TONY MALLAM: Fintech sector could provide answers to many problems SA faces

News that SA Clickatell raised more than $91m in its latest fundraising round isn’t surprising to those of us who were there when the business was born.

But while companies like Clickatell and Yoco may now be the poster children for the success of SA’s fintech sector, it is by no means the only one making big moves. Just two months into 2022 we have already seen major funding announcements from Floatpays, Lipa, Tall Order and Stitch, among others.

The Briter Bridges African Investment Report for 2021 paints a positive picture of start-ups in Africa, which secured more than $4bn in funding last year, and SA ranks second on the continent both in terms of the volume of investment and the number of deals concluded. Fintechs, and particularly payment options, took the lion’s share of investment in Africa.

Africa is a fast-growing continent, home to some of the world’s fastest-growing economies. It has a young population, which is predominantly mobile-first. But what is it about SA specifically that has driven its fintech sector into one of our major success stories?

Some answers are to be found in Google’s recently released Africa Developer Report, which reveals that SA has a strong developer landscape as a result of having the largest developer population on the continent, investment in leading technologies, strong education and a robust startup and tech ecosystems.

Certainly, having the money is a cornerstone of any successful industry and SA has a number of willing investors, both locally and internationally, in the form of major players like Naspers Foundry, Knife Capital and an established network of angel investors. 

When it comes to the growth of fintech specifically, our mature financial services industry has created fertile ground in which to grow and develop our fintech sector. SA’s financial sector has for many years been recognised as an established and innovative sector, as anyone who has ever tried to bank in the US will attest. In SA, we’ve long been banking from our mobile phones while other countries are still writing out cheques. We’ve also seen the rise of established players in mobile payments, payment apps and in the cryptocurrency space.

Beyond this, it is also key that the SA Reserve Bank has recognised the potential of the industry, establishing the Intergovernmental Fintech Working Group in 2016 and a dedicated Fintech Unit in 2017. This means that the Bank is not only working to understand the landscape and develop policy and regulations, but is also working towards innovating in this space. 

We’ve also seen our educational institutions supporting the sector. The University of Cape Town introduced the world’s first specialist fintech degree in 2017, and the 2021 Global Startup Ecosystem report, which names Cape Town as Africa’s tech capital, indicates that the universities, business schools, research institutes and various coding schools around Cape Town collectively produce more than 12,000 science, technology, engineering and maths (Stem) graduates and 500 coders per year, creating a talent pool to support the country’s tech ecosystem.

All of this is adding to the growing wave of disruption in the traditional finance and banking sectors in SA. We’ve already seen fintech players like Tyme Bank start to challenge the traditional “big four” banks by making it easier and cheaper to open a bank or savings account, and Yoco’s range of affordable card machines is allowing small businesses to take digital and card payments where they would previously only have been able to accept cash.

My prediction for our fintech sector is that as the established areas like payments start to saturate we’ll see a move towards savings, investments and loans. Floatpays, for instance, which has just secured Naspers funding, allows employees to access a portion of their earned, but not yet paid, income at any time of the month to cover unplanned expenses.

We’ve already seen the early shoots of micro-pensions in countries like Nigeria, to cater to a large workforce in the informal sector that may not be saving towards their retirement. Micro-savings and investment products, which allow consumers to put away a small amount of money, are perfectly suited to the SA context, where savings rates are low and the cost of living means not everyone can put away set amounts of money each month.

SA’s fintech sector has the potential to produce answers to many of the problems South Africans face, whether it be our low savings rate or improving financial inclusion. This goes way beyond just having a bank account, it’s about being able to save for your future, take out a loan to fund your child’s education or start a business, or even simply insuring your belongings.

Most importantly, it is about allowing people to access their potential, accumulate wealth and change their circumstances, which are pretty compelling reasons to applaud the work and the wins in the fintech industry.

• Mallam, a venture capital adviser and chartered accountant, is MD at UBU. He has been an angel investor in various start-ups, including Clickatell.