From digital banks to mobile-payment solutions, technology is set to change the South African financial services landscape at a pace that will continue to surprise even the most hard-core non-believer, writes Dominique Collett, head of Rand Merchant Investments’ (RMI) club for fintech entrepreneurs, AlphaCode.
On the banking front, 2017 will be the year of the digital bank, both globally and locally. In South Africa we will see Discovery Bank and CBA Tyme – both digital banks – start operating and it should be interesting to see how the market responds.
Politicians and economists tell us that the economic future of the world is in the hands of small business owners. But financing in this sector is almost just as often mentioned as a major stumbling block. It was a huge talking point in 2016 and SME finance will be a massive trend in 2017. Interesting funding models such as invoice and discount financing and digital lending models will continue to gain traction aided by rapid developments in technology. Companies such as Merchant Capital and Lula Lend will continue to grow locally.
In 2017, we will embrace Bitcoin after the world got hyped up on blockchain in 2016. I think banks will soon see that blockchain doesn’t really make sense and there will be a move back to Bitcoin – the largest and original application of the blockchain. The move to Bitcoin will be helped along by increased instability in governments. It is still far from becoming mainstream, but I expect to see more of Bitcoin locally. Expect to see more of local companies like Luno (BitX).
A lot is said about big data and everyone is implementing technology that will gather huge amounts of data. But just having data has little purpose if you do not analyse it and use the results to your own advantage. Advanced data analytics will continue as a major trend. We see many advanced data analytics startups globally and they are gaining traction. Institutions are beginning to understand that they need to work with startups such as Isazi Consulting and Emerge Analytics to offer a service that they cannot build in-house. Advanced data analytics is used for credit scoring and insurance risk selection, but we will start seeing more applications for it.
Partnerships are an important aspect when we look at the growth of fintech. Bank and insurance executives are beginning to understand this, and we will start seeing more successful partnerships between the large institutions and the smaller fintechs.
In 2015 the discussion was around card versus mobile phone payments, and many partnerships were formed around payment technology. Locally we have seen the rapid development of mobile phone payment solutions such as SnapScan, Zapper and Wicode. We won’t be ditching our cards any time soon, but smartphone apps linked to our cards will change the nature of card usage, as customers get more comfortable using their phones for payments.
Price comparison websites
As more and more consumers become sensitive to price and service, price comparison websites will start to gain more traction. They are already huge in the UK, but not really in any other developed markets. South African consumers are becoming more aware of the lack of transparency around banking charges and interest rates. They are demanding more information on how much they pay, and they will rely on technology to supply the answers.
While AlphaCode is supporting more and more financial comparison online services, its member, fincheck.co.za, stands out. After less than one year of existence, it is the most significant given the number of products it compares, the number and nature of its partnerships with legitimate financial providers/institutions, the support and endorsements from institutions such as the National Credit Regulator (NCR) and Micro Finance South Africa (MFSA) ― and its rapidly escalating number of users.
Real estate disruptors
But it is not only the banking environment that changes as a result of the development of financial technology. New-age real estate advisors such as Leadhome and Propertyfox are threatening the traditional market with their non-traditional fee and commission structures. These platforms could do more, like adding mortgage origination or robo-advisors. And yes, not all role-players in the fintech space will be human!
We will see robo-advisors become a buzzword and a mainstream product as big players launch their own robo-advisors. A surprising number of institutions already have this in advanced planning stages. It won’t disrupt the industry; it will merely become a new distribution channel.
2017 promises to be the year of major developments on the fintech front, so buckle up and enjoy the ride!