When start-up investment works both ways

Back in 2018, when a fuel management start-up called Payment24 first made an appearance in this column, Standard Bank was one of its customers. Today, the banking group has a 40% stake in the business.

It’s a classic example of someone liking working with a company so much, they buy it. But also of an investment working both ways.

Shadab Rahil and Nolan Daniel were techies who had been implementing payment systems for a major fuel company and had decided to build something better.

Most fleet solutions at the time consisted of a plastic fuel card provided by banks or a proprietary attachment on a fuel pump nozzle that connects to a fuel management system. These were expensive solutions, difficult to maintain and open to offline fraud.

The two roped in the cloud, mobile technology, the Internet of things, and contact technology, all commercially available but not pulled together for the market. The system they built allowed companies both to make payments and track their fuel.

And one of their early customers was the Standard Bank Group.

“One portion of our business was really focusing on helping customers with fleet systems,” says Daniel. “We had a dedicated team that developed a whole new fleet management system for the bank. Given our experience and background, we obviously know the industry quite well and we were able to give them a new web-based system within about 18 months that they rolled out. It included migrating terabytes of historic data into the new environment.

“That is something that was good for us, but it was a game changer for them as well: something that they can take to their customers and say, ‘look what we’ve got’. It’s not just a card terminal, but it’s an intelligent machine that can run your business, and there’s a lot of value added services. And similarly with the fleet management system.”

The bank liked it so much, they took a stake in Payment 24, leaving Daniel and Rahil as majority holders, who still run the company from a strategic point of view.

Says Rahil: “They were a customer, and they saw the value to their business as well as the strategic value, and that’s why they wanted to come on board. We might be a funded company, but we still have the mindset of a startup, because we still want to remain agile and do the most that is possible with the least number of people possible. That’s the DNA of the company, even though we are about 80-plus people now.

“We are still a private company, but we do have a big brother behind us that has helped us to grow into other markets as well as to grow as a company. We are operating in about 17 countries today, 9 or 10 in Africa, 6 or 7 in the Latin/Central American region. We have staff in 10 countries, and expanding.”

Daniel says Standard Bank is very aware that the bank is not a start-up company and runs very differently. As a result, it leaves the founders to do their own thing.

The main concern about getting a bank on board, says Rahil, was that “it’s an oil tanker and we are a speedboat”.

“That’s what they call us. And that’s what we are, and they are the largest bank in Africa. But they acknowledge it, so a lot of solutions that we deliver for them are a case of using us as a speedboat to deliver solutions rapidly. They are letting us thrive.

“It does come with some compliance requirements and some red tapes, but that’s not too bad. I know we are a fintech. We are agile in everything, but rules and guidelines do help give us the scale that we want.”

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