South Africa’s fintech companies share highs and lows of Covid-19 lockdown

South African fintech startups, partnered with AlphaCode, reveal how the country’s extended lockdown regulations have some adapting their finance strategy to secure financial growth. In contrast, other fintech startups share their challenges experienced during Covid-19 lockdown.

Head of ecosystem development at AlphaCode Andile Maseko said, “Mixed experiences are expected for our members, but those with a digital-first approach are benefiting the most. Those experiencing difficulties are evaluating product offerings to address the new normal better, but the uncertainty of the Covid-19 environment adds complexity to pivoting.”

 Make hay while the sun shines

Luno, a leading global cryptocurrency platform to four million happy clients across 40 countries and the no. 1 crypto platform in South Africa, has achieved record trading volumes in March with a 50 percent rise in the number of active users, month-on-month.

GM for Africa at Luno Marius Reitz said, “The high trading volumes indicate continued cryptocurrency investment by existing holders and entirely new investors entering cryptocurrencies for the first time.”

Franc, a digital investment platform that offers investors an affordable way to access money market and exchange-traded funds, has seen the most substantial monthly growth (25%) in terms of new investors.

CEO of Franc Thomas Brennan said, “Covid-19 has reminded people of the importance of having an emergency fund. With Franc, investors can get better returns than a bank without having to lock up their money in a fixed deposit.”

Tami Ngalo, the founder of Oyi medical card, a medical savings account, said: “We’ve had some challenges, but we managed to unlock opportunities from people being at home and hungry for digital. Our complete digital experience came through for us as we acquired 150 percent more customers last month.”

Worth is an ed-tech business that provides financial education to employees via an online training portal. Hayley Parry, the co-founder of Worth, said, “Because finances are such a significant source of anxiety for staff, we have noticed that online learning through our platform has increased significantly. Employees are using this time to take control of their finances. We have seen the highest course completion rates during the lockdown.” Parry added, “We also created a new course around Covid-19 – a financial shock course via webinars and an online short course for employees developed for a household that’s had a financial shock.”

Graham Rowe, who heads up Guidepost, a health and insurtech company that allows insurers to manage their diabetes risk significantly better said, “We have had one of our best months ever during April. In providing virtual and remote healthcare services, we have seen even more of an appetite from our customers, medical aids and pharmaceutical companies to get great healthcare services to people that they may access telephonically from their home. Patients who have diabetes are at a higher risk during this pandemic, and there has been an increase in willingness to engage with our nurses to improve the management of their condition.”

In reviewing these innovations in businesses, Maseko said that besides the digital-first approach, these businesses are also providing services that address the concerns around health and finance insecurities that consumers may have. Maseko added, “Solutions in these areas, as well as, contactless payments and credit may be the theme for at least the remainder of 2020 in the South African fintech space.”

Challenges faced during the lockdown.

Nicky Swartz, the founder of Spoon Money, a savings and lending platform providing loans at fair rates to female informal traders in South Africa, said that the lockdown has brought about immense challenges.

“Our clients are informal traders in township environments. They are deeply constrained in trading points, and where they can trade, there is a decrease in demand, which in turn negatively affects our revenue and planned growth. Like every other business, we have re-forecast the rest of the year by looking at the worst-case scenarios.”

Swartz added, “On the upside, we have automated processes and have tested for levels of digitisation in anticipation of growth post lockdown. We’re using the opportunity to engage with our clients to understand their immediate and medium-term business needs, and that’s opening our eyes to new possibilities.”

Idan Jaan is founder of Fundrr, alternative funding for small businesses, said the lockdown has brought about a financial setback.  He added, “We have had to cut salaries and operational expenditure to ensure that we can provide the relative payment holidays for our clients. Over 90 percent of our clients are on payment holidays which has taken a massive toll on our revenue. We are getting a lot of requests for funding and have accepted applications for businesses that can continue to operate during lockdown levels five and four.”

Fincheck is South Africa’s giant financial comparison site, as well as the most significant lead aggregator, having signed on 71 banks, lenders and insurers. CEO Michael Bowren reported that while some banks and insurers have tightened their belts and risk appetites due to a rise in default rates and employment uncertainty, others have remained open to new business and potentially more risk.

“The companies who have remained open are looking to take advantage of having ‘less competition’ during this period and move ahead with client acquisition,” Bowren said.

FundingHub.co.za, is a company that provides business loans to small and medium enterprises.

Business development manager at FundingHub.co.za Simon Purdon has noted a definite increase in business applications, particularly for purchase order funding and unsecured funding to cover cashflow shortages. Purdon said, “We have seen a reduction in lenders appetite to disburse funds due to uncertainty as to whether that business will make it through.”

Businesses are forced to pivot

Peach Payments is enabling South African businesses to promote their online commerce solutions and create innovative ideas during Covid-19. The company has seen a 400 percent growth in monthly customer acquisition since February.

CEO Rahul Jain said the challenges faced by local tech startups vary, but the most significant is declining demand. Jain added, “Tech startups in the travel, tourism, food and beverage sectors are hit quite significantly with revenues drying up. However, we see a massive push from SMMEs to embrace online sales and payments to supplement their existing business.

“Many are pivoting to new models. We’re seeing our merchants go from physical to online retail. We’re working with restaurants, coffee roasters, personal trainers, gyms, dieticians, among many others. People are now creating videos, lessons, food plans and sharing via email, WhatsApp, their websites and we help them to get paid digitally.”

Leonard Shenker, joint-CEO of walletdoc, which offers several payment options for merchants, said that he had noticed an increase in the demand for contactless (no-touch or remote) payment options.

“Businesses are implementing digital payment solutions to cater for a changed consumer engagement. These include payment links, a ‘pay now’ button which is easily sent to customers via SMS, WhatsApp or email enabling customers to settle via card immediately.”

“Because of the increased demand for delivery services, drivers can be equipped with mobile tap-to-pay enabled credit card machines, minimising contact. Another secure payment channel is equipping drivers and websites with QR codes,” he added.

Guidance

FundingHub has created a list of information about the different forms of relief available for SMME’s in South Africa on its Covid-19 resources page.

Dov Girnun is CEO of Merchant Capital, a company offering small business loans, explains that the pandemic has created chaos in an already weakened economy. He added, “Turbulence has always been the official climate for SA’s SMMEs,” he says, recommending that SMMEs embrace the situation and try to find opportunities in the chaos.

“This is the time businesses should be really listening to customers, relooking their cost structures and engaging meaningfully with their stakeholders. Chaos creates opportunities. Coronavirus is pressing a reset button in many industries, thereby creating a blank canvas for businesses that are agile, able to act fast and technology-enabled. These businesses without high costs and fixed overhead structures are best placed to take advantage of opportunities to get products and services out to market quickly. We saw it during the global financial crisis where these types of businesses arose: Instagram, Airbnb, Pinterest and Uber. These fintech entrepreneurs found new problems to solve and new opportunities by adding real value to the world,” concluded Girnun.

originally written in Disrupt Africa

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