‘Grandfather of fintech’ talks about the digging secrets…

A serial entrepreneur, an accidental banker and an early disciple of the internet’s transformative power, Christo Davel wears the label “grandfather of South African fintech” with pride.

Davel was drawn into banking in the late 1990s, leaving dental school too early to start the business, and had started several businesses before coming across insurance.

“I was manufacturing automotive components and exporting them to the United States,” Davel explained. The Rand was strong at the time, so young people with a bit of brass in their pockets could do such things.

“Then one of my friends at a brokerage suggested I stop by to see what they do.”

So he fell into investment consulting and insurance brokerage in the 1980s. Clients and advisers still visited each other, but while on holiday in the UK – where insurance was sold on TV – he realized: “You don’t have to pay the insurance broker. You call in and they can do the rest.”

Old Mutual Direct

That was the trigger for Davel to start a direct insurance business, which Old Mutual helped incubate before buying it as Old Mutual Direct in the late 90s. It was his first foray into fintech and algorithms.

“I also realized how challenging it is for a successful business to change the way they distribute their products, especially in financial services.”

In 2001 he left Old Mutual to start 20twenty – SA’s first online retail bank with easy digital banking, low transaction costs, low interest on loans and higher interest on savings.

Davel focused on the interface – the customer experience – to ensure it was very simple. “I managed to get the most amazing group of people around me and we used Saambou bank as our licensee.”

He had to convince customers that it was possible to bank without a bank building. Within a year, they had more digital customers than the big four banks combined.

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“In 2002, there was a fairly large bank consolidation for second-tier banks. BOE was bought out by Nedbank. Perm and NBS disappeared. The only second-tier bank that was put into receivership was Saambou.”

Davel realized he had to find a sponsor bank to replace Saambou within a week.

“It was the most incredible story. Our customers formed 20twenty fan groups. There were newsletters where customers were asked about the fan clubs and they said they wanted to keep 20twenty alive. They said to the curator, ‘You have to help these guys … it is the best banking experience we’ve had’.

“I ended up selling 20twenty to Standard Chartered Bank and none of our customers lost money. They did not care about Saambou’s troubles; they just wanted to know where their money was.” He had learned that it was not just about the technology, but about the customer experience.

Davel was head of consumer banking at Standard Chartered in South Africa for two years, but says he was “too young and arrogant” to fit into the corporate culture.

Direct transaction

In 2021, he joined Direct Transact — South Africa’s first provider of SaaS solutions (software that enables data to be accessed via a web browser) to banking and financial services. The company serves 70% of the clearing and settlement banks in the country, is a major VISA processor and processes more than R40 billion in transactions a month.

Davel decodes the jargon, explaining that they offer banking as a service. “That means the whole front-to-back process – from when the customer enters their bank account online, to all the processing, down to the settlement with other banks and the Reserve Bank overnight.”

Hennie Dreyer and Anthony de Gray Birch, Direct Transact’s founders, were executives at Saambou and bought the technology from the Saambou trustee, took out second mortgages on their properties, and started their business to enable second-tier banks to do banking without a sponsor bank.

“It’s come full circle for me … I’ve found myself back in the saddle with two guys I met more than 20 years ago.” DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available nationwide for R25.