Many South Africans know of TymeBank, the new kid in banking that shook the industry when it launched a zero-fee account earlier this year.
In the insurance space, the likes of Naked Insurance, Pineapple and Click2Sure are likely to ring a bell to most people. And those who frequent pop-up stalls may be familar with Snapscan and Yoco payment devices.
But there is a sea of fintech startups that most people don’t know about. They are challenging the status quo in banking, payments, investments and insurance and are turning some of these industries’ fundamentals on their heads.
The 2019 Rand Merchant Bank’s SA Fintech in Motion Report says while retail banking and insurers have seen the most fintech disruption, investment banking and capital markets are starting to feel the winds of change too.
It’s impossible to keep track of, or name, all under-the-radar players - however many there may be. But here are four that are doing some notable work.
This on-demand car insurance startup is one of the fintech companies that were each awarded R2m grant and support packages by AlphaCode, the incubation programme backed by Rand Merchant Investments. It’s in the same programme that the likes of Livestock Wealth - a crowdfunding platform for farmers - and stokvels administration platform, Stokfella, also graduated.
OkGo.live is targeting old car owners who can’t afford insurance. Like Naked, it will allow consumers to activate cover when they need it. But the interesting part is that it will be using second-hand and refurbished car parts to repair cars that have been in accidents to further push down the cost of car insurance.
The People's Fund
This is a platform that allows ordinary people and investors to back experienced entrepreneurs who have secured contracts but don’t have money to begin the work. It goes a step further than invoice-backed financing by taking a leap of faith on business owners at the start of their new projects.
One of the co-founders, Luyanda Jafta, says the fund was established after spotting a gap in the financing of SMEs, especially those who have secured government contracts as banks are sometimes reluctant about projected cash flow from state tenders.
The People’s Fund doesn’t charge the SMEs interest. Instead, its investors get a pre-determined share of the profit that the project they are financing generates. Initiatives like the People’s Fund are encroaching into the space of private equity but with shorter lock-in periods for investors.
Another recipient of the AlphaCode funding this year, Isiduli will soon provide development credit to aspiring township landlords to build backyard rental stock.
Anyone who lives and frequently visits townships would know what a booming business backyard lets have become. Statistics SA’s 2018 General Household Survey showed that about 671 000 households in the country lived in formal backyard dwellings, while almost another million lived in informal backyard structures.
These were just people living in backyards of formal houses, not shacks in informal settlements. Isiduli has realised the massive potential of this market and could potentially take away some of the banks’ unsecured lending market.
Blockchain pilot in Khayelitsha
Unlike the other three, this probably falls more in the regtech space: it’s a pilot and it’s not-for profit.
The initiative, driven by three organisations, namely the Centre for Affordable Housing Finance in Africa, research consultancy 71point4 and Seso Global, is SA’s first blockchain-based property register.
Apart from recording government-subsidised houses that have not yet been registered on deeds registry; the platform is also helping to facilitate formal house sales in the township, ensuring everything is on records.
The intervention should help solve the headache of informal house trading in townships which, according to 71point, has often left buyers with no recourse when previous owners who sold their homes in the informal market come back to demand more money when house property values appreciate.