Fintech is a multi-faceted umbrella term for a range of technologies that disrupt the way financial transactions take place in the world. These technologies are based on tech-savvy users who can make the most of the available features. As a company, you can include several of these fintech portals, integrations and applications in your fintech strategy as they open up new customer opportunities and revenue streams for you. From there, customer loyalty is about understanding the needs of those you are offering a product or service to.
The South African FinTech ecosystem.
It may come as no surprise to people in the start-up business that South Africa has a rich fintech landscape that can be broken down into certain categories, namely:
- Payment and transfer platforms
- Insurance and Risk
- Big data / AI / machine learning
- Savings and Investments
- Comparison solutions
- Digital B2B solutions
- Platform solutions
- Regulatory Technology or Regtech
A single company can use more than one of these categories to move its business forward by either streamlining its business. Opening up business to new markets; or simply find better ways to capitalize on financial resources by comparing supplier prices; Investing in other companies through a fintech platform; or leverage the capabilities of big data, AI, and machine learning to improve process automation and scaling.
There are structures within the fintech ecosystem that support the development of each individual company and thus each systemic offshoot. The three most important are investors, incubators and entrepreneurs. Depending on the nature of your business and how much you want to have in the finished product or service offering, you can be one of these. For example, if you are interested in the Payments and Transfers category, you can either start your own disruptive business. Note that in order to disrupt you absolutely need a unique selling proposition that is difficult to replicate or that you exceptionally do to the point where competition is minimal; or you can start a disruptive business. Incubation is more complex than starting or investing because, unlike money, it requires guidance, mentoring, and resources. It takes a lot of time and energy, and sometimes the companies in the incubator don’t even make it to market.
Where do you start with such a large selection of fintech products?
Start with easy-to-understand fintech and then graduate in the more complex environment.
As you begin your journey of integrating fintech into your business, you’ll be researching the above categories thoroughly. The best advice is to start with the fintech that is easiest for you to understand as you have less chance of losing money or sleeping on it. Once you know exactly which category to focus on, there are a few key companies that you should focus on and hedge your bets.
As appealing as it may seem to just endorse a horse based on its popularity or the fact that it is the easiest platform to use, it does not mean that it is actually the best. Even within the same category, choosing one platform over another has advantages and disadvantages. For example, in the Payments and Transfers category, SnapScan is one of the most popular technologies. A user downloads the SnapScan app, links it to their debit or credit card, and wherever there is a SnapScan mark (indicating that the merchant supports SnapScan) the user can take their phone, the QR code scan and go through a payment.
The entire USP of SnapScan in this case is the ease of use in terms of mobile integration with the QR code reader via the phone’s camera. A PIN will still be entered during the transaction to check the validity. However, all of this is done over the phone – a device that tucks in the customer’s pocket 99% of the time they shop. A customer forgets their bank card much more often in the car than a phone. This is the opportunity that SnapScan is taking advantage of.
As a company, you can add SnapScan as a complementary payment method to the other payment methods your company already has, most likely cash and card. And if you’re a retailer with an online store, there are other far more advanced platforms like PayU that are desktop based.
PayU is an online payment portal that allows you to get paid as a company without needing a merchant account with a bank. It prides itself on the fact that no paperwork is required – all you need is a website and a working shopping cart. PayU then offers you an integration document for using the API to enable payments via PayU on your website.
When customers reach the payment phase of their customer journey on your website, they click “Pay Now” and choose their preferred payment method. PayU processes it in the backend and the transaction is confirmed and completed. The amount paid by the customer is deposited into the company’s PayU account and can later be transferred to and withdrawn from a personal bank account.
SnapScan and PayU are just two examples of simple ways a company can use Fintech now and spot differences almost immediately. To dispel the confusion about which fintech platform is really good for your business and which is only costly, you need to equip yourself with the knowledge of the entire fintech landscape and its impact on your business. There are online courses in fintech that provide the building blocks for those ready to envision a future where financial transactions take place in a multitude of ways.
Again, when it comes to the other fintech categories, it depends on what industry you are in. You should then do a feasibility study to see if it makes financial sense to include any of the technologies in your fintech strategy.
Look into the future of fintech.
In the digital world, platforms are based on protocols. HTTP is the Internet’s standard information protocol and blockchain technology is touted as the “trust protocol” of the fintech of the future. It is believed that blockchain will lead to new business models using the Leger distributed network protocol on which it is based. It is extremely difficult to edit the leger without first undoing every previous block of data that preceded the current block of transaction. In fact, you need extremely powerful computers that work almost around the clock to break down a new block in the chain.
The advantage will be in banking, as the decentralized and distributed nature of the blockchain layer means that networks are not exposed to the same risks as centralized databases. Even a targeted hack of such a distributed database would not affect the entire functionality of the layer.
Time will tell if existing financial institutions will embrace this technology as quickly as it is embraced and used by smaller, disruptive fintech companies. It used to be believed that some banks were “too big to fail”. However, recent history has proven that this assumption is wrong. Fintech will take over the traditional banking business in the not too distant future.