Fintech. It's 2017 and already the term is as accepted as 'bank card' and 'mobile wallet'. It is the title granted to the financial disruptor and innovator; to the entrepreneur and startup that relooks payments and possibilities to create alternatives that leapfrog the traditional queue and card and replaces them with seamless solutions. It is also a space where everyone wants to play - competition is fierce, consumers are feisty and banks are watching...
Towards the end of 2016, Gartner predicted that by 2019, 50% of consumers will be paying with their wearable devices or smartphones. Forrester has estimated that in the US alone, mobile payments will be 2.6 times their 2015 value by 2019. In China, these expectations have already been surpassed as third-party mobile payment value hit $5.5 trillion in 2016. The future of payments is far from settled as sprightly startups and stable big business compete for attention and innovation across crowded markets and consumers.
"Fintech is having a powerful impact on the payment sector, presenting new capabilities that have the potential to redefine the very culture of payments as we know it," says Charl Smedley, head of Retail Payment Innovation, Absa Retail and Business Banking.
South Africa is slowly starting to pay attention to payment technology as the seemingly endless variety of solutions inches across the financial landscape. From tap-to-pay NFC (near field communications) to mobile wallets and peer-2-peer money transfers, there are applications making a mark and changing age-old perceptions.
"Wechat wallets, Snapscan, Zapper, Mobicred, Yoco, iPay - these are just some of the solutions competing for a slice of the pie, and ApplePay hasn't even arrived yet," says Jason Sive, CEO of Mobicred.
Cash and carry
The South African horizon also boasts two new digital banks - Discovery Bank and CBA Tyme - alongside cryptocurrency companies like Ripple, Luno, BitX and Ethereum, mobile point-of-sale solutions for SMEs, and tap-and-go payments at retailers such as Pick n Pay. Small business funding is being disrupted by solutions such as LulaLend. For those who fancy financial disruption on a more personal level, there are solutions like TaxTim - your complex tax returns made easy - and 22Seven.
"Consumers are becoming more aware of the ever-increasing demands of modern-day living and the need for convenience," says Smedley. "Fintechs see this as an opportunity to deliver end-customer payment propositions using digital peer-to-peer platforms such as mobile payments, ecommerce and internet banking. This allows consumers to transfer funds using mobile devices or online technology, and social media platforms are emerging as new fintech partners to banks to reach consumers and deliver to their changing payment needs."
Customers want their money and the transactions that surround it to be convenient, interoperable, safe, seamless and governed my local and international standards and rules. They will always have concerns around security, especially in the African context, where the risk of fraud forms part of doing business.
"More trusted payment solutions are being launched by non-banks and these are solutions that have brand recognition and trust," says Ahmed Cassim, MD of Hello Paisa. "From a security perspective, it goes without saying that there is a lot of emphasis by regulators and the industry around cybercrime, hacking, phishing et al, and all credible operators know that if their solution is not secure, they won't be able to scale."
Martin Grunewald, ?executive head: Digital Infrastructure - Africa strategy, BankServ Africa, agrees: "There are contradictory forces at play - on the one hand, there is a drive towards speed and seamlessness, driven by the digitisation of the developed world. On the other, there's a drive towards security and rigour, driven by concerns around cybercrime and global money laundering."
The real disruptor
For the disruptor to gain deeper traction, there needs to be a clearer line on how to resolve one without compromising the other, and vice versa. In the US and China, mobile payment offerings and solutions have become such staggering successes that consumers without them are the anomaly rather than the norm. In South Africa, however, things are moving slowly. Perhaps ponderously is the term. The e-commerce market still makes up only one percent of total retail, which is significantly behind the rest of the world. Even Nigeria has Amazon, Google and eBay and an estimated e-commerce worth $10 billion.
Interestingly, for Grunewald, the real disruptors in finance have yet to be revealed as none of those in play today could really walk away with a title as effectively as an Uber or AirBnb. Why? Because financial services have always been a trade in intangibles supported by complicated ledger systems and activities so, in essence, it's just really moving data around.
"Most of the kinds of disruption that are held up as paradigm cases in other industries, like Uber, for example, have long been the norm in financial services," he adds. "If you're hoping to disrupt in this space, you have to consider how to either co-opt this enormous, sprawling network of systems, ranging across many different regulatory and commercial entities, or you have to go around it and undercut it by providing an alternative. Both are harder than you might think."
Wechat wallets, Snapscan, Zapper, Mobicred, Yoco, iPay - these are just some of the solutions competing for a slice of the pie, and ApplePay hasn't even arrived yet.
Jason Sive, Mobicred
And the banks are not sitting on the sidelines looking sadly at the stream of customers leaving their doors. They are doing plenty of investment and innovation of their own. Standard Bank is the proud owner of SnapScan, one of the more popular tap-and-go payment solutions on the market at the moment, and Absa has recently launched ChatBanking, which allows users to conduct banking while sitting on social media. Why leave Facebook or Twitter to pay your mortgage?
Revolutionary solutions
"Banks are putting a lot of effort into digital channel functionality and are recognising the need to meaningfully participate in the lives of their customers and become more customer-centric," says Gwena"el Trotel, head of Consumer Solutions, Standard Bank, Emerging Payments Division. "We are aware that the models are changing and that we need to adapt to a new regulatory environment that reacts to both customer needs and the necessity of learning how to play with non-traditional partners."
It's a view shared by most - fintech isn't so much eliminating the need for the financial institution as it is working in tandem with them to create truly revolutionary solutions. Most of the banks recognise the need for collaboration and most of the fintechs are aware that without this collaboration, they won't gain access to an impressive pool of customers. In 2015, Absa started to work closely with Techstars to encourage fintech growth and development, FNB invests in programmes such as Codefest and Alpha Code, and Nedbank has recently partnered with LaunchLab to kick up some fintech dust.
"New regulations, technologies and actors have shaken the payment and banking world and brought together a full range of new opportunities for banks to reinvent their business and relationships with their customers," says Neil Cosser, Identity & Data Protection manager for Africa, Gemalto. "If they find the right partners, use more open technologies and refocus on customer needs, they can be the new kings of the world."
That said, retailers and big business like Apple, Amazon and Google are also sidling up to the South African market, so things are set to get very interesting indeed.
This article was first published in the June 2017 edition of ITWeb Brainstorm magazine. To read more, go to the Brainstorm website.
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