Financial technology deals may lift Capital Appreciation

Technology group Capital Appreciation said on Monday its entry into the financial technology (fintech) space presented many market opportunities for expansion.

The use of technology has disrupted traditional banking as more people look for convenience. Banks have embraced fintech by developing their own technology platforms and teaming up with start-ups that have developed unique innovations.

Capital Appreciation, which listed in October 2015 as a special purpose acquisition company spent almost R1bn buying three fintech companies — African Resonance, Rinwell and Synthesis.

African Resonance and Rinwell’s subsidiary Dashpay are involved in online payments while Synthesis develops software for the financial sector.

The acquisitions were finalised only about seven weeks ago and were not included in Capital Appreciation’s results for the year to March.

Capital Appreciation joint CEO Bradley Sacks said the businesses were performing "exceptionally well and it is nice to see the things we were promised coming to fruition".

"These are high-growth businesses and it is that growth, which we saw during our due diligence, which made the businesses attractive to us," he said.

African Resonance grew full-year earnings before interest, tax, depreciation and amortisation (ebitda) 74% to R83.2m. Synthesis’ ebitda rose 51% to R29.9m.

Sacks said the group was looking at pursuing global expansion. It has a presence in Australia through 17.45% in Resonance Australia. Synthesis is  doing some work in Kenya and Mauritius.

"The technology space is evolving so rapidly and banks understand financial technology is a necessity to retain customers and remain competitive," said Sacks.

A PwC survey across 1,300 banks, insurers and asset managers has found that globally, 88% view fintech as a threat, with the number rising among African respondents.

On average, up to 24% of revenue is thought to be at risk from stand-alone fintech companies, according to the survey.

Nearly half of the companies surveyed are already in partnerships with fintech companies, with 82% indicating that they plan new or first linkages in the next three to five years.

In SA, 63% of respondents have teamed up with fintech companies and 96% expect to increase partnerships in the medium term.