure

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

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

Fear of electronic fraud and sluggish internet speeds have held Nigerian online customers back however wagering firms says the new, fast digital payment systems underpinning their websites are altering attitudes towards online deals.

"We have seen significant development in the number of payment services that are readily available. All that is definitely changing the video gaming space," stated Seun Anibaba, CEO of Lagos State Lotteries Board, video gaming regulator in Nigeria's industrial capital.

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

That development has actually 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 licensed banks.

In 2016, there were 14 million web payments worth an overall 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 nearly 190 million, rising smart phone usage and falling data expenses, Nigeria has long been viewed as a great opportunity for online services - once consumers feel comfy with electronic payments.

Online gaming companies say that is taking place, though reaching the tens of countless Nigerians without access to banking services remains a difficulty for pure online sellers.

British online sports betting company Betway opened its first African organization 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 market is going," Betway's Nigeria supervisor Lere Awokoya said.

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

FINTECH COMPETITION

sports betting companies capitalizing the soccer frenzy worked up by Nigeria's involvement on the planet Cup state they are finding the payment systems created by local startups such as Paystack are proving popular online.

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

"We included Paystack as one of our payment alternatives without any excitement, without announcing to our clients, and within a month it shot up to the primary most secondhand payment choice on the site," said Akin Alabi, creator of NairabBET.

He said NairaBET, the country's second biggest sports betting company, now had 2 million regular customers on its website, up from 500,000 in 2013, and Paystack stayed the most popular payment choice since it was added in late 2017.

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

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 frenetic Ikeja district of Lagos, said the number of monthly deals 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 month," said Emmanuel Quartey, Paystack's head of growth.

He stated a community of developers had actually emerged around Paystack, developing software to incorporate the platform into websites. "We have actually seen a growth in that community and they have actually brought us along," stated Quartey.

Paystack said it enables payments for a number of sports betting companies but also a large range of services, from energy services to transport companies to insurance provider Axa Mansard.

Flutterwave, co-founded by Nigerian business owner Iyinoluwa Aboyeji, is also backed by the Y-Combinator program along with venture 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 accompanied the arrival of foreign investors wanting to tap into sports betting wagering.

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

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

NairaBET's Alabi stated its sales were split between shops and online but the ease of electronic payments, cost of running stores and ability for customers to prevent the stigma of gaming in public suggested online transactions would grow.

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

He said the company, with about 60 percent of Nigeria's sports betting wagering market, had a substantial network. Nigerian wagering shops frequently serve as social centers where customers can see soccer totally free of charge while positioning bets.

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

Richard Onuka, a factory worker who makes 25,000 naira a month, was focused on a TV screen inside. He stated he began gambling 3 months back and bets as much as 1,000 naira a day.

"Since I have been playing I have actually 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)