Fintech Trends in South Africa
Fintech Trends in South Africa

Fintech, a word widely popular these days is a blend of the two terms “Finance” and “Technology”. Fintech refers to any business that makes use of technology to amplify and automate financial services and operations. In other words, it basically challenges the old-school ways of delivering financial services. Fintech is an emerging industry which uses technology to enhance activities in finance.

Some well-known companies such as Personal Capital, Lending Club, Kabbage and Wealthfront are examples of FinTech companies that have emerged in the past decade around the globe.

Africa is one such place where the Fintech trend has started coming into play. Initially wary of investing in Africa, backers have now started realizing the untapped and underestimated potential of this continent.

Talking about Fintech and South Africa, here are some of the latest trends observed with respect to Fintech there.

Senior investment executive at Rand Merchant Investment Holdings and the head of AlphaCode( An incubation, acceleration, and investment initiative that identifies, partners, and grows early-stage financial service ventures) Dominique Collett was quoted to have said that Fintech is rapidly transforming the very essence of global financial services in South Africa. At AlphaCode, they spend a lot of time researching and analyzing how technology and a revolutionizing consumer base is changing the outlook of the financial service of South Africa.

SME BANKING :

2020 is mainly going to focus towards Small-to-Mid size enterprises.

  • Mercantile Bank, which dealt with large to mid-size businesses was recently taken over by Capitec Bank for R3.56 Billion showing that it views the SME and entrepreneurial parts of SA as capable of being provided with growth opportunities. Capitec was responsible for popularizing consumer banking in the last decade and is expected to do the same for SME banking.
  • Bank Zero, an exclusively digital mutual bank in South Africa will be launching soon, hence putting pressure on existing platforms to innovate.
  • FNB has already reciprocated to the inflow of digital SME banks with the launch of its First Business Zero account. It is one of SA’s “big five” banks and a division of First Rand Limited, a large financial services conglomerate, Created for digital-savvy owners, this account provides zero-rated account fees to entrepreneurs and includes unlimited free card swipes.
  • Yoco and iKhokha are also venturing in the SME market – with more than 100,000 small businesses already part of their payment network.

Common Finances:

  • Stokvels have become an integral part of South African society. A Stokvel is a pooled savings scheme, whereby members opt in to join a savings club and each contribute a set amount of money every month. Then, based on a pre-decided rotation, each member would receive a huge chunk of money at a specific time of the year. This scheme has helped people allay themselves from financial crises they might have faced in the past or either are planning to achieve some goal with the help of this money. Stokvels showcase the gravity of how we relate to one another when it comes to money.
  • Sanlam is working with the National Stokvel Association of South Africa (NSASA) to offer financial services products to their consumer base.
  • Iemas Financial Services, a group-buying community functions as a co-op that negotiates good deals on behalf of its members. This can include anything from discounts at a retail store to more affordable insurance products.
  • Popularization of PPS which by separating different sectors and focusing on a niche, helps provide them services according to their preference. Thus, this enables the members to benefit from the affordable premiums.

Bitcoin :

Bitcoin usually gains prominence in areas which are emerging markets. South Africa serves as a perfect example for this. Hence, bitcoins will be the new talking point in the town giving a much-needed break to its existing system. Centbee, recently launched in SA has introduced a Minute Money payment system by using Bitcoin SV. This helps support families and afford things easily. Luno, a cryptocurrency platform that recently relaunched itself in Malaysia and is also continuing to expand itself in African countries has continued to cement its position as a dominant emerging market crypto-currency platform.

PropTech:

A portmanteau of the two terms “Property” and “Technology”, it refers to using information technology in real estate markets. Key elements of proptech include reducing paperwork and making transactions easier and efficient, which often relates it to fintech.

  • HouseMe provides a tech-enabled platform for better rental management. 
  • Leadhome has pivoted itself from property sales and launched a rental service.
  • IsiDuli is the AirBnB of the township market. It gives inhabitants the opportunity to generate income from their land by providing financing to build a backyard room that can be rented out.
  • When house prices are low and in a buyers’ market, people cannot afford to pay a lot of money to brokers and agents. This is where PropTech and Fintech can come together and dominate the market.

Financial Inclusion:

It is referred to as granting equal access to financial services to every segment of the society.

  • Selpal, Flash and Nomanini are making it easier for local traders to sell their products. These startups bring alternative distribution mediums to informal communities that easily link merchants to suppliers and customers.
  • Zande provides trade and merchant finance to spaza shops (shops that are run in one’s home) to enable stock purchases. It offers brands in huge amounts at a lower price with goods delivered to spaza shops within 24 hours of being ordered.
  • Spoon Money is a group-based micro-working capital finance platform for local female merchants. This platform enables them to access money to support their businesses and create a more supportive and predictable income.

Insurance:

Insurers such as Discovery and OUTsurance are utitlizing data to reward good driving behaviour, using telemetry data to improve and more fairly calculate their premiums.

Sensor Networks is working with Sanlam, Nedbank, and Standard Bank to deliver smart insurance to customers. They use smart sensors in user’s homes to provide an early error-and-fraud detection system that allows for computerized logging of faults and the easy systematization of assessment and technical repair teams. Everything from geysers to security cameras and fire detectors are connected to the network.

Alternative fintech partnerships:

There are multiple fintech firms which are working not just for their industry, but also aiding different markets as well. Root and Investec is one such example, they are launching a programmable bank account for software developers. Essentially, this lets developers control their money programmatically, construct their own features, and integrate with other services without worrying about safety and security.

Lulalend and Vodacom have partnered to develop VodaLend. Designed to provide SMEs with money through a digital portal in three steps; small businesses can apply for funding of up to R1.5 Million over 12 months.

Retailers will also start return to the financial services sector. Shoprite is looking at a number of financial services initiatives while Pick n Pay has collaborated with TymeBank. Contestably, many distributors understand that they cannot provide these kinds of services themselves and are identifying fintech specialists who can assist them in doing so.

Fintech has enabled greater financial literacy in all segments of the society, helping consumers to take charge of their financial lives. By holding on to advanced technology, it is enhancing the financial situation of all its users.

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