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Finance for the future

Read time 4min 40sec
The Yoco co-founders.
The Yoco co-founders.

Cryptocurrencies like Bitcoin are increasingly gaining traction among mainstream investors and companies. Digital banks are challenging the finance industry status quo by offering customers innovations like behavioural banking at lower costs. The e-commerce industry experienced strong gains thanks to the coronavirus pandemic and is forecast to grow into a R225 billion market within the next five years.

All of this signals one thing – the world of financial services is changing. Fast.

Finance forecast 2025

Looking ahead to 2025, Sage’s Gerhard Hartman, asserts that the after-effects of Covid-19 will be felt across the finance space for years to come. According to Hartman, Covid-19 has accelerated the industry’s adoption of technology and the development of new business models to such an extent that changes to the landscape that were otherwise anticipated by 2030 will be arriving a lot sooner. But this doesn’t mean that the world of financial services will be totally transformed. Many of the technologies that we know and use today will still be in play come 2025. However, the stakes will be slightly different. Trust will emerge as a major competitive advantage. Brands that put customers at the centre, and that act ethically and with integrity, will secure a bigger share of the market.

Given the incredible disruption that the industry, and the world, has experienced in recent months, it’s hard to predict what the future of the space will look like, says Lungisa Matshoba, Yoco co-founder and CTO. That being said, he believes the South African story is all about the digitisation of money. “The growth of online payments is being accompanied by a decline in the use of traditional money,” he says. “This is not entirely new; it’s a trend that’s been happening for quite a while, but now we’re seeing a great acceleration in the rate of change happening in this space.”

As global economies struggle, Matshoba forecasts that many more fintechs will start popping up and these ventures will increasingly be embedding other features and functionalities into their products, solutions and services that wouldn’t traditionally be seen as fintech offerings. Market maturity is a good thing, he notes, because it puts pressure on us to do better and it gives customers more options. This, in turn, decreases their reliance on more traditional banking solutions.

Success roadmap

For Yoco, it’s important to not allow a noisy market to distract from a broader vision.

“Currently, around 80% of our customers have never accepted a card payment before, so our biggest competitor is cash,” he explains. “When you think about it, cash is actually quite a formidable opponent, especially because it remains the biggest payment method across South Africa. But rather than focusing too much on the competition, we prefer to focus our attention on what customers need and on the different opportunities that exist across the market.”

Around 80% of Yoco’s customers have never accepted a card payment before, so our biggest competitor is cash.

That’s why the company has spent so much time developing products and solutions that make card payments possible for merchants in the informal, rural and SME sectors.

“When we started out, it felt like no one cared about SMEs and there weren’t a lot of startups building products for the local market,” says Matshoba. “No one was designing products to meet the needs of these more humble ventures or to address the requirements of South African consumers. Because access to capital and investment opportunities is still a major hurdle for SMEs and startups, our local small businesses need all the help they can get. If you launch a startup in Silicon Valley, you’re launching your brand on the back of the region’s major success stories. So just about every investor wants to hear your story because you could be the next Google,” he comments.

When we started out, we had to be very intentional about how we wanted to grow and court investors because we had a lot more to prove.

“But in South Africa, there just isn’t the same success roadmap or the same investment apetite. When we started out, we had to be intentional about how we wanted to grow our brand and carefully court investors because we had a lot to prove.”

Curtailing Covid chaos

Learning from his own experiences of starting a new business, Matshoba says digitalisation can often be tough for smaller businesses because they lack the skills, financial means and reach of their larger counterparts. And Covid-19 hasn’t made the situation any easier. According to Yoco’s Small Business Recovery Monitor, about 15% of the businesses that were trading with Yoco before the pandemic had not turned on their Yoco devices come January 2021. Unfortunately, that suggests that some of its customers have had to close their doors.

The business growth balancing act

“When you launch a business, the nature of the problems you are trying to solve change rather dramatically over time,” says Yoco’s Lungisa Matshoba. “When you’re first starting out, your biggest worry is getting your first customers. When your venture starts to expand, you focus on making sure that customer number 150 000 enjoys the same level of support and the same experience as customer number one.”

When businesses are growing, he adds, it’s important that they also expand their product offerings so that they can address changes in customer behaviour and meet evolving market needs. But they have to come up with ways to do so without making their suite of solutions too cluttered or complex. “It really is a balancing act,” he says. 

“When our small businesses struggle, we struggle. So we are always working to develop solutions to support these businesses.” Solutions like the Yoco Neo, which was revealed in October 2020 and is the brand’s first ‘standalone’ card machine. This means that users don’t need a smartphone, tablet or bluetooth pairing to accept payments.

According to JPMorgan, advances in financial technologies, like the Neo, coupled with growth in digital credit and payment platforms, are the real financial transformation success stories of the Covid-19 era. Matshoba agrees.

Starting a business and turning it into a success is tough, he confesses. And pandemics don’t make things any easier.

“Entrepreneurs often make decisions to mitigate the risk of failure, but I believe it’s more important that they make decisions to maximise success. Often, you’re so scared of failing that you aren’t willing to take any risks. But entrepreneurs need to get comfortable with discomfort because that’s how they’ll create opportunities to do well,” Matshoba says. “For Yoco, as long as it remains ‘too hard’ for businesses to accept and make payments, we will be developing software and solutions that aim to make it easier to do business.”

* This feature was first published in the May edition of ITWeb's Brainstorm magazine.

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