By Alexis Akwagyiram and Didi Akinyelure

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

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 cultivated a culture of cashless payments.

Fear of electronic scams and sluggish web speeds have held Nigerian online consumers back but sports betting companies says the new, quick digital payment systems underpinning their sites are changing attitudes towards online transactions.

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

"The operators will go with whoever is much faster, whoever can connect to their platform with less issues and problems," 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 a rise in web payments, according to data 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 almost 190 million, rising smart phone use and falling data costs, Nigeria has long been viewed as a fantastic chance for online companies - once consumers feel comfy with electronic payments.

Online gaming firms state that is taking place, though reaching the tens of countless Nigerians without access to banking services stays an obstacle 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 released in Nigeria in January.

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

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

FINTECH COMPETITION

sports betting firms cashing in on the soccer craze worked up by Nigeria's involvement worldwide Cup state they are discovering the payment systems produced by local startups such as Paystack are showing popular online.

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

"We added Paystack as one of our payment choices with no excitement, without announcing to our customers, and within a month it soared to the primary most secondhand payment alternative on the website," stated Akin Alabi, creator of NairabBET.

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

Paystack was established by 2 Nigerian computer 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 financiers including China's Tencent and Comcast Ventures in the United States.

Paystack, based in the mad Ikeja district of Lagos, said the variety 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 each and every single month," stated Emmanuel Quartey, Paystack's head of growth.

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

Paystack said it makes it possible for payments for a variety of wagering firms but likewise a wide variety of businesses, from utility services to transport business to insurer Axa Mansard.

Flutterwave, co-founded by Nigerian entrepreneur Iyinoluwa Aboyeji, is also backed by the Y-Combinator programme in addition to 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 coincided with the arrival of foreign investors wanting to tap into sports betting.

Industry specialists state the sector generates about $1 billion a year and is most likely to grow faster than in South Africa and Kenya where business 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 launched in 2015.

NairaBET's Alabi stated 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 sports betting in public meant online deals would grow.

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

He stated the business, with about 60 percent of Nigeria's sports betting market, had an extensive network. Nigerian sports betting stores typically act as social hubs where customers can enjoy soccer free of charge while putting 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 said he began gambling three months ago and bets up to 1,000 naira a day.

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