Connect with us

Featured

Changing the rules of fintech

A whirlwind of investment is swirling around fintech startups in South Africa, as innovation in banking and payments changes the rules of the financial game. By ARTHUR GOLDSTUCK.

Published

on

A new story, laced with cliffhangers, drama and intrigue, is being written across the pages of the world’s financial newspapers. The plot does not include gangsters, espionage or murder – yet – but it has its readers riveted.

The story begins with the well-worn premise of how technology is changing the world of financial services. But it quickly hurtles into the heady world of startups that are rewriting the rules of this nascent industry called fintech, for financial technology. It then charges across the balance sheets of venture capital firms transfixed by unprecedented opportunity to return untold multiples on investments.

Depending who does the counting, anywhere from $17-billion to $25-billion in venture capital went to fintech firms globally in 2016. According to CBInsights, 2017 was the biggest year ever in fintech VC.

In South Africa, startups seem to pick up million-rand cheques on the basis of little more than PowerPoint presentations. Relatively young businesses that have already proven themselves are pulling in hundreds of millions.

Three examples from the past year encapsulate the scope of fintech and the scale of investment:

  • Prodigy Finance, a company started by a South African in the United Kiingdom before being brought back to South Africa, offers loans to postgraduate students accepted into leading universities around the world. This “borderless credit” provider has accumulated funding of R4,2-billion, with R3,19-billion raised in 2017. One of the participants in the latest funding round, AlphaCode, the fintech investment arm of Rand Merchant Bank, is becoming a familiar brand behind much of the fintech VC in South Africa. It recently hosted an event where R1-million was handed to each of four winners of a fintech competition for black-owned startups.
  • Luno, a trading platform for cryptocurrencies like Bitcoin and Ethereum, announced a R120-million funding round, led by UK-based Balderton Capital, and also including AlphaCode. An earlier R60-million investment came from Naspers.
  • Synthesis Software Technologies, an established fintech company that approaches innovation like a startup, was acquired by JSE-listed Capital Appreciation for R132,1-million. While it provides software development and integration services to financial institutions like Investec, Absa, Standard Bank, Capitec and Nedbank, it has also become a leading player in the rapidly evolving cloud computing space. Last year it became the first company in Africa and the Middle East to be named an Advanced Partner by Amazon Web Services (AWS), the fastest growing division of Amazon.

The last is the most intriguing of the three, given that it’s value and potential are not grounded in a specific trend or marketplace. With the cloud as backdrop, its innovation plays out in the fields of financial channels, blockchain, big data and artificial intelligence.

“We constantly review current technology trends and formulate products and solutions based on common industry needs using current and available technologies,” said Synthesis MD Michael Shapiro. “This is where our focus on cloud technologies was incubated and formulated five years ago.”

The combination of a 20-year track record and a fresh, startup-like approach to cloud computing, gave Synthesis a head-start in an environment where the starting point is often not clear. It assists financial institutions in “becoming cloud ready, to execute mass migrations, to harness the benefits of big-data analytics and to extract the cost savings and regulatory benefits of the cloud platforms,” said Shapiro.

“In the world of fintech, technical innovation and business innovation are often interchangeable – and we have to unlock this value. We translate the institution’s business strategy into solutions with real, measurable impact.”

Shapiro pointed to a fascinating twist in the plot, however: financial services companies that plan to disrupt themselves with their own, internal fintech start-ups.

“Cloud platforms such as AWS give new startups the opportunity to disrupt. That is why our customer base of established players is seriously evaluating and using the same technologies to up their game and provide better banking, insurance and investment solutions to the market.”

A striking example was First National Bank (FNB) last November awarding R10,5-million to employees in a contest to come up with innovations that would create radical disruption in the financial industry. The programme has been running since 2004, and has awarded a total of R54.5-million.

Last year FNB was named Most Innovative African Bank at the 2017 African FinTech Awards, for the second year in a row, as well as being named Master Innovator in the 2017 Accenture Innovation Awards.

FNB Business CIO Peter Alkema put the strategy simply: “Our aim is to disrupt rather than be disrupted. A new way of thinking is needed to demystify banking within the financial services industry.  Fintech helps grow, educate and enrich the market. We find that businesses are incorporating innovation in their business models which encourages us to think and act differently. This radical disruption is necessary for cross industry collaboration and is crucial for future value generation.”

However, investing in a fintech start-up is a very different process from incubating an idea in-house. For one thing, the team behind a startup hasn’t been recruited by the parent company. Yet, it has to fit in with the ethos and goals of the investor.

“The cultural fit of the team is critical,” said Bradley Sacks, joint CEO of Capital Appreciation. “A large component of any fintech company is its people, their entrepreneurial drive, their innovation and their understanding of the market opportunity their product or solution is trying to address. Ideological differences, be it in terms of architecture or otherwise, can be quite disruptive, and it is important to understand this as part of a due-diligence process.”

The bottom line, however, is the bottom line.

“The financial returns of any investment are obviously important, and we place a great deal of emphasis on this, including the benefit the acquisition may afford other initiatives we already have in the group. Our analysis does not only consider the direct impact within the quarter or half-year results, but also a medium-term horizon. Often the impact of innovative solutions is not visible until the solutions have reached critical mass adoption.”

This is probably the biggest conundrum in fintech investments: how to assess the potential of a solution before it has taken off, and before every other investor lines up to fund this potential. It is into this gap that many VC funding rounds have plunged and many promising fairy tales have ended in financial tragedy.

In many cases, the flaw in the story has been the belief in a good idea rather than a good business. But there is a formula to differentiate the two.

“The distinction between a good opportunity and a good idea is the viable economic application of the good idea,” said Sacks. “If the idea does not have a viable economic business case, it will never evolve into a real opportunity. Where clients derive value from an idea or application, they are happy to compensate us. Value to a client arises from the more traditional sources such as lower costs or increased revenue, but equally can arise from user experience, customer satisfaction and retention and brand awareness.”

Sacks and Alkema sound like they are reading from the same script. But that is probably because most good, new fintech stories still depend on the same tried and tested plots.

  • Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter on @art2gee and on YouTube

 

Featured

AppDate: Prepare for space

In this week’s AppDate, SEAN BACHER highlights Space Nation Navigator, Hitman Sniper, Snake Mask, Memrise, WhatsApp Web, and Carrot Weather.

Published

on

Space Nation Navigator

Space Nation Navigator is a bit of a strange app. It is part game, part exercise and part educational. On the game side, users have to navigate the Mars Rover, put the International Space Station back into orbit or move their Martians to safety before a sand storm hits Mars. When it comes to exercise, Space Nation Navigator provides users with a range of exercises and Yoga videos to prepare them for space travel and working in an anti-gravity environment. The education aspect teaches users about the planets, and star constellations, and then offers quizzes on what has been taught.

Platform: Android and iOS

Cost: A free download.

Stockists: Visit the store linked to your device.

 

Memrise

Memrise takes a new approach to help people learn new languages. Instead of providing a user with random phrases and words to memorise, the app connects you with a person already fluent in the language you want to learn. In turn, the person you are speaking to wants to learn the language in which you are fluent. Once your profile is filled out and languages selected, it connects you with people around the world who are interested in your language, and then allows you to chat with them in real-time. Memrise also lets one learn new languages through games, chatbots and grammarbots that help with spelling, tenses and pronunciations.

Platform: Android and iOS

Cost: A free download.

Stockists: Visit the store linked to your device.

 

Hitman Sniper

Hitman Sniper is loosely based on the Agent 47 movie released a few years ago. The game offers players the ability to hone their shooting skills through a range of training courses and, once they think they are ready, they can start taking out the bad guys. Things start off easy enough, but they get more and more difficult as one progresses through the 150 missions on offer. One will also have to upgrade various gun components, like scopes, magazine capacities and silencers, to make the missions a little easier. Hitman Sniper lets users buy 16 to tackle each of the missions – either with real money or via the points accumulated by completing missions. Money and points can also be used to upgrade firearms.

Platform: Android and iOS

Cost: R7 – with a range of in-app purchases.

Stockists: Visit the store linked to your device.

 

Snake Mask

The iconic Snake game that was preinstalled on most older Nokia phones has had a complete make-over. It now uses Facebook’s AR technology, meaning that you have to navigate the snake around obstacles in your home or office, all the while collecting coins and stars that change the snake’s speed and length. Unfortunately, Snake Mask is only available on Nokia’s new range of smartphones. However, it should not take long before it slithers onto other devices.

 

Platform: New Nokia smartphones running Android.

Cost: Free to use through the Facebook app installed on the device.

Stockists: Available through the Facebook app.

 

WhatsApp Web

Although this is by no means a new app, it is an extremely useful one, and one that not many people know about. Tapping out WhatsApps on your phone is easy enough, but thanks to WhatsApp Web it can be even easier. Open the WhatApp Web page under WhatsApp and you will see a QR code. Scan this code through WhatsApp on your mobile and you will be shown a replica of what you would normally see on your phone. You can then type and reply to messages using your computer instead of having to stop everything and unlock your phone every time a message comes through. WhatsApp Web is great if you share your computer with other people as it automatically disconnects when the browser is closed. However WhatsApp also offers an app that when installed will stay connected to your phone unless you manually remove it.

 

Platform: Any up-to-date Internet browser

Cost: Free to use and install

Stockists: Visit www.WhatsApp.com

 

Carrot Weather

There are thousands of weather apps on the Internet these days and all of them do the same thing – inform you of the weather in your area. However, Carrot Weather has taken what is just another app and turned it into something fun. By fun, I mean sarcastic, rude and completely politically incorrect. A user starts off by selecting religious and political views. It then asks about personality, ranging from friendly to homicidal to overkill – which includes profanity. So, for instance, instead of waking up to to the standard partly cloudy forecast, Carrot Weather will display something like: “It’s only partly sunny, the sun is a total effing failure.” It also has a range of insults that it throws at you whenever you open the app – some of them downright insulting, so it is definitely not for those who are easily offended. The app’s user interface is very simple, displaying a week’s daily forecast and hourly forecasts for the day selected.

Platform: Android and iOS

Cost: Free to download but with adverts. The premium, advert free version costs R12 per month.

Stockists: Visit the store linked to your device.

* Sean Bacher is editor of Gadget.co.za. Follow him on Twitter on @SeanBacher

Continue Reading

Featured

SA Start-up reinvents PABX

For any South African business, the idea of setting up or changing a telephonic switchboard system is the stuff of nightmares. Dealing with expensive hardware and hearing things like QSIG and VOIP is not what you’d call exciting.But now there is an app.

Published

on

Enter BuzzBox (www.buzzboxcloud.co.za), a web-based telephone switchboard that is aimed at small and medium sized businesses wanting to take the hassle and cost out of the company switchboard. Whether you are a small one-man operation or a larger organisation with staff working remotely, BuzzBox is the best switchboard solution.

What sets BuzzBox apart from anything else on the market is its easy-to-use dashboard. It puts you in control of everything from picking your phone number to setting up voice prompts and managing your business-hours schedule.

BuzzBox was developed when the startup behind it, Jini-Guru, needed such a service for its own use across multiple continents. “When we started Jini-Guru we could not find a seamless online process that would allow us to set up a full web-based switchboard, so we decided to build one for ourselves,” says Mike Smits, Director at Jini-Guru.

He says a lot of startups today are tech savvy and know how to use apps and the services that go with it. “It’s the uberisation of services and its driving demand for instant service activation.”

BuzzBox works as an app on both iOS and Android but users wanting a desk phone option can choose from a variety of devices on offer or use their existing VOIP phones.

Setting up a BuzzBox account takes 5 minutes. During registration your FICA documents are uploaded [ID and proof or residence] and you get to pick your phone number before the account is created. Companies that want to keep an existing number can do so too.

The real magic happens when you log on to the BuzzBox Dashboard. The main screen displays a summary of statistics for your account while the left-hand menu provides you quick access to various configuration settings and reports.

Setting up new extensions or external numbers is done with a few clicks and you can even set up various departments which is a great way to route a call to various people in a department, like sales or support.

The intuitive user interface also makes it easy to set up hold-music and voice prompts. You can add voice prompts by recording them straight to your phone, just make sure you use a clear voice with quiet surroundings for the best customer experience.

One of the main features of BuzzBox is its call recording feature that allows an organisation to record calls for legislative purposes, such as a lawyer, or for customer service purposes such as support. Recordings are stored securely online, and you have the ability to download recordings for playback. Companies can opt-in for this service and it’s free to use. Recordings are stored online and are fully encrypted so only you can listen to, or download them. Storage costs R1 for every 1000 minutes of stored recordings.

Other features include call forwarding and scheduling. The latter allows you to set office hours for your organisation which will divert calls to an after-hours messaging service. You also have the option to enable routing to an employee who is on call after hours.

BuzzBox also has a reseller program for companies wanting to offer this as a switchboard solution to their existing customers.

The costs for this service is R89 p/m for the first phone number which includes your first extension for free. Thereafter you’ll pay R89p/m per extension. Calls between extensions are free but you pay per second for all outgoing phone calls. More info on pricing can be found here: https://buzzboxcloud.co.za/pricing/

BuzzBox is offering a Launch promotion where they are offering the first line and extension free for 12 months. Only pay for calls. Use promo code “feoifyaa” during sign-up to apply your discount.

Continue Reading

Trending

Copyright © 2018 World Wide Worx