Retailers, banks & fintech players unpack SA’s ambitious fintech future

OPEN FINTECH FUTURE: Jean Olivier of Shoprite, John Singlam of Investec and Anand Naidoo of HelloPaisa shared their fintech journeys in discussion with financial journalist Refilwe Moloto at the dt (Direct Transact) Open the Future gathering in Joburg. Several local innovators came together to discuss the future of fintech for brands, retailers and banks in Africa in the next 20 years. 
Photo credit: Sandy Coffey
Monday 31 October, Johannesburg – As South Africa heads into a financial future where its flow of money will be impacted by a likely greylisting, an irreversible shift to cashless and non-traditional transacting, and more retailers entering the banking game, an unavoidable fintech boom will transform the financial ecosystem as we know it.

This picture of the future was painted at a recent gathering of decision-makers from many of South Africa’s top banks, fintechs, and retailers in Johannesburg.

Fintech company Direct Transact, South Africa’s pioneer outsourced banking-as-a-service platform, hosted the event to mark its establishment in 2002. Since then it has enabled the rise of more than 20 of SA’s challenger banks and payment players.

The future of fintech for Shoprite, Investec, and Hello Paisa

With fintech trends in focus, financial journalist Refilwe Moloto led a discussion between three prominent players all embarking on ambitious fintech journeys – investment bank Investec, retailer Shoprite and Hello Paisa, a secure money transfer service for migrant communities in 35 countries in Africa and South-East Asia.

Moloto probed Anand Naidoo, Chief Technology Officer of Hello Paisa, on the remittance company’s platform strategy, given the money security concerns of their target market in the tough economic climate as well as local and international regulators’ concerns ahead of SA’s imminent greylisting due to the country’s poor illicit financial flow controls.

Naidoo said: “For people in the informal economy, going to a bank to open an account is very time-consuming, requiring them to take time off from work and often commuting multiple times until the bank account is open. Hello Paisa partnered with Sasfin and Direct Transact to provide a digital banking solution that would make their financial inclusion journey convenient, secure and easy to understand.

Their banking solutions for individuals – whether they were high or low income – complied with all regulatory and know your customer (KYC) rules. Hello Paisa has built a number of complex systems and processors to ensure extensive verification and adherence to compliance requirements.

The Shoprite Group’s General Manager: Financial Services, Jean Olivier, spoke about the retail giant’s fintech ambitions. With over 30 million customers, the retailer’s consumer-focused fintech play is making a dramatic impact on the local financial ecosystem.

Olivier said the Group realised from the outset that it was “important to give people what they want, not what you want to give to them”. “We looked at our customers – most earn R10 000 or less per month. We realised if we can help them save on banking fees, they can spend their hard-earned money on other things that matter to them.”

According to Olivier, there were three top challenges to overcome if they wanted to launch a transactional bank account: distribution and a strong balance sheet, both of which they have covered, and technology, which Direct Transact and other partners provide to them. “We’re designing the Money Market Account and its customer engagement and service model to be absolutely human-centered. Giving customers the choice of how they prefer to deal with their money.”

Asked about the evolving banking needs and concerns of the country’s highest earners, John Singlam, Head of IT (Corporate and Institutional Banking) at Investec South Africa, said: “Clients don’t care about what happens in the background – for them everything is about convenience and having a very seamless experience. They want to travel easily, companies want to transact easily. In these days of fraud, it’s all about trust and safety too.”

Singlam said Investec realised that bank and fintech collaboration was vital. “Banks actually can’t work in isolation anymore. Think of the convenience of Apple Pay. We need to combine financial solutions to create the best customer experiences.”

Big picture trends

Providing a global overview of fintech trends, futurist Bronwyn Williams from FluxTrends said it was important to realise that data was the biggest commodity in the world today, and that “all data is credit data”. And because of the growing abundance of consumer data, money solutions would become programmable, which in best case scenarios could be tailored to suit the needs of each individual consumer, but could also give institutions like governments and companies greater control over consumers.

Williams believed Africa would continue to leapfrog the world in terms of its fintech innovation, but said it was vital that this was done in the spirit of innovation rather than purely for regulation.

Hearing from the pioneers of SA’s burgeoning fintech landscape

Hennie Dreyer, co-founder and CEO of Direct Transact, said when the fintech-as-a-service company was founded in 2002, there was a real gap in the market for challenger banks and banking solutions.

The company rose out of the ashes of Saambou Bank, where its first 46 employees came from when the bank went into curatorship. It was a time of financial worry and bootstrapping, but the early days of digital banking opened up new possibilities in the industry.

It quickly became their mission to help launch smaller banks and banking services in the market through cost-effective outsourced core banking and payments services as well as compliance expertise. Within a few years, they had been instrumental in assisting African Bank, Absa, Barclays, Bidvest, Old Mutual, Grindrod, Sasfin, Al Baraka and many more.

Dreyer also launched the Direct Transact Foundation to support vulnerable members of society – and today this is his greatest passion. “Profit by itself is meaningless, but profit applied to purpose and stewardship gives meaning to life.”

Anthony de Gray Birch, co-founder, Managing Director at Direct Transact, said the most challenging and rewarding part of actively growing the banking industry was to build scalable platforms for each new player that wouldn’t fall over and that complied with all local and international banking and payments regulations. 

Launch of the dtOpen Skunkworks to enable greater fintech innovation in SA

Christo Davel, often referred to as the “grandfather of SA fintech”, having founded SA’s first digital bank 20twenty in 2001, alongside Dreyer, said he foresaw a big boom in open and embedded forms of financial technology.

“The next 20 years is going to be all about fintech openness, in terms of innovation, opportunity and collaboration. How do we open banking, payments and fintech services to banks, brands and customers? You do it in a way that is absolutely seamless.”

Davel believes corporations often struggle to innovate internally, precisely because they are already successful and innovation means change. This is why he was a big fan of the Lockheed Martin “SkunkWorks” model of external innovation that was launched during WWII. “That’s why we’re launching our own “dtOpen SkunkWorks”, to help banks, brands and fintechs to innovate more quickly and effectively.”

For more information visit directtransact.co.za.