Fintech or financial technology is disrupting traditional banking. It is the use of software solutions for financial transactions such as Google Wallet, Apple Pay, Wonga and M-Pesa and a myriad of other innovative solutions – see KPMG Best Fintech Innovators 2014. In 2014, fintech investment in the US tripled from to $9.89 billion with Europe investing $1.5 billion. Digital disruptors like Google disrupt because they are continuously looking at new services for their customers and how to use digital technologies to own more of the payment process. The banks know that this is where the real threat is coming from and are looking at ways to innovate.
To support this, Barclays Africa recently launched its first Tech Lab Africa Programme in Cape Town. As Ashley Veasey, Chief Information Officer for Barclays Africa says: ‘In order to compete, Barclays Africa needs to connect, shape and scale with these new industry players. We are looking for big, fresh ideas that promise to shake things up’. This follows on from both FNB and Standard Banks’ focus on innovation and their aim to work closely with tech entrepreneurs to find new transactional solutions. Fintech does not require banking infrastructure and the growth in mobile device usage is spurring on these solutions.
As part of the drive to develop fintech solutions in Cape Town, Cape Innovation and Technology (CiTi) recently launched BitHub to better understand crypto currency and the block chain which is the technology used in digital currencies such as Bitcoin. CEO Ian Merrington said, ‘There’s an enormous thirst for knowledge around crypto currency and the block chain and major banking groups are alive to the disruption that new technologies will have on their traditional business model’.
While the banking sector is looking for disruptive solutions for global markets, this is particularly important in Africa. McKinsey & Company projects around 80% of the continent’s population is not connected to formal financial services. In South Africa, our banked population has increased from 46% to 75% over the past ten years according to Finscope Survey 2014., but 27.9% of these are considered banked as a result of a SA Social Security Agency credit card and an additional 5.3 million South Africans are still financially excluded. With 81% of the excluded having access to a cellphone and South Africa’s mobile phone penetration at 133%, there’s a large untapped market for financial transactions via a mobile device and it’s great that Cape Town has a focus on developing these solutions.