The Fintech adoption rate in Africa is set to soar, with South Africa ranking third in future growth, after China and India. This is due to the presence of established Fintech firms and higher customer acceptance in the country. Partnerships between Fintech start-ups and conventional banks can advance the financial inclusion small to medium sized enterprises (SMEs) need for sustainable economic and social development.
With the spotlight on the role of SMEs in the South African economy, there are many products and services, which collaborations between Fintech and incumbent banks can bring to the sector. “Fintech start-ups are offering solutions to many of the problems faced by small businesses, such as cash flow concerns and insufficient funding,” says Daniel Goldberg, co-founder of Bridgement, a digital lender offering invoice financing and revolving credit facilities to SMEs.
“While some SMEs are hesitant to make the shift towards digital, the reality is that they no longer have a choice. By partnering with Fintech start-ups, banks can expand their client services to better serve small businesses,” says Goldberg.
Banks can leverage the strengths of digital innovation. Fintech has created new business models, applications and processes including peer-to-peer marketplaces, online lending, proactive financial alerts and robo-investing. Using the latest technology, banks and Fintech can work together to develop real-time, multi-channel capabilities that are highly personalised, contextual and more affordable.
In turn, banks can offer Fintech start-ups insight into the regulatory environment and access to a significant client base with whom the bank has developed relationships. Innovative thinking and cutting-edge technology combined with established customer bases and distribution networks produce a mutually beneficial relationship for banks and Fintech. “Partnerships can deliver better, cheaper, faster and more innovative solutions for customers,” says Goldberg.
Banks have largely overlooked servicing small businesses because they occupy a small portion of their income relative to consumer and large corporate banking. “Banks are reluctant to offer small business loans, because the costs involved in offering them don’t scale with the size of the loan. Larger businesses that take out bigger loans naturally end up being prioritised – they’re more profitable for the bank,” says Goldberg.
Using machine learning for credit analysis and decisioning to speed up their application, Bridgement’s first product to market has a record time of 90 minutes from loan application to money landing in an SME’s account. Registered companies who have been trading for longer than six months can access credit facilities from R10 000 up to R5-million. SMEs can apply in under two minutes on their website – www.bridgement.com.
