The future of fintech
Across Africa, people are working on exciting, innovative and ground-breaking solutions in the fintech space.
Recently, I was fortunate to spend a few days in Silicon Valley, where I had the opportunity to speak to a variety of different fintech businesses. There were a handful of interesting themes I picked up during my discussions, which I share here.
Innovation is happening everywhere
While Silicon Valley is synonymous with technology and innovation, some of the most interesting solutions I came across weren't American-based. The usual countries were well represented, and those include Canada and China, both of which are producing a plethora of new fintech businesses and solutions.
Yet the unusual suspects are holding their own. I was very impressed by a Croatian-based business I met, and I spoke to a company with Brazilian founders who are market leaders in their field.
What is interesting to observe is that different countries and regions have different problems to be solved, and more often than not, these problems are best solved by the innovators and entrepreneurs in those countries who can truly understand the underlying dynamics of their markets.
It's also interesting that a solution which may work really well in one market isn't always transferrable to other regions, but we can still learn a lot from our problems and how opportunities are approached.
SA (and indeed Africa) is not miles behind
I had prepared myself to be wowed by the new technologies, businesses and ideas which are being created on the world's biggest stage, but ultimately, we are not lagging behind the others. Many of the challenges we face in building new fintech businesses are experienced across the globe.
Having had some limited exposure to African tech start-ups through some of the local incubators, I can now confidently say that across Africa, people are working on some of the most exciting, innovative and ground-breaking solutions in the tech space, and in particular in the financial sector.
Given the unique challenges we face here, such as high data costs and limited (yet growing) accessibility to smart devices, as well as peculiar market dynamics, it should come as no surprise that Africans are best placed to innovate around these challenges, and identify opportunities for Africa far better than our developed market counterparts.
Challenges that individuals in general have here in SA are not dissimilar to those faced in many parts of the world.
We tend to spend too much. And save too little. And borrow excessively. And make poor micro and macro decisions around money. We don't understand money as well as we should, and our decisions tend to reflect that. We don't insure enough. We don't have understandable and actionable personal financial plans. And we tend to distrust those who should be helping us.
We tend to spend too much. And save too little. And borrow excessively. And make poor micro and macro decisions around money.
If there was ever an indictment on the financial services sector, it is that these problems are still daily realities for millions of people. They are clearly problems worth solving, and some of the brightest people all over the world are working tirelessly at the challenge.
One of the most interesting groups I spoke to had an insightful way of putting it. When looking at banks, for example, in the 1990s the first Internet banking facilities were introduced. The product underneath (a bank account, or loan) didn't change, but Internet banking introduced a new channel.
Accelerate a decade or so forward, and most banks have endeavoured to build better digital experiences (in other words, Internet banking has become easier to use with increased functionality over time). Yet, the same product underneath largely remains intact.
These particular people tell this story because they are working on a new banking product with the ambitious vision of having a bank which means you "never have to think about money again".
Using data, behavioural economics, advanced algorithms and data science, they have developed a bank account which helps you to spend more wisely, gives you more control over your money, pays off debt automatically and automatically grows savings contributions.
It's likely too early to tell whether this business will be a success, but it was the best example of a trend I saw across many other businesses. Essentially, computing power, artificial intelligence and data science are making it increasingly possible to create solutions which can assist clients on an individual and tailored basis, while maintaining scale.
This means the end of the cookie-cutter approach to personal finances. You, as an individual, will eventually be able to use products and services tailored specifically for you by design and will help you solve your particular challenges.
In the investing space, this type of thing is also gaining traction. For example, one business is looking to help you (and it) understand your money personality. Armed with this individual profile, it can anticipate how you might react, given changing markets, and intervene, on an individual basis (all automated of course) to help you avoid something you'll later regret.
A practical example would be being able to identify if you're the type of person who will panic-sell their assets if the markets are down 5%, and then gently walk you away from the ledge before you do something irrational.
Applications to life insurance
Exactly how these trends influence insurance remains to be seen. It's always been possible to tailor cover and benefits to an individual's needs, but as far as I'm concerned, this is just scratching the surface.
One of the greatest weaknesses of life insurers is their inability to create a meaningful and useful relationship with clients around the service they offer them (the life insurance itself). Most insurers rely on rewards programmes to try to bridge this gap, but I believe more can and should be done around the primary insurance relationship itself.
There are large investments going into wearable technology, whereby insurers can seek to keep you healthier through interventions triggered by data being supplied by your smart watch. Yet again, this feels like it's scratching the surface of what is possible.
Ultimately, if the industry isn't adding real value to clients' lives, we will have failed. Life insurance is the greatest source of wealth potential, and our job as insurance providers is to protect that potential.
Peter Castleden is CEO of Indiefin, a wholly-owned subsidiary of Sanlam Life. He spent the majority of his career within the Sanlam group prior to starting Indiefin, most recently heading up the actuarial product management function. His experience has helped to mould the innovative product design at Indiefin, where the team is on a mission to bring digital together with design-led thinking in the financial services environment.