Fintech is a multifaceted, catch-all term for a range of technologies which are disrupting the way financial transactions occur in the world. These technologies rely on tech-savvy users who can make the most of the features at hand. As a business, you can employ multiple of these fintech portals, integrations, and applications in your fintech strategy because they open you up to new customer possibilities and revenue streams. From there, customer retention is a matter of understanding the needs of those to whom you provide a product or service.
The South African FinTech Ecosystem.
It may come as no surprise to people who are in the business of start-ups that South Africa has a rich fintech landscape that can be divided into specific categories, namely:
- Payments and Remittances Platforms
- Insuretech and Risk
- Big data/AI/Machine Learning
- Savings and Investments
- Comparison Solutions
- B2B Digital Solutions
- Platform Solutions
- Regulatory Technology or Regtech
A single business can leverage more than one of these categories in order to advance its operations, either by streamlining those operations; opening the business up to new markets; or simply finding better ways to make use of financial resources through comparing vendor prices; investing in other companies using a fintech platform; or using the capabilities of big data, AI, and machine learning to increase process automation and scale.
Within the fintech ecosystem, there are structures which support the development of each individual company and therefore, each systemic offshoot. The three most important are investors, incubators, and entrepreneurs. You can be any one of these depending on the nature of your business and the stake you would like to have in the finished product or service offering. For example, if you’re interested in the payments and remittances category, you can either start your own disruptive company – note, that to disrupt, you necessarily need to have a unique selling point which is difficult to replicate, or which you do exceptionally to the point where competition is minimal; or you can incubate a disruptive company. Incubation is more complex than starting or investing because it requires giving guidance, mentorship and resources as opposed to money. It requires a great deal of time and energy and sometimes, the companies within the incubator don’t even make it to market.
So, with such a wide array of fintech to choose from, where do you start?
Start With Easy-To-Understand Fintech And Then Graduate To The More Complex.
When you start your journey in integrating fintech into your business, you’ll do quite a bit of research into the categories mentioned above. The best advice is to start with the fintech that you most easily understand because you have less of a chance of losing any money or sleep over it. Once you have a firm grasp of which category you would like to focus on, home in on some key companies and hedge your bets.
As appealing as it seems to just back one horse based off its popularity or the fact that it’s the easiest platform to use, it doesn’t mean that it actually is the best. Even within the same category, there are benefits and disadvantages to choosing one platform over another. For example, in the payments and remittances category, one of the popular technologies to use is SnapScan. A user will download the SnapScan app, link it to their debit or credit card and anywhere where there is a SnapScan sign (showing the retailer supports SnapScan), the user can take her phone, scan the QR code, and a payment will go through.
SnapScan’s entire USP in that instance is the ease of use in terms of mobile integration with the QR code reader via the phone’s camera. The transaction still involves inserting a PIN to verify that it’s valid, but all of this is done on the phone – a device which is 99% of the time in the pocket of the customer when they are out shopping. A customer is far more likely to forget her bank card in the car than she will a phone, which is the opportunity SnapScan exploits.
As a business you can include SnapScan as a complementary payment method to the others that already exist at your establishment, most probably cash and card. And then, if you are a retailer with an online store, there are other far more advanced platforms such as PayU which are desktop-based.
PayU is an online payment portal that allows you as a business to get paid without the need for a merchant account at a bank. It prides itself in the fact that there is no paperwork involved – you just need you to have a website and a functional shopping cart. PayU then gives you an integration document on how to use its API to allow payments through PayU on your website.
When customers reach the paying stage in their customer journey on your website, they click ‘Pay Now’ and choose their preferred payment method. PayU processes it in the back-end and the transaction is confirmed and completed. The amount paid by the customer is paid into the business’s PayU account and can later be transferred this into a personal bank account and withdrawn.
SnapScan and PayU are only two examples of simple ways in which a business can make use of fintech right now and start seeing differences almost immediately. To quell the confusion of understanding which fintech platform will genuinely benefit your business and which is a mere expense, it’s necessary to equip yourself with knowledge of the fintech landscape in its entirety and how it can affect your business. There are online courses in fintech which provide the basic building blocks for those who are willing to visualise a future where financial transactions take place in myriad ways.
When it comes to the other fintech categories, it will again depend on which industry you operate within, and then you should conduct some sort of feasibility study to see whether it will make financial sense to adopt any of the technology into your fintech strategy.
Looking Towards The Future Of Fintech.
In the digital world, platforms are built on protocols. HTTP is the standard information protocol of the internet and blockchain technology is being touted as the ‘trust protocol’ of fintech of the future. It is believed that blockchain will give rise to new business models by leveraging the distributed leger network protocol upon which it’s built, where it’s extremely difficult to edit the leger without first having to undo every previous block of data that came before the one of the current transaction. In fact, you require extremely powerful computers, that work nearly around the clock to ‘mine’ a new block in the chain.
The advantage will come in banking because the decentralised and distributed nature of the blockchain leger means that networks are not susceptible to the same risks as centralised databases. Even a targeted hack of such a distributed database would not cripple the entire functioning of the leger.
Time will tell if existing financial institutions will welcome this technology as quickly as it’s being welcomed and used by smaller, disruptive fintech companies. It was once thought that some banks are ‘too big to fail’, however, recent history has proved that assumption wrong. Fintech make take over traditional banking in the not-too-distant future.