With Cyril Ramaphosa now having taken over from Jacob Zuma, all eyes are on whether the new president can breathe life back into the economy. 2017 was marred by downgrades and even a slip into recession and while the immediate attention will be on amending tax and spending, the long-term focus will be on the industries that have the potential to fuel growth. One such sector is fintech – a growing field in which technology is shaping the way we do everything from personal banking to trading on Metatrader 4 and shopping.
While fintech has grown massively in recent years – global growth was about 400 per cent between 2013 and 2014 alone – the potential in South Africa is particularly high. Indeed, the future adoption rate of fintech services is likely to increase by 71% in the coming years according to EY – well above the global rate of 52%.
EY’s Ashwin Goolab says the prospect of growth relies on the existence of an established network of fintech firms as well as ‘higher customer acceptance’ from a tech-savvy population that has already shown an acceptance and appetite for fintech.
EY released its Fintech Adoption Index last year and this study found that only India and China are expected to have a higher increase in their adoption rates. Both countries already lead the way in terms of current fintech use – with South Africa currently sitting in ninth just below Germany (and above the USA).
Eager customers and an array of companies help to promote fintech, but it’s expected that the amended Financial Intelligence Centre Amendment (FICA) rules, which came into force last year, should also help to boost this sector, helping to clamp down on money laundering, tax evasion and other financial crimes and generally help to give investors confidence that the country has cleaned up its act. As the year goes on, we will start to see how the new rules will have a practical impact on the way South Africans go about their business.
We can also see that the South African market is starting to latch on to the growing insurtech business (something that attracted a lot of attention within fintech circles in 2017). The likes of peer-to-peer company Fo-Sho and Cascade are starting to service this market. Indeed, Cascade was one of four fintech startups that awards one million Rand at the end of 2017 at a pitching event hosted by AlphaCode. Alternative credit scorer Commuscore, fraud insurance provider Investsure and SME advice service Everest Ventures also earned the investment – and all are good examples of the companies springing up to help drive the fintech boom.
Fintech, therefore, offers South Africa an opportunity. Despite economic difficulty in recent years, the foundations are in place for big growth in this sector. From online foreign exchange to cryptocurrencies, telematic car insurance, peer-to-peer investments and borrowing, spread betting and online budgeting and financial planning, South Africans can expect their money to get even more digital in the coming years. If the economy is to return to growth, politicians will need to do all they can to foster this trend.