It’s always great to be back home. It’s an opportune time to catch up with both family and friends. During my time off, I was privileged to spend time with banking executives who shared their thoughts around Fintech and what could happen. Interestingly, many of them appear blind or are ignorant to the fact that Fintech South Africa is slowly gaining traction. So, as ridiculous as it may sound, I agreed with them because I didn’t want to limit my career and neither did I want to tell them how far they were from the truth.
So I said to myself, why not write about it?
According to the findings of the Disrupt Africa African Tech Startups Funding Report 2015, 36 per cent of African startups that raised funding in 2015 were based in South Africa, with companies taking home in excess of $54.5 million over the course of the year. During that period, venture capital (VC) firm Grovest was looking to invest $12.8 million in highly scalable, post-revenue South African tech startups, with the strategy to “buy, build and flip”, Cape Town-based Silvertree Internet Holdings planned to invest US$10 million in South African tech startups and Knife Capital announced the launch of KNF Ventures, a $6.4 million fund dedicated to investing in innovative startups with proven traction.
African tech startups raised funding in excess of $129 million in 2016, with the number of startups securing funding up by 16.8 per cent compared to 2015. The Disrupt Africa African Tech Startups Funding Report 2016 reveals South Africa, Nigeria and Kenya were the top three destinations for tech investors in 2016, both in terms of number of deals and total amount of funding. Sector specific research shows the Fintech sector received the most funding; while the Agri-tech sector saw the biggest percentage growth as compared to 2015.
In essence, it may not be all doom and gloom in the market where bankers are thinking that with shrinking capital availability, Fintech will have limited or zero traction ito its effect to the system. In fact, if we observe some of the machinations of the past few months, there seems to be a lot of interest in Fintech Africa.
Let’s take a closer look;
Google playing its part…
Google brought the Launchpad Accelerator to Africa, aimed at assisting startups in leveraging Google’s latest technologies to scale their businesses through mentoring. The goal of Launchpad Start is to provide startups with actionable, in-person mentoring to help them tackle critical growth and scale challenges. Six African startups have been selected to take part in the first programme, i.e. four are from Nigeria which includes data collection startup Delivery Science, payments startups Flutterwave and Paystack, and mobile learning platform Gidimo. They are joined in the Launchpad programme by Kenyan sourcing and distribution platform Twiga Foods, and South Africa-based financial services marketplace JUMO. All six startups will now work closely with Google for six months, which includes two weeks of all-expenses-paid training at Google Headquarters, equity-free support, access to Google engineers, resources and mentors, credits for Google products, and marketing spotlight opportunities.
TechCrunch and Facebook to launch $25k Startup Battlefield Africa…
TechCrunch and sponsor Facebook will bring the Startup Battlefield competition to Africa for the first time this year, offering startups the chance to win $25,000 in non-equity funding. The TechCrunch Battlefield Africa 2017, for which applications are open here until July 17, will take place in Nairobi, Kenya, on October 11, with the organisers looking for Sub-Saharan Africa’s best innovators, makers and technical entrepreneurs to participate. African startups are invited to apply to three categories: social good, productivity and utility, and gaming/entertainment. This approach may be seen as a typical code fest however, IT hackathons in most corporates do not give away $25,000 in equity funding for executing your idea\innovation.
Scandinavia in the game as well…
African startups have been invited to apply for the Norway-based Katapult Accelerator, an impact-tech programme that offers startups hands on assistance and up to $100,000 in funding. Applications were open until May 31 for the Katapult Accelerator, which is looking for startups using exponential technologies to solve environmental and societal challenges and will run for three months from July 31. Selected startups will receive up to $100,000 to cover the cost of living expenses and build their businesses, and will be given access to hands-on training and mentorship over the duration of the programme. They will also be provided with access to a global network of leading thematic mentors, dedicated expertise to unleash potential of AI in their businesses, and the chance to access to further capital. A selected number of companies will also be given the opportunity to take part in a one-month follow-up programme in New York with Katapult partner ERA, a leading startup accelerator that has made 127 investments since 2011 and has a network of more than 350 mentors and dozens of industry partners.
Canada not as cold as we thought…
Canadian entrepreneurship hub Kamloops Innovation is inviting applications from African ventures to its startup contest, with one applicant to win six months intensive acceleration and $7,300 to launch its startup. The startup will take part in the organisation’s Venture Acceleration Programme (VAP), which is designed to guide, coach and grow ambitious early-stage technology entrepreneurs; delivered by an experienced entrepreneur-in-residence and supported by a network of mentors. The programme aims to help founders define a business model, and validate their product and market. A package of other benefits are on offer to the selected startup, including office space, accommodation, cultural passes and event tickets, and memberships to Kamloops Chamber of Commerce and Kamloops Makerspace. Kamloops started a tech revolution in with the goal to create a community where technology startups can grow and prosper, where successful members of this community go on to help the next wave entrepreneurs to achieve success.
AfricArena innovation conference 2017
Silicon Cape and French Tech have partnered to host the AfricArena innovation conference, which will take place in November with the goal of connecting African startups with investors. AfricArena, which will take place at the Century City Conference Centre on November 6-7, is a new platform that aims to connect investors from all over the world with startups from all over Africa. The main themes of the event are Smart City Living, Smart Agri, Smart Commerce, Smart Education, Smart Media, and Smart Travel, and the objective is to attract 500 delegates, with a strong proportion of international visitors. The conference will host keynotes and panel discussions with top speakers from Europe and Africa, as well as numerous pitch battles for investment opportunities from committed angel investors, VCs and private equity players.
In theory, the views from our elite bankers remain quite conventional, i.e. Fintech is still a long way off from having an impact in South Africa, let alone Africa. I am in agreement, albeit only by a small percentage, mostly due to the overwhelming challenges of economic stability, financial prudence, intellectual property rights, taxation and ICT penetration still being discussed at many venture capitalist (VC) tables. We may still have plenty of challenges however; these concerns are not stopping the opportunity of capital trickling into the African Fintech industry. Nonetheless, a large part of me believes we are making slow progress and the industry is moving forward. It is only a matter of time when an innovation disrupts the financial services industry and what better place to do it, than in South Africa. Let us not forget, South Africa has positioned itself, rhetorically at least, as a ‘gateway’ to Africa and that role entails facilitating economic engagement and conduct of its own private commercial interests in the continent (Moore, 2012).
Should there be an opportunity to solve a real social challenge, create value for humanity or make a difference to the African population via a Fintech solution, I am saying, why not disrupt the market?
In closing, I will include comments from two very specific articles that I read recently. I think the views shared by the writers provide adequate closure to what’s happening in the Fintech space.
Why Asia will be the first to feel banks’ WhatsApp moment?
Asian banking is on the cusp of a WhatsApp moment. Do you remember paying an arm and a leg for text messages? Now all the Telco’s in the world combined can’t match WhatsApp’s 30 billion pings a day. Financial transactions will go the same way and Asia may lead the trend, rather than follow it a decade later. Banks in the Asia-Pacific region were responsible for 46% of the global industry’s $1trillion profit in 2015. It is estimated that around $400bn of their banking revenue will be at risk by 2025, says McKinsey. A small part of that may be from the direct loss of market share to Fintech startups however, most of it will be a consequence of the price erosion that will result from banks trying to protect their turf. There is a compelling reason for Asia to lead this shakeup because the region is home to 55% of the 2-billion people worldwide who do not have bank accounts. Interestingly, 37 million small businesses buy and sell goods on Alibaba’s platforms and its Ant Financial venture is China’s most valuable Fintech firm. With the focus on Jack Ma, nothing stops him from replicating that model in India, where Ant’s Alipay has a stake in the country’s top mobile-payments firm, Paytm. We can expect this approach to become the blueprint for the region where the very essence of traditional banking doesn’t remain the norm.
Techies look to outfox banks!
Financial technology (Fintech) is not about technology at all. It is about developing new transaction capabilities through innovative business models, more often than not, enabled through consumer-facing technology. Banks are not the principal focus, as Fintech seeks to tap into the multibillion-dollar demand for consumer friendly financial services. Most Fintech offerings are incremental improvements on existing financial products and services, and target the mass market rather than the elite. Some will trigger disruptive innovations, a well documented process in which existing industries are completely overhauled when new players using innovative business models and cost lowering technology persuade the majority of customers to change the way they have always done business.
A telling attribute of disruptive innovation that should alarm South Africa’s Big Four banks is that leading companies are not guaranteed to survive the disruption. The Big Four are not automatically destined for the history books, even after three decades of the internet, e-commerce and mobile banking because global banks are still standing strong. Interestingly, PwC estimates that banks globally will lose 35% of future revenues to Fintech. The loss will be more severe in emerging markets, where large numbers of unbanked citizens are drawn to mobile Fintech, not banks. Banks will need to rally their forces along these fronts to stand a chance of protecting future earnings and remaining relevant.
From a South African banking perspective, the first survival strategy when disrupted is to keep the marauders at bay by drawing on the apathy of customers. People are inherently conservative and will choose to stick with brands they know, despite the zeal of early adopters. Banks have been leveraging customer inertia through complex loyalty programmes, digitised services and partnership programmes that result in customer lock-in. It is not easy for a potential disruptor to change this momentum, especially when the status quo is propped up with billion-rand brand campaigns and strategic partnerships with resources outside the grasp of start-ups. It is not a coincidence that banks have fended off iconic global brands if we look at where some of those funds are going to e.g. the Absa Cape Epic; the Old Mutual Two Oceans race and the Standard Bank Iron Man. Banks have front row seats to ensure they uphold consumer consciousness through brand brainwashing. Remember that guy on the radio!
Banks err by relegating Fintech to their information technology department or internet solutions manager. By regarding it only as a technology play, banks are overlooking the necessity to revisit the business of customer loyalty, value for money and interrogating which business offering digital citizens are seeking. These are issues that Fintech companies obsess over.
Fintech is not a technological development, but a fight for the very soul of financial inclusion and transactional capability. To remain relevant, banks will need to rebuild customer loyalty, and transform loathing customers into doting fans. This is what Fintech companies are doing, and why they can win the battle. Technology is the new battlefront and it can be either a threat or potential saviour, depending on which view you are leaning towards.
Notes to consider:
Africa as an investment opportunity has certainly caught his eye, especially because the continent’s entrepreneurs have a habit for designing products that solve local problems. Africa is the last growth market, with investors all over the world well aware that while Asia is booming today, Africa is really the last market for growth across many asset classes. The founders of these startups are very amenable to advice and their ability to listen to investors, mentors, and other entrepreneurs, whilst turn that advice into results is encouraging as an investor. In general, African entrepreneurs are very capital efficient, and can do a lot with fairly small amounts of financing, startups on the continent also tend to have low burn rates. There is huge demand from customers across both the B2B and B2C in Africa, which makes it a great place to be as an investor. (Bennet, 2017)
Moore, C. (2012). Policy Brief BRICS partnership : A case of South- South Cooperation ? Exploring the roles of South Africa and Africa, (99).
Mukherjee, A. (2016). Why Asia will be the first to feel banks’ WhatsApp moment? Available at: https://www.businesslive.co.za/bd/opinion/2016-07-04-why-asia-will-be-the-first-to-feel-banks-whatsapp-moment/
Lamprecht, S, J. (2016). Techies look to outfox banks. Available at: https://www.businesslive.co.za/bd/opinion/2016-06-08-techies-look-to-outfox-banks/
Jackson, T. (2016). Could 2016 be the best year yet for SA startup funding? Available at:
Jackson, T. (2017). 6 African startups selected for Google’s Launchpad Accelerator. Available at: http://disrupt-africa.com/2017/05/6-african-startups-selected-for-googles-launchpad-accelerator/
Jackson, T. (2017). Cape Town event to connect startups with investors. Available at:
Jackson, T. (2017). Meet the Investor: Greg Bennett, Village Capital. Available at:
Jackson, T. (2017). African startups can apply for this Norwegian accelerator. Available at:
Mulligan, G. (2017). Accelerate your startup in Canada. Available at: