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Savings, investments and loans the next frontier for SA fintech

South Africa’s burgeoning fintech sector is one of the country’s major success stories. File Image: IOL

South Africa’s burgeoning fintech sector is one of the country’s major success stories. File Image: IOL

Published Mar 19, 2022

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South Africa’s burgeoning fintech sector is one of the country’s major success stories. Just three months into 2022, and there have been major funding announcements from Floatpays, Lipa, Tall Order and Stitch, among others, says Tony Mallam, managing director at UBU and part of the team involved in developing upnup, a microsavings platform.

Mallam has also been an angel investor in various startups, including Clickatell, which has just raised over $91 million in funding.

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Google’s recently released Africa Developer Report reveals that South Africa 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, which are all driving South Africa’s standout performance, says Mallam.

“Certainly having the money is a cornerstone of any successful industry and South Africa 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.”

South Africa’s financial sector has for many years been recognised as an established and innovative sector, adds Mallam.

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“In South Africa, we’ve 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 crypto currency space.”

Beyond this, it is also key that the South African Reserve Bank (SARB) 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 SARB is not only working to understand the landscape and develop policy and regulations, but that it is also working towards innovating in this space,” explains Mallam.

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“All of this is adding to the growing wave of disruption in the traditional finance and banking sectors in South Africa. 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.”

Mallam predicts that as established fintech areas start to saturate, there will be 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.

“Micro-savings and investment products, which allow consumers to put away a small amount of money, are perfectly suited to the South African context where savings rates are low, and the cost of living means that not everyone can put away set amounts of money each month.”

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South Africa’s fintech sector has the potential to improve financial inclusion which goes way beyond just having a bank account, says Mallam.

“It’s about being able to save for your future, take out a loan to fund your child’s education or to start a business, or even simply to insure your belongings.”

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