Fintech is the term used to refer to innovations in the financial and technology crossover space, and typically refers to companies or services that use technology to provide financial services to businesses or consumers (Sraders, 2019). Any company that provides financial services through software such as the internet, mobile services or the cloud is a Fintech company. Simply put, Fintech is a digital financial infrastructure.
For many years financial institutions have built payment systems that are gradually becoming obsolete since the disruptive phenomenon that is fintech took the fore. For the past three years we have seen a rise in virtual currencies, distributed ledgers and decentralized protocols coming through fintech startups led by young entrepreneurs who better understand the millennial digital market.
For today’s digital crowd, the world is flat and goods can be bought and sold from anywhere around the world with a simple tap of a button on a phone or a PC and be delivered to your doorstep in just a few hours. In South Africa the demand for new, digital solutions for more flexible financial transactions has been driving the South African Fintech companies forward, putting Fintech startups at the top of the industry with the most funding in all of Africa and the world is taking note.
According to Finextra, most of the fintech startups in South Africa are concentrated on the five major banking functions: payments, capital raising, deposits, lending, investment management, and market provisioning (Rabin, 2019). We are however still slacking on the other fields of fintech such as wealth management and investment but we are hopeful. South Africa is on an innovative marathon and soon innovative solutions to tackle bigger markets will emerge.
Existing financial institutions can benefit from working with startups, with the one providing stability and a bigger platform for the other to function profitably and the other providing new industry insights and innovative solutions for the other to keep its head above the water.
Now the call is for banks to fall into the fold and actively step into the Fintech space.
“Financial institutions must be able to deliver an easy to navigate, a seamless digital platform that goes far beyond a miniaturized online banking offering.”
– Jim Marous
A famous Zulu saying goes “Nala kungekho Qhude kuyasa,” directly translated the saying is ‘even where there is no rooster, the sun rises.’ This proverb teaches us that change will come whether or not we are prepared for it. However, while there has been a huge buzz and excitement in the general public about Fintech, many banks have simply dismissed the movement. Fin-tech is not only about technological integration with Finance, it is also the success propellent in the market of these changing times. For financial companies to succeed they must implement some changes by moving from traditional financial service practices and adopting a more customer centric system that will keep them relevant.
Our current state of industry is in desperate need of change as most people have very little faith in their banks and around 33% of South Africa’s adult population, according to FinMark Trust, has no access to banks and are living on payslip to payslip. These people need financial services more but they have very few and very expensive options.
Instead of financial institutions viewing Fintech as either a threat or a passing fad, they could leverage this change by either merging and investing in Fintech startups or developing new technologies that can help them better service their customers while cutting huge banking costs for all stakeholders. Imagine a bank that caters for the individuals specific needs, while cutting costs and improving customer experience.
Tech service delivery is on the rise and we have a good opinion that no man should be left behind. Fintechs positive impact on society is undeniable as it is increasing industry competition, reducing prices paid by customers and is providing services for customers whose needs aren’t being met by traditional banking. For those of us who have not hopped on the fintech train, now is the time. Get ready for the sun even before the rooster crows.