FinTech is an emerging sector in South Africa. With funding pouring into startups like Zande Africa, Bright on Capital and Livestock Wealth. FinTech will surely play a big role in the digital transformation of South Africa while creating jobs and new business opportunities.
FinTech, short for Financial Technology, encompasses the new applications, processes, products, or business models in the financial services industry. Use cases for FinTech include crowdfunding, Insurance, mobile payments, blockchain and cryptocurrency.
FinTech is ripe for mainstream adoption in South Africa. Banking systems across the country is expensive and/or outdated. Many South Africans do not have access to these banking systems or even basic financial utilities. The lack of economic infrastructure paired with inadequate financial education has left many South Africans without bank accounts.
There is a need for a secure way to make digital payments and loans. Many South Africans also do not have a place to store their hard-earned salaries or wages.
We have already seen FinTech attract a large user base in Asian and Western countries. Is South Africa next?
Reasons Why South Africa Might be the Next Big Market for FinTech
It’s hard to expect widespread FinTech adoption in a country where a large percentage of the population do not have bank accounts or even basic financial utilities. However several indications show that FinTech will become a major market in South Africa.
Many people in South Africa, suffer from the slight fluctuations of the South African Rand. When purchasing goods or services internationally or online, South Africans are subject to ridiculously high bank fees, and the exchange rate between the South African Rand and foreign currencies like the United States Dollar.
Banks in South Africa are going digital. TymeBank is one of South Africa’s only fully digital banks and offers no monthly fees, free day-to-day banking transactions, and low charges for other transactions.
Standard Bank, one of South Africa’s largest banks also has plans to go digital, and according to BusinessTech, plans to cut around 1,200 jobs and close 91 branches as part of efforts to digitise its retail and business bank.
South Africa has increasingly shown itself to be open to the idea of FinTech.
Many countries in Africa realise the potential economic improvement that comes with FinTech, and have started experimenting with the technology, or have invested in FinTech startups. The South African Reserve Bank is actively studying cryptocurrency and is encouraging FinTech innovation through their FinTech programme.
FinTech Advantages and Disadvantages for South Africa
FinTech is not the final solution to South Africa’s problems just yet, there are still many challenges that the country needs to overcome. With these challenges come advantages and disadvantages for FinTech in South Africa
- The first advantage is a faster rate of approval. No more waiting in long queues or having to sign your way through stacks of paper. Today you can open a bank account from the comfort of your home.
- Convenience is the second advantage as you may no long require a physical plastic or metal card to transact in the real world. Simply login to your phone and open an app and proceed to make the payment. Snapscan is a great example of this.
- Lower costs result in savings for customers and confidence in the FinTech market.
- Connectivity required. Most FinTech apps and software require a stable internet connection. Going digital is the way forward, but having lower costs for data and internet lines, adsl/fibre, will surely help in that regard. Many South Africans do not own smartphones, so FinTech has to be inclusive for all South Africans, especially the poorest of the poor.
- Crime is another disadvantage. FinTech solutions will surely become a target for those who are trying to make a quick buck or who want to game the system. FinTech has an enormous responsibility in keeping user funds safe and to ensure all transactions are secure, if not, the FinTech market in South Africa will face many challenges before it can win over the trust of South African consumers.
The Case for FinTech in South Africa
As we have come to know that new technology often creates a chasm between those who have and those who do not, especially in South Africa. FinTech presents a massive opportunity for South Africa, and its citizens. South Africa definitely seems to be the next big market for FinTech and this boasts massive business opportunity. There are already numerous FinTech Startups in South Africa working towards a South Africa where everyone has access to financial tools and education.