OPINION: South African fintech in 2019: what can we expect?

Digital banks

The introduction of TymeBank, BankZero and Discovery Bank will only shake the industry and offer customers more choice. It will also force the banks in charge to respond by perfecting their value propositions for the client and user experiences. As a result, we expect more attention from traditional banks on their digital channels.

We also anticipate new players from other sectors: mobile network operators are releasing mobile money products that focus on payment offers. Other non-bank actors such as insurers and retailers will continue to advance in the banking space.

cryptocurrency

There was a lot of attention on the cryptocurrency given the meteoric rise of last year and then the fall in the price of Bitcoin. Some industry observers call it the death of a crypto. I'm not on agreement. There was undoubtedly a huge accident, but Crypto's current market capitalization is just under $ 150 billion. This may be small in terms of the global asset class, but it is not insignificant.

Cryptocurrency is here to stay. It is not clear if and when cryptocurrencies like Bitcoin will reach the peak of $ 20k again, but investing in criptos is a long-term investment trend and should not be considered in the short term. Tim Draper, one of the best venture capitalists in the world, remains confident about long-term cryptography. Smart money is still investing in this asset class despite volatility.

I think one of the positive results of the crash is the collapse of the initial coin offerings (ICO). Nearly $ 10 billion was raised through ICO in the first half of 2018, but a study by the ICO group's Statco consulting firm showed that over 80% of these were scams and investors lost large sums of money. money. With the collapse of the encrypted price, ICOs seem less attractive and I think this is a positive trend. Investing in a new asset class requires in-depth research, as many of those who lost a lot of money in ICO have discovered painfully last year. Thus, there is likely to be a significant reduction in the number of ICOs as a form of raising capital.

We hope to see also a reduction in the number of cryptographic investments and pyramid schemes, mainly driven by greed. Many have lost a lot of money. Crypto is a very volatile and risky and highly speculative asset class. Do not invest in it unless you really understand the technology and the asset class and, even in this case, do not invest too much. There is really no easy way to make money. If you decide to invest, make sure you buy, sell and store via trusted exchanges like Luno.

Regulators are also likely to become more involved in the sector: most have fintech and cryptocurrency working groups and are ensuring they have a good knowledge of the asset class.

Insurtech

We plan to continue to see activities in the Insurtech space. 2018 has seen many new, interesting participants such as Indie, Naked and Pineapple who are supported by large institutions. I think it's difficult for these niche insurers to scale quickly, but they expect these players to grow and new entrants to appear on the market. Players like Root Insurance make it much easier for new insureds to enter the market with their open API software supported by Guardrisk.

We can expect incumbent insurers to pay more attention to their digital offerings to compete with these new operators, and this is good news for consumers. We will also see non-insurance players such as mobile network operators, resellers and banks entering the digital insurance space.

Other savings products

We have seen the launch of robo-advisors like OUTvest that aim to attract younger customers through their digital offering and simplified investment process. Alternative savings platforms such as Easy Equities, which make investing in stocks easier, have grown. We expect to see more participants in this space like Akiba and Franc that increase their market share.

Focus on financial inclusion

In our recent AlphaCode Incubation initiative, which identifies South African financial services entrepreneurs with extraordinary ideas and activities that could impact the financial services industry, we have seen many companies attempting to solve the problem of financial exclusion and ways to provide customers with low income relevant financial products. These companies will gain traction in 2019 as they mature. Prospa, for example, provides a low-income savings product while iSpani provides access to marketing and sales for insurers in townships.

Innovative financing solutions for SMEs

Given the interest in the growth of the SA economy, it is imperative to build SMEs. Together with pressure for companies to transform their supply chain with the adoption of new BEE cards, we will see an increase in the number of financing solutions for SMEs that will enable black SMEs to gain greater access to the market. I am enthusiastic about models like Nisa Finance and InvoiceWorx that offer innovative offers for SMEs. I also think we can expect a shock of business banking in the SME market, as Capitec is moving into the SME space through the acquisition of Mercantile Bank. This is a turning point.

Other financing options

We have seen a number of international venture capitalists investing in SA fintechs in 2018, such as Yoco and Jumo. I think this is a positive trend that highlights the maturation of our local fintech industry and I believe we will continue to see the interest of international players. We will also see other local funding such as Naspers Foundry, which will be exciting for the fintech space. Banks in particular will start to see the successes of SA fintech.

Launch of Hot Fintech to watch in 2019

• Pineapple, a digital insurer, aims to reduce costs, maximize profits and discourage frauds in an effort to create more value from an insurance policy than the traditional model.
• Akiba allows you to track your savings goal, maintain concentration and get rewards for saving.
• The franc is the cheapest way to invest in South Africa. It allows stokvel members to invest for free in the money market and in exchange-traded funds (ETFs).
• Prospa is a savings platform for those who earn between R2000 and R8,000 per month.
• Nisa Finance is an invoice financing platform that allows financiers to issue secured loans from invoices to small businesses quickly and conveniently.
• InvoiceWorx is a stock financing platform that allows small retailers access to suppliers' credit lines.

Dominique Collett is a senior investment executive at Rand Merchant Investments and the head of AlphaCode

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