Is Owealth Legit? How Safe And Secured Is Owealth, A Saving And Investment Platform On Opay

Opay made headlines in 2019 when it raised $50 million to further its goal of financial inclusion for all in Nigeria through innovative mobile-based services. One of OPay’s offerings that caught the public’s attention is Owealth, an easy-to-use savings and investment platform touting attractive returns.

As appealing as Owealth’s promises sound, it has left many wondering – is Owealth legit? Can users trust Owealth to safely custody funds and provide transparency around its investment activities? This background casts doubt on how secure and reliable Owealth’s services are.

In this blog post, we dive deep into Owealth to determine if it delivers on its assurances of enabling smart saving and investing for Nigerians.

By the end, you’ll have the knowledge to decide whether the rewards of Owealth’s offerings outweigh the risks according to your risk tolerance.

What is Owealth and How Does it Work?

Owealth positions itself as “Nigeria’s 1st cooperative digital banking service”. It allows OPay users to open a “Wealth Card” which works just like a regular bank account, into which customers can deposit savings. Owealth promises annual returns of 10-15% (depending on the amount deposited) and says this interest will be paid out to customers every 30 days.

The minimum deposit is 1000 Naira and up to 1 million Naira can be deposited initially. Additional funds can be deposited at any time to top up the amount. Owealth says the full deposit amounts are covered by insurance and funds will remain liquid – so customers can withdraw their money with ease, with no fees or penalties.

Owealth is essentially functioning as a digital cooperative – pooling deposited funds together with that of other customers and then deploying the funds via their sister company Opay Digital Services Limited (OPDSL). OPDSL will then channel these funds into money markets, commercial papers, corporate bonds and P2P loans on their digital lending platform – Solid. Interest generated from these investments will be passed back to customers in the form of returns.

So how safe and secure is your money when deposited into Owealth? Let’s analyze further.

Is Owealth Regulated and Customer Funds Insured?

Opay as a mobile payments platform holds operating licenses from the Central Bank of Nigeria (CBN). However, Owealth is currently unregulated by the CBN or Nigeria Deposit Insurance Company (NDIC), the agencies which supervise and insure bank deposits in Nigeria. So this poses an element of additional risk for customers’ funds versus regulated bank deposits.

In an interview, Opay CEO Yahui Zhou said Owealth will be regulated “very soon” but could not confirm a specific timeline. Until regulation comes into force, deposited funds do not enjoy protection via government insurance. For now, the guarantee for funds comes only from the Opay group itself.

But regulation may be on the way. The SEC recently created an investment crowdfunding regulatory framework, under which digital platforms like Owealth may fall. Opay also applied for an asset management license via OPay Money Market Fund Management Limited – though final approval is still pending. Proper regulation would go a long way to assure safety of deposits.

What is Opay’s Track Record and Financial Health?

Opay burst onto Nigeria’s fintech scene in 2019, quickly amassing an engaged user base thanks to aggressive promotions and heavy subsidies. By 2021 they claimed processed payments volume of over $2 billion. This sounds impressive, but Opay has yet to turn a profit – recording a $45.7 million net loss in 2021.

The lack of profitability does not automatically equate to financial instability. Opay has strong backing from reputable international investors like Softbank Vision Fund, Sequoia Capital China, and Source Code Capital. This gives them substantial capital funding.

But investors will not subsidize indefinitely without a pathway to actual profitability. So Opay still has plenty to prove in turning their large user adoption into a truly sustainable fintech business generating profits – rather than relying on continual VC cash infusions. Until consistent profits materialize, there is an enhanced element of financial uncertainty.

Ultimately with any new financial provider there are more unknowns versus established players regarding their long-term viability. So relying on them inherently carries more risk. As they mature over the next few years, their financial position and stability outlook should come into clearer focus.

Do Customers Have Any Recourse if Owealth Fails?

An inherent risk when banking with fintechs versus traditional banks is lack of regulatory protections – such as Nigeria Deposit Insurance Corporation (NDIC) coverage of up to 500,000 Naira per depositor if a bank fails. Fintechs currently fall outside these consumer safeguards.

So if Owealth were to fail for some reason, customers may have limited legal recourse to recover deposited funds not backed by assets. However, reputational damage makes it imperative for fintechs like Opay to keep client funds secure come what may.

And OPay insists sufficient contingency measures are in place – claiming Owealth pool funds are covered 1:1 by assets to guarantee payouts even under failure scenarios. But it remains difficult for the average customer to independently verify such claims regarding internal asset coverage, pools, reserves etc. Some degree of good faith in the platform’s integrity is required when depositing funds unregulated entities like Owealth today.

What Are Other Key Pros and Cons to Consider Regarding Owealth Deposits?

Below we summarize the key potential benefits and drawbacks depositing savings into Owealth:

Pros:

• Attractive yields significantly higher than traditional bank savings accounts

• Convenient access to deposit, track, withdraw funds via OPay super app

• Liquidity to withdraw funds anytime (no lock-in)

• Opay has strong capital funding from prominent investors

Cons:

• Owealth currently unregulated and uninsured by Nigerian agencies like CBN and NDIC

• Underlying investments carry risk and returns not guaranteed

• Opay still loss-making and long term financial viability unproven

• Legal recourse limited if platform fails (no NDIC protection)

So in summary – is Owealth legit and safe? The answer is yes, we believe Owealth likely to be a legitimate platform backed by a well-funded company in Opay. And internal safeguards may be in place to secure deposits. But being outside Nigeria’s financial regulatory umbrella objectively poses enhanced risks for customers versus regulated institutions. Each person should assess their personal risk tolerance and do proper due diligence before depositing funds into Owealth or any fintech provider.

Frequently Asked Questions

Is Owealth regulated by the Central Bank of Nigeria (CBN)?

No, Owealth is currently not regulated by the CBN or insured by the Nigeria Deposit Insurance Corporation (NDIC). It says regulation is coming soon.

What happens if Owealth goes bankrupt? Will I lose my money?

If Owealth fails, customers may have limited legal recourse to recover funds not backed by assets. Opay claims safety nets are in place but independent verification is difficult.

How does Owealth generate the returns it promises customers?

It pools customer deposits and lends funds out via platforms like OPay’s Solid digital lending app. Interest earned is paid as returns to Owealth customers.

Can I withdraw my money from Owealth at any time?

Yes, Owealth promises full liquidity so customers can withdraw deposited funds anytime without fees or penalties.

Is Owealth investing customer funds in risky assets?

Details of asset allocation are opaque. But likely a mix of money markets, commercial paper, bonds – relatively low risk. The underlying investments do carry some risk though.

How does the 10-15% interest from Owealth compare to traditional bank rates?

Far higher than typical 1-3% from Nigerian savings accounts. But the higher rewards have higher risks attached.

Conclusion

Owealth offers a promising way for digital banking customers to earn interest via secure, regulated platforms – rather than risky Ponzi schemes falsely promising outrageous returns. We are cautiously optimistic on such fintech innovations.

However proper regulation with consumer safeguards needs to catch up to protect users and ensure longevity of platforms like Owealth. We expect and encourage regulators like SEC and CBN to move swiftly granting licenses, enforcing governance policies, mandating adequate capital buffers and liquidity coverage ratios.

If a full regulatory framework with requisite oversight comes into force, it should pave the way for sustainable, responsible digital wealth management platforms to flourish – delivering an emerging alternative to traditional bank savings with attractive yields for financially underserved Nigerian consumers.