FILE PHOTO: The PayPal and Android Pay apps are seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration/File Photo
FILE PHOTO: The PayPal and Android Pay apps are seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration/File Photo

For a host of homegrown financial technology (fintech) companies 2019 will be a make-or-break year, according to a leading investor.

While still a small industry by global standards, Dominique Collett, head of AlphaCode,  says interest in launching and developing fintech has grown impressively in the last few years.

“When we started the AlphaCode Incubate programme four years ago, we had just 10 applications for funding. In the last year we received over 200 applications for financing, and the calibre and quality of the entrepreneurs is improving. The system is maturing and we are seeing a lot of foreign capital interest — like recently when Goldman Sachs invested in Jumo.”

SA has a small but growing number of companies that have been able to develop proprietary technology and  expand these commercially, including Lumo, the world’s largest cryptocurrency trading platform and Entersekt, a payment security technology provider. 

But there are a number of companies that have been  invested in at an early stage, developed and now need to demonstrate the commercial value of their propositions, says Collett.

AlphaCode is Rand Merchant Investment Holdings’s investment vehicle that identifies, partners, and grows next generation fintech businesses. They funded both Lumo and Entersekt.

Entersekt was started nine years ago by a group of students at Stellenbosch University who developed security authentication technology that is used when people make electronic payments online.

The technology asks users to authenticate themselves on their banking apps using what is referred to as “two-factor authentication” by creating a unique fingerprint on the smart phone, not the SIM card.

“They are a global mobile banking security business present in 45 countries, protecting roughly 150-million transactions per month. They serve banks and insurers worldwide and have strategic partnerships with global firms such as Mastercard,” says Collett.

Collett says 2019 will be a defining year for companies like Franc, Pineapple and InvoiceWorx.

Pineapple was founded by Matthew Smith, Marnus van Heerden and Ndabenhle Ngulube in 2017. The app can be downloaded on smartphones and allows users to snap pictures of goods they would like to insure. “We use AI [artifical intelligence] to identify the item and provide a quote in realtime for how much it will cost to insure,” says Smith.

But the biggest differentiator is that the premium goes into an individual’s wallet, and whatever is left at the end of the year is kept by the client. (Pineapple charges a fixed fee as a percentage of the premium for administration and reinsurance.)

“Clients can then begin to build networks with other users they know and trust, which can lead to lower incidences of claims and more money at the end of the year for members of the group,” says Van Heerden.

“They have developed a quite unique proposition in insurance using peer review. But I am interested to see if customers will take up digital insurance,” says Collett.

“Invoiceworx provides innovative working capital financing solutions that provide access to inventory and purchase order financing for small businesses.

“They have secured strategic partnerships with large FMCG [fast-moving consumer goods] companies and I think we will see some exciting progress from them this year,” says Collett.

Franc is a low-cost savings platform which is attempting to change the country’s poor savings culture. “I am interested to see how this technology progresses. They have gameified the whole savings experience and I think it’s a make-or-break year for them.”

thompsonw@businesslive.co.za