The African continent is poised to experience its next big growth phase. While previous growth phases on the continent – which helped birth the ‘Africa Rising’ narrative – were fuelled by the continent’s natural resources and young population, this one will be driven by financial technology, or fintech.
That’s according to Karl Westvig, CEO of Retail Capital, a company which specialises in providing funding to Small and Medium-sized Enterprises (SMEs).
He’s got a point too. Africa has long been a pioneering force in fintech, with Kenya’s MPesa showing the impact of combining mobile and financial technologies.
That legacy hasn’t slowed down either. According to a report from Disrupt Africa, almost a third of funding raised by African startups in 2017 was in the fintech sector. Given the low number of people with access to traditional banking across the region, fintech could unlock the continent’s true economic potential.
Outside of Africa’s general fintech trends, Westvig has seen first-hand how powerful it can be in unlocking a business’ potential.
At surface level, Retail Capital has seen its traditional SME-funding business made more efficient through digitising processes. But for Westvig, fintech is about more than simply digitising financial service processes.
“Our definition of Fintech extends to building the digital rails which accommodate a seamless customer experience, from real-time application and approval to contracting electronically,” says Westvig. “Traditional lenders are improving processes by collecting and using data digitally and also automating processes, but unless they can do it at scale, in real-time with minimum fuss from the consumer, it isn’t really Fintech.”
Retail Capital has applied this definition of Fintech to its own partner model. This model has seen it team up with payment players such as Yoco, iKhokha, and SureSwipe to provide funding to their customers. This funding process, Retail Capital says, is fully integrated into the systems of these payment players so the customer has a seamless experience.
Doing so has allowed it to provide pre-approved offers, a realtime mobile application, a digital contract and same day disbursement. Moreover, Westvig points out, the model allows SMEs applying for funding to have a contract in as little as 30 seconds, “providing them access to funding that is not available from the traditional banks”.
So successful has this approach been that Retail Capital has attracted funding from three development finance institutions (DFIs), including Developing World Markets. While Retail Capital can’t put a specific number on how much each of the DFIs has invested, the average international funder is putting in between US$2-million and US$5-million per funder.
Further confirming Westvig’s conviction that fintech will have a major impact on Africa’s economy was the content at the recent AFSIC (African Financial Services Investment Conference). Believed to be the largest Africa investment event taking place annually in Europe and one of the most important Africa investor events globally, this year’s them was “Fintech in Africa”. Given the high-level investment discussions which take place at AFSIC, this clearly demonstrates how much of a future fintech has in Africa.
But how can SMEs take advantage of this increased interest and acquire funding?
According to Westvig, one of the best ways to do this is for companies to prove interest in their business model from the continent’s mobile network operators (MNOs).
“The MNOs are critical to the success of Fintech and Financial Services in Africa as they have transaction information, mobile data as well as the rails to disburse credit and collect credit through the wallet,” says Westvig. “As the platform to get to the customer, they are constantly being approached by Fintech operators to tap into their network to provide financial services”.
Grab their attention, in other words, and you’ll find it much easier to bring funders onboard.
“Fintech in Africa is alive and well,” says Westvig. “With the right backing, it has the opportunity to completely transform Africa”.