By Alexis Akwagyiram and Didi Akinyelure

LAGOS, June 25 (Reuters) - Online sports betting is expanding in soccer-mad Nigeria mostly thanks to payment systems established by homegrown technology companies that are starting to make online businesses 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 fostered a culture of cashless payments.

Fear of electronic fraud and sluggish internet speeds have held Nigerian online customers back but sports betting companies says the new, fast digital payment systems underpinning their sites are altering mindsets towards online deals.

"We have seen substantial growth in the variety of payment options that are readily available. All that is certainly changing the gaming space," said Seun Anibaba, CEO of Lagos State Lotteries Board, gaming regulator in Nigeria's commercial capital.

"The operators will opt for whoever is faster, whoever can link to their platform with less problems and problems," he said, 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 a rise in web payments, according to data from the Nigeria Inter-Bank Settlement System (NIBSS), which is owned by the central bank and certified 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 very first quarter of 2018 there were almost 10 million worth 61 billion.

With a young population of nearly 190 million, increasing smart phone usage and falling information costs, Nigeria has actually long been seen as a great opportunity for online organizations - once customers feel comfy with electronic payments.

Online gaming firms state that is taking place, though reaching the 10s of millions of Nigerians without access to banking services remains a challenge for pure online retailers.

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

"There is a steady shift to online now, that is where the market is going," Betway's Nigeria supervisor Lere Awokoya stated.

"The growth in the variety of fintechs, and the federal government as an enabler, has actually helped business to thrive. These technological shifts encouraged Betway to begin operating in Nigeria," he said.

FINTECH COMPETITION

sports betting companies cashing in on the soccer frenzy worked up by Nigeria's participation in the World Cup say they are finding the payment systems created by regional start-ups such as Paystack are showing popular online.

Paystack and another local start-up Flutterwave, both founded in 2016, are providing competition for Nigeria's Interswitch which was established in 2002 and was the primary platform utilized by businesses operating in Nigeria.

"We included Paystack as one of our payment options with no fanfare, without revealing to our customers, and within a month it soared to the primary most used payment option on the website," stated Akin Alabi, founder of NairabBET.

He stated NairaBET, the nation's 2nd biggest wagering company, now had 2 million regular clients on its website, up from 500,000 in 2013, and Paystack stayed the most popular payment alternative because it was added in late 2017.

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

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

Paystack, based in the frenetic Ikeja district of Lagos, said the variety of monthly 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 month," said Emmanuel Quartey, Paystack's head of growth.

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

Paystack stated it makes it possible for payments for a number of sports betting companies but also a vast array of companies, from utility services to transport companies to insurance company Axa Mansard.

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

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

Russia's 1XBet and Slovakia's DOXXbet have both set up in Nigeria in the last two years while Italy's Goldbet was ahead of the trend, taking a 50 percent stake in market leader Bet9ja when the Nigerian company introduced 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 clients to avoid the stigma of gaming in public suggested online deals would grow.

But in spite of advances in digital payments, Kunle Soname - chairman and co-founder of Bet9ja - said it was very important to have a store network, not least because numerous consumers still stay reluctant to spend online.

He stated the business, with about 60 percent of Nigeria's sports betting market, had a comprehensive network. Nigerian sports betting shops frequently serve as social hubs where customers can watch soccer totally free of charge while placing bets.

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

Richard Onuka, a factory employee who earns 25,000 naira a month, was fixated on a television screen inside. He stated he began gambling three 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 a person day I will win," said Onuka. ($1 = 314.5000 naira) (Reporting by Alexis Akwagyiram and Didi Akinyelure in Lagos; modifying by David Clarke)