Johannesburg, 25 Jan 2023
“In the last decade, fintech has gone mobile,” explains Ahmed Gani, Head of Innovation and DevOps – Collections and Payments at Altron FinTech. “A lot of the transaction types and interactions have moved towards a cellular point of entry.”
While payment streams are typically defined by a country’s financial needs, they’re usually executed by third-party fintech apps. “Each country has its own payment stream that it uses. Some are universal, like Swift, or Visa and Mastercard card transactions,” adds Gani. “The SADC regions are pushing towards having shared payment streams among them and a lot of fintech companies are trying to take advantage of that.” For countries that want to make use of different payment streams but don’t have the right infrastructure in place, fintech apps are not only convenient, they also provide an entry point.
“We saw a big shift as soon as mobile phones became as powerful as they are,” he says. Besides from scenarios which require physical devices – like point-of-sale transactions or cash withdrawal – fintech is software, rather than hardware dependent. “So, while there is a cost, it doesn’t require infrastructure tenancy. With fintech gravitating towards the mobile phone, your barrier to entry in Africa is not the same as for other functions or other businesses,” says Gani.
Traditional financial services are banking related. They comprise a four-party model: merchant, account holder, acquirer and issuer. “It isn’t written in stone, but everyone recognises that those four parties are generally involved in every transaction. But the way of the world is changing,” he says. African FinTech’s are disrupting the market by leveraging a functionality that was once exclusive to banks and exposing it to customers or merchants in a different way. “They’re also aggregating a lot of transactions. Fintech itself will act as an aggregator of transactions for other companies and then execute on the settlement and processing under their specific banner,” explains Gani. “They’re giving smaller merchants an opportunity to operate within the fintech space, but without having to go through the hefty paperwork by the bank – they act as aggregators themselves.”
Africa faces a unique set of challenges relating to infrastructure, such and electricity and running water, access to cash and more. Because fintech is a key part of unlocking sustainable development, the result has been the sector adopting a start-up model with agile deployment.
“Some of Africa’s challenges require a unique set of solutions that you don’t get elsewhere in the world,” he adds. “One of the key factors for sustainable development is getting small to medium enterprises and entrepreneurs off the ground. This cannot be done without fintech businesses.” For these kinds of businesses to operate, they need to be able to collect pay-out in exchange for goods. “They were previously dependent on banks and other kinds of organisations… and if there is no infrastructure or pre-existing set-up, it wasn’t going to happen anytime soon,” says Gani. “With the advent of fintechs, the barriers to entry for these small businesses are less. You’re able to have a small till system, you’re able to charge money, have an inventory management system and perform card transactions – and all of this can be done with a very small footprint and get it off the ground quickly.”
According to Gani, it can take less than a week to get an entire transaction processing infrastructure set up for a small business. These fintech solutions, however, are dependent on power and connectivity. “I wouldn’t say ‘always on’, but at the very least enough to sync up. Luckily, fintech data typically is in small packages, so you don’t have to have a massive connection to run anything – just a stable connection to get the transaction through,” he says. That said, Gani is finding that stability of connection is a concern. “We are also finding that a lot of our devices, and other assets we put down on the ground, need to be powered.”
From South Africa’s growing electricity supply deficit to Mozambique’s underdeveloped transmission and distribution network, and Botswana’s blackouts due to plant malfunctions, there is a knock-on impact on the availability of connectivity. “And these challenges need to be overcome to reduce the barriers to entry and encourage growth,” says Gani. But through innovative fintech solutions, people are finding ways around these challenges. “We have a lot of talent in Africa, we must just unlock it and nurture it. I think that’s our biggest challenge on the continent as a whole,” he ends, “is that we have the talent and the capacity, but we have to build our own scarce skills.”
Share