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The future of fintech

Even the most hardcore Luddite can't ignore the rate at which technology is changing South Africa's financial services industry.

Digital banks


In South Africa we will see Discovery Bank and CBA Tyme – both digital banks – start operating and it should be interesting to see how the market responds.

SME financing


Politicians and economists tell us that the economic future of the world is in the hands of small business owners. But financing in this sector is almost just as often mentioned as a major stumbling block.

It was a huge talking point in 2016 and SME finance will be a massive trend in 2017. Interesting funding models such as invoice and discount financing and digital lending models will continue to gain traction aided by rapid developments in technology.

The future of fintech

Bitcoin


In 2017, we will embrace Bitcoin after the world got hyped up on blockchain in 2016. I think banks will soon see that blockchain doesn’t really make sense and there will be a move back to Bitcoin – the largest and original application of the blockchain. The move to Bitcoin will be helped along by increased instability in governments. It is still far from becoming mainstream, but I expect to see more of Bitcoin locally.

Data analytics


A lot is said about big data and everyone is implementing technology that will gather huge amounts of data. But just having data has little purpose if you do not analyse it and use the results to your own advantage.

Advanced data analytics will continue as a major trend. We see many advanced data analytics startups globally and they are gaining traction. Institutions are beginning to understand that they need to work with startups to offer a service that they cannot build in-house. Advanced data analytics is used for credit scoring and insurance risk selection, but we will start seeing more applications for it.

Partnerships


Partnerships are an important aspect when we look at the growth of fintech. Banking and insurance executives are beginning to understand this, and we will start seeing more successful partnerships between the large institutions and the smaller fintechs.

Mobile payments


In 2015 the discussion was around card versus mobile phone payments, and many partnerships were formed around payment technology. Locally we have seen the rapid development of mobile phone payment solutions, but we won’t be ditching our cards any time soon. Smartphone apps linked to our cards will, however, change the nature of card usage, as customers get more comfortable using their phones for payments.

Price comparison websites


As more and more consumers become sensitive to price and service, price comparison websites will start to gain more traction. They are already huge in the UK, but not really in any other developed markets. South African consumers are becoming more aware of the lack of transparency around banking charges and interest rates. They are demanding more information on how much they pay, and they will rely on technology to supply the answers.

Robo-advisors


We will see robo-advisors become a buzzword and a mainstream product as big players launch their own robo-advisors. A surprising number of institutions already have this in advanced planning stages. It won’t disrupt the industry; it will merely become a new distribution channel.

About Dominique Collett

Dominique Collett is a senior investment executive at Rand Merchant Investments and the head of AlphaCode, a Rand Merchant Investments club for fintech startup entrepreneurs.

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