Should fintechs have upgraded their apps for the Dangote IPO? Orezi Mena says building for the rush could be a costly mistake

Infrastructure costs are a significant concern for financial platforms, a point that Orezi Mena highlighted amid the recent rush to invest in the Dangote Petroleum Refinery IPO, a major event in Nigeria’s investment landscape.

When the IPO opened to the public, an overwhelming number of Nigerians tried to buy shares, spiking activity on investment apps like Bamboo and Cowrywise. Unfortunately, this surge caused considerable disruptions, with many users struggling to access their accounts as the platforms struggled to cope with the sudden influx of traffic.

Naturally, this raised a pressing question among frustrated prospective investors: If these platforms were aware of the impending Dangote IPO, why weren’t they better prepared for such a massive surge?

Mena, however, sheds light on the complexity of the issue. He argues that the answer isn’t as simple as it seems. “Infrastructure is expensive,” he noted on X, emphasising that building up the capacity to handle high volumes of traffic can be financially burdensome, especially if this spike is only temporary.

His concern lies in what happens after the initial excitement fades. Investment platforms could invest heavily to boost their capacity for a short period, only to end up with excess infrastructure once the Dangote IPO frenzy is over. This leaves them in a tough spot, having spent significant resources for performance that they may not need in the long run.

Similar read: Investors fume as Dangote IPO frenzy freezes Bamboo, Cowrywise, Afrinvest apps

For Mena, balancing immediate needs with long-term sustainability is key. Investing heavily for temporary spikes might not be the best business move. As we navigate this evolving landscape of fintech, it’s crucial for companies to find solutions that manage both heightened demand and efficient, cost-effective operations in the long run.

The problem with preparing for the Dangote IPO

Mena is a design engineer with a passion for creating products, and he’s currently focused on building Groove. His journey of bootstrapping a product has equipped him with valuable insights into the costs associated with infrastructure, knowledge that shapes his perspective on what happened during a recent IPO.

Despite the issues users faced during this event, Mena is cautious about jumping to conclusions. He believes it’s too simplistic to say the platforms weren’t adequately prepared. In his view, a crash doesn’t provide the full picture.

Many companies rigorously stress-test their systems, anticipate spikes in traffic, and implement safeguards to manage increased user activity. Yet, predicting the behaviour of millions of users simultaneously is a challenging task. “You can never fully know what will happen, no matter how thorough your planning is,” Mena explains. This distinction is crucial.

The Dangote IPO aimed to encourage everyday Nigerians to participate in the stock market. With 4.1 billion shares available at ₦525 each and a minimum purchase requirement of just 10 shares, or ₦5,250, the offer, which opened on September 14 and closes on October 13, was designed to be accessible. The combination of a low entry price and the high-profile nature of Dangote stirred considerable excitement, leading to a frenzy of interest in the shares.

However, the difference between anticipating large participation and accurately forecasting how many people would actually show up and attempt to buy shares at the same moment is significant. This uncertainty is crucial in understanding the dynamics of such a high-stakes event.

Mena’s insights remind us that while preparation is essential, the unpredictable nature of human behaviour can still lead to unexpected outcomes, no matter how well we plan.

A spike is not necessarily a signal

In the world of fintech, understanding how to respond to challenges is key. One of the most important lessons is to distinguish between ongoing issues and isolated incidents. Mena highlights this distinction perfectly.

Let’s say you notice that your fintech product struggles when a large number of users try to access it at once. That’s a clear sign that it’s time to scale your infrastructure. However, if your system crashes during a one-time event, like when everyone rushes to buy tickets for a concert, that shouldn’t immediately signal the need for a complete overhaul.

Mena made an example of the O2 website, which faced a meltdown when a limited number of Wizkid tickets went on sale. Just because the website couldn’t handle the sudden surge doesn’t mean O2 should have made huge, permanent changes based on that single incident. Mena puts it simply: “One-offs are not a signal that you need to scale.”

That said, companies shouldn’t ignore these unusual events. Instead, Mena believes that fintech businesses should adopt flexible systems. Imagine being able to quickly expand your infrastructure during a spike in demand and then scale it back down when things return to normal. It’s about being smart with resources. As Mena explains, “If you build an infrastructure that will be large just in case there’s an IPO rush, I don’t think that’s smart business or smart use of resources.”

The goal is to make strategic decisions about when to increase capacity and when to rein it in. By doing this, you keep your operations efficient and ready to adapt to market changes without overspending. It’s all about striking a balance between being prepared for growth while not overcommitting to infrastructure that may not be necessary most of the time. In the ever-evolving fintech arena, staying agile and resourceful is the way to thrive.

But fintechs knew the Dangote IPO was coming

The recent Dangote IPO poses a challenge for investment platforms. While there was a lot of excitement, it was hard to predict how many new investors would actually participate and how much they would invest. As Mena points out, there are alternatives like MTN and GTCO after the initial hype fades.

Mena states, “You have to calculate your risk and try to manage your burn rate as much as possible.” He believes that attracting new investors during events like this can be beneficial: “If you’re thinking about putting the cost into customer acquisition, then it makes sense.”

The Dangote IPO is more than just a one-time transaction; it’s an opportunity to engage a larger audience. Yet, Mena warns that managing a sudden influx doesn’t mean permanently expanding infrastructure. He mentions,*** “It’s just a matter of how much risk you can take,” ***emphasising different strategies for rare events.

Platforms facing issues on launch day like the Dangote IPO need to tackle those challenges. Mena notes that “Serve the people that you are serving well, and you will last pretty much,” stressing the importance of continuous improvement and customer focus for long-term success.

Also read: Dangote Refinery unveils IPO prospectus: Here’s all you need to know about the huge ₦2.15tn affair