Far from the panic of Y2k and the limited capabilities of the Nokia 3310, consumers in 2020 have a world of financial services accessible on their smartphones. With an 82% Fintech adoption rate in 2019, according to the EY Global Index, South Africa is set to experience further shifts around traditional financial and banking systems in 2020.
“We’ve seen unprecedented developments in the Fintech space over the past few years. Innovations in mobile payments, digital currencies, cloud software and digital lending have completely changed the way consumers engage with financial services,” says Daniel Goldberg, co-founder of Bridgement, a Fintech company offering digital invoice financing and credit facilities to small businesses.
“Strides in digital lending were made in 2019. We’re seeing higher adoption rates of Fintech lending, through a more informed and educated market,” says Goldberg. “By promoting a more client-centric and interactive approach to financial and banking services, Fintech will continue to change customer experiences and expectations.”
Bank Zero, Thyme Bank, Better Bank and Discovery Bank, were launched in 2019. Goldberg believes that by lowering the need for physical infrastructure and optimising processes, the newcomers will be able to run more cost effectively than traditional banks. “Going forward into 2020, these banks will play an important role in the market. Their accessible services and apps built off the latest technology, will draw in a number of customers, even from incumbent banks.”
He predicts that 2020 will see the continuation of big non-financial institutions moving into the Fintech space. “We’ve seen several big companies such as retail chains and the Telco’s moving into financial services by offering insurance and credit products. This trend will continue, with more retailers becoming active in this space.”
Hesitation surrounding cryptocurrency is likely to continue this year as South Africa holds no specific laws or regulations that address the use of virtual currencies. “Due to their unregulated status, cryptocurrency cannot be classified as legal tender or a means of payment,” he says. “Mass adoption will only occur once people become more familiar with and comfortable with cryptocurrency.”
Although unlikely to come into effect this year, South Africa is set to follow the global trend of open banking – allowing customers to more easily share their financial data. “This will allow customers to access a new wave of Fintech services with more automation, better security and greater efficiencies within financial services,” says Goldberg.
He believes that local Fintech startups will continue to help small businesses avoid new digital security risks such as EFT fraud and hacked accounts. “As we continue to transact and communicate more online, the risk for fraud and other cyber threats will only increase.”
Using machine learning for credit analysis and decisioning to speed up their application process, Bridgement’s first product to market has a record time of 90 minutes from loan application to money landing in an SME’s account. Accessing customer’s financial data directly from their accounting software, such as Xero, Quickbooks and SageOne, credit facilities from R10 000 to R5-million are available to registered companies who have been trading for longer than six months and have an annual turnover of more than R500 000. Interested businesses can apply in under two minutes on their website, www.bridgement.com.
Bridgement’s Fintech predictions for 2020:
- Digital only banking – lowering the need for physical infrastructure and optimising processes, online banks will be able to run more cost effectively than traditional banks.
- More corporates moving into Fintech – several big companies such as retail chains and the Telco’s are moving into the Fintech space by offering insurance and credit products.
- Continued scepticism for cryptocurrency – currently in South Africa, there are no specific laws or regulations that address the use of virtual currencies. Mass adoption will only occur once it is regulated and more people become familiar and comfortable with cryptocurrency.
- Increase in digital security – as we continue to transact and communicate more online, the risk for fraud and other cyber threats will only increase. Local Fintech companies will help businesses avoid new risks including EFT fraud and hacked accounts.
- Open banking – South Africa is set to follow the global trend of open banking. This means businesses will experience more automation, better security and greater efficiencies with financial services.
- Further growth of Fintech lenders – filling the gaps that banks are missing in terms of SME funding. More partnerships between Fintech lenders and banks and other non-financial institutions will be seen.
