Fintech start-ups have transformed the market for consumer lending in the United States and other mature credit markets, by giving people an alternative way of borrowing money without having to go through a bank or a traditional lending institution. We see a similar trend happening in South Africa, but some of the drivers and market dynamics are very different to other markets.
Fintech lenders provide a platform for investors to lend money directly to consumers and businesses. The application and approval processes are quick, as risk is assessed almost instantly using data and technology.
As with most new technologies, though, there’s a lot of fear, uncertainty and doubt around Fintech lending. What’s interesting is that when you review some of the most popular perceptions, it’s clear how dramatically different South Africa’s fledgling Fintech lending industry is compared to its more-established US counterpart.
Let’s look at common beliefs about Fintech:
“Fintech lending is a youth phenomenon; older consumers are more likely to engage in traditional lender relationships.”
True – In South African, the Fintech lender consumer profile is almost exclusively younger, making up 70% of consumers taking loans. This is in stark contrast to the US where less than 15% of consumers borrowing from Fintechs are under 30, and more than 60% of these loans are taken by people 40 and older.
Within the South African market there is real opportunity for further penetration of the older consumer market. Fintechs have successfully created solutions that resonate with younger generations and now need to extend their offering if they are to gain market share outside of their core customer base.
“Fintech lenders cater largely to the unbanked and underbanked.”
False – In fact, South African and US Fintechs have some of the most credit-active consumers in the market. 67% of US consumers have more than six credit lines open at any time, and half of those have more than 11. They use multiple types of credit products – credit cards, vehicle and asset finance and home loans. In South Africa TransUnion analysed over 15 million Fintech originated personal loans and statistics revealed that 65% of these consumers already had a home loan, 37% of them had a vehicle financed and 19% of them had Home Loans. This clearly shows that these consumers are not new to credit, they have existing relationships with traditional financial institutions, yet used a Fintech to get a personal loan
Most of the Fintech activity comes from the major urban business centres of Gauteng and Western Cape, which suggests that the South African Fintechs are not necessarily targeting the unbanked and underbanked as conventional wisdom would suggest.
“Fintechs are more focused on technology than risk management.”
False – In South Africa Fintechs tend to target less risky consumers than other personal loan lenders, and as a result, have lower delinquencies across all risk tiers. They issue the smallest loans across the risk spectrum and focus exclusively on short-term loans of no more than 6 months. But, while local Fintechs don’t apply risk-based pricing and play in the short-term, small loan amount arena, they certainly have the potential to expand into different markets.
In contrast, in the USA, Fintechs have a broad distribution of risk, offering loans to consumers across the credit spectrum. They also tend to issue large loans across the risk spectrum, with robust risk-based pricing. And while US lenders experience higher delinquencies in the sub-prime segment, they appear to price for this risk. They tend to favour loans with terms between one and three years, with more than 40% of their loans falling in this category, where banks write more than half of their loans between 37- 60 months.
The bottom line? Unlike the US, where Fintech lending has matured to the point where it is starting to resemble traditional lending in many ways, the Fintech landscape in South Africa is on the rise as the country is primed for growth. Start-up funding increased four-fold in 2018 over 2017, with R10.75 bn raised across 458 deals, according to WeeTracker statistics.
South Africa’s Fintech start-ups represent a new era of financial services, with characteristics that separate them from established lenders. They’re not only bringing new products, services and channels to the table, they’re also creating value with differentiated consumer experiences, and empowering the consumer by providing frictionless, multi-channel financial access.
Importantly, Fintechs also share. They thrive in an ecosystem of fellow start-ups, investors, incubators, accelerators, regulators, and industry thought leaders. With this foundation, the industry is set for exponential growth in South Africa in the coming years.
Second-hand smartphone market booms
The worldwide market for used smartphones is forecast to grow to 332.9 million units, with a market value of $67 billion, in 2023, according to IDC
International Data Corporation (IDC) expects worldwide shipments of used smartphones, inclusive of both officially refurbished and used smartphones, to reach a total of 206.7 million units in 2019. This represents an increase of 17.6% over the 175.8 million units shipped in 2018. A new IDC forecast projects used smartphone shipments will reach 332.9 million units in 2023 with a compound annual growth rate (CAGR) of 13.6% from 2018 to 2023.
This growth can be attributed to an uptick in demand for used smartphones that offer considerable savings compared with new models. Moreover, OEMs have struggled to produce new models that strike a balance between desirable new features and a price that is seen as reasonable. Looking ahead, IDC expects the deployment of 5G networks and smartphones to impact the used market as smartphone owners begin to trade in their 4G smartphones for the promise of high-performing 5G devices.
Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker, says: “In contrast to the recent declines in the new smartphone market, as well as the forecast for minimal growth in new shipments over the next few years, the used market for smartphones shows no signs of slowing down across all parts of the globe. Refurbished and used devices continue to provide cost-effective alternatives to both consumers and businesses that are looking to save money when purchasing a smartphone. Moreover, the ability for vendors to push more affordable refurbished devices in markets in which they normally would not have a presence is helping these players grow their brand as well as their ecosystem of apps, services, and accessories.”
Worldwide Used Smartphone Shipments (shipments in millions of units)
|Rest of World||136.8||77.8%||245.7||73.8%||12.4%|
Source: IDC, Worldwide Used Smartphone Forecast, 2019–2023, Dec 2019.
Table Notes: Data is subject to change.
* Forecast projections.
Says Will Stofega, program director, Mobile Phones: “Although drivers such as regulatory compliance and environmental initiatives are still positively impacting the growth in the used market, the importance of cost-saving for new devices will continue to drive growth. Overall, we feel that the ability to use a previously owned device to fund the purchase of either a new or used device will play the most crucial role in the growth of the refurbished phone market. Trade-in combined with the increase in financing plans (EIP) will ultimately be the two main drivers of the refurbished phone market moving forward.”
According to IDC’s taxonomy, a refurbished smartphone is a device that has been used and disposed of at a collection point by its owner. Once the device has been examined and classified as suitable for refurbishment, it is sent off to a facility for reconditioning and is eventually sold via a secondary market channel. A refurbished smartphone is not a “hand me down” or gained as the result of a person-to-person sale or trade.
The IDC report, Worldwide Used Smartphone Forecast, 2019–2023 (Doc #US45726219), provides an overview and five-year forecast of the worldwide refurbished phone market and its expansion and growth by 2023. This study also provides a look at key players and the impact they will have on vendors, carriers, and consumers.
Customers and ‘super apps’ will shape travel in 2020s
Customers will take far more control of their travel experience in the 2020s, according to a 2020 Trends report released this week by Travelport, a leading technology company serving the global travel industry.
Through independent research with thousands of global travellers – including 500 in South Africa – hundreds of travel professionals and interviews with leaders of some of the world’s biggest travel brands, Travelport uncovered the major forces that will become the technology enablers of travel over the next decade. These include:
Customers in control
Several trends highlight the finding that customers are moving towards self-service options, with 61% of the travellers surveyed in South Africa preferring to hear about travel disruption via digital communications, such as push notifications on an app, mobile chatbots, or instant messaging apps, rather than speaking with a person on the phone. This is especially important when it comes to young travellers under 25, seen as the future business traveler, and managing their high expectations through technology.
With the threat of super app domination, online travel agencies must disrupt or risk being disrupted. Contextual messaging across the journey will help. Super app tech giants like WeChat give their users a one-stop shop to communicate, shop online, book travel, bank, find a date, get food delivery, and pay for anything within a single, unified smartphone app. Travel brands that want to deliver holistic mobile customer experiences need to think about how they engage travellers within these super apps as well as in their own mobile channels.
In the next year, research shows, we will see an accelerated rate of change in the way travel is retailed and purchased online. This includes wider and more complex multi-content reach, more enriched and comparable offerings, more focus on relevance than magnitude, and an increase in automation that enables customer self-service.
“How customers engage with their travel experience – for instance by interacting with digital ‘bots’ and expecting offers better personalised to their needs – is changing rapidly,” says Adrian Roodt, country manager for Southern Africa at Travelport. “We in the travel industry need to understand and keep pace with these forces to make sure we’re continuing to make the experience of buying and managing travel continually better, for everyone.”
Read the full 2020 Trends report here: 2020 Trends hub.