Africa’s fintech future | ITWeb
“In the last decade, fintech has gone mobile,” explains Ahmed Gani, head of innovation and DevOps – collections and payments at Altron FinTech. “Many of the transaction types and interactions have moved toward a mobile entry point.”
While payment flows are typically defined by a country’s economic needs, they are typically performed by third-party fintech apps. “Each country has its own payment flow that they use. Some are universal, like Swift or Visa and Mastercard card transactions,” adds Gani. “The SADC regions are pushing towards having shared payment flows among them and many fintech companies are trying to take advantage of that.” For countries that want to tap into different payment streams but don’t have the right infrastructure in place, fintech apps are not only convenient, they also provide an entry point.
“We saw a big shift as soon as cell phones became as powerful as they are,” he says. Apart from scenarios that require physical devices – such as point-of-sale transactions or cash withdrawals – fintech is software, rather than hardware-dependent. “So while there is a cost, it doesn’t require renting infrastructure. With fintech gravitating towards mobile, your barrier to entry in Africa is not the same as for other functions or other businesses,” says Gani.
Traditional financial services are banking related. They consist of a four-party model: merchant, account holder, acquirer and issuer. “It’s not written in stone, but everyone recognizes that these four parties are usually involved in every transaction. But the way the world is changing, he says. African FinTechs are disrupting the market by leveraging a functionality that was once exclusive to banks and exposing it to customers or merchants in a different way. “They also aggregate a lot of transactions. The fintech itself will act as an aggregator of transactions for other companies and then do the settlement and processing under their specific banner,” explains Gani. “They give smaller merchants an opportunity to operate within the fintech space, but without having to go through the heavy paperwork from the bank – they act as aggregators themselves.”
Africa faces a unique set of challenges related to infrastructure, such as electricity and running water, access to cash and more. Because fintech is a key part of unlocking sustainable development, the result has been that the sector has adopted a start-up model with agile implementation.
“Some of Africa’s challenges require a unique set of solutions that you don’t get anywhere else in the world,” he adds. “One of the key factors for sustainable development is to get small and medium-sized enterprises and entrepreneurs up and running. This cannot be done without fintech companies.” For these types of businesses to work, they need to be able to collect payments in exchange for goods. “They used to depend on banks and other types of organizations … and if there’s no infrastructure or existing set-up, it wouldn’t happen in the first place,” says Gani. “With the advent of fintech, the barriers to entry for these small businesses are lower. You can have a small POS system, you can charge money, have an inventory management system and do card transactions – and all of this can be done with a very small footprint and get it up and running quickly.”
According to Gani, it can take less than a week to set up an entire transaction processing infrastructure for a small business. However, these fintech solutions are dependent on power and connectivity. “I wouldn’t say ‘always on,’ but at least enough to sync. Fortunately, fintech data is usually in small packets, so you don’t need a massive connection to run anything – just a stable connection to get the transaction through, he says. That said, Gani finds stability of the connection a concern. “We also find that many of our devices, and other assets we put on the ground, need to have power.”
From South Africa’s widening deficit in electricity supply to Mozambique’s underdeveloped transmission and distribution network, and Botswana’s power outages due to plant failures, there is a negative impact on the availability of connectivity. “And these challenges must be overcome to reduce barriers to entry and encourage growth,” says Gani. But through innovative fintech solutions, people are finding ways around these challenges. “We have a lot of talent in Africa, we just have to unlock it and nurture it. I think that’s our biggest challenge on the continent as a whole,” he concludes, “is that we have the talent and the capacity, but we have to build our own scarce skills.”
