Fintech is booming in South Africa, where innovations ranging from AI-powered insurance tools to borderless crowdfunding platforms that are helping to unlock the continent’s economic potential.
Few places on Earth are evolving at the pace of Africa. According to the Organisation for Economic Co-operation and Development (OECD), Africa has over 480 million mobile money accounts – more than all other developing regions combined – and there are more than 500 African fintech companies making a mark on societies. By 2030, Africa’s fintech sector is expected to be worth $65 billion [£52.8 billion]. Today, financial service solutions are booming.
Much of this growth is occurring in South Africa. Whether providing cashless payment tools, AI-powered insurance or crowdfunding platforms shrinking the distance between investors and entrepreneurs, South African fintech start-ups are propelling the whole continent toward the next phase of its economic evolution.
Crowdfunding for the continent
Small and medium-sized enterprises account for a staggering 90% of businesses worldwide. But these essential enterprises often struggle to get the funding they need to grow. The IFC estimates that 43% of SMEs in developing nations have unmet financing needs totalling more than $5 trillion each year.
Sthembiso Zwane, co-founder of the equity crowdfunding platform GoGetta, thinks the key to helping African SMEs unlock their full potential can be found in a rapidly emerging space: crowdfunding. “Raising capital is particularly tough for African entrepreneurs, who [struggle] to get funding from traditional financiers, be it banks, angel networks or venture capital firms,” says Zwane.
With GoGetta, however, African entrepreneurs can tap into a global crowdfunding market expected to reach $90 billion-$96 billion by 2025.
Launched in 2022, GoGetta lets entrepreneurs showcase their businesses on a trusted digital platform. The start-up thoroughly vets every company it lists, which range from telecommunications social enterprises to fintech, adtech and mobility start-ups. Once they’ve been onboarded, investors the world over – including retail investors – can buy equity shares in them for as little as ZAR1,000 (about $50).
So far, GoGetta has raised ZAR14 million (about $736,280 ) and counting for African SMEs. But the work doesn’t stop at helping to democratise investments.
“What does life look like after you receive the money?” asks Zwane. “That story never gets told.”
GoGetta’s team works with the companies to grow over time, tailoring their services – ranging from accounting and structural support to legal help – and preparing each to exit in four or five years. “We don’t take majority stakes,” explains Zwane. “We’re here to get them to the VC funding level. We want to go with them until the training wheels come off. Whenever you feel you’re falling, there’s a wheel to lift you up.”
“SMEs are the key to prosperity throughout Africa,” he explains. “We need as many opportunities for sustainable investments as possible.”
Turning traditional insurance on its head
About a decade ago, long-time insurance professional Sumarie Greybe wondered if she should change careers. While she championed the benefits insurance offered societies, from decreasing out-of-pocket expenditures to boosting economic growth, she felt the sector was failing consumers.
Sumarie Greybe – image courtesy of Naked Insurance“Inherently, there’s a conflict of interest [in the way the industry functions],” she says. “If your bonus depends on keeping claims below a certain level, you will do everything you can to meet that mark.”
Alongside business partners Alex Thomson and Ernest North, Greybe set out to prove that insurance could be done differently. In 2018, the three launched Naked Insurance, an AI-driven app that provides usage-based insurance for cars, homes and valuables as well as automated roadside assistance, claims approvals and more.
Their company doesn’t make money like a traditional insurer, where profits depend on how much they pay out in claims. “We take a fee for service and the rest of the money goes into a pot to pay claims,” says Greybe.
By leveraging AI to develop their systems, they have not only made it easier to shop for insurance, but also kept costs low. Greybe says their third-party liability starts at just ZAR50 (about $2.50). “Most other [traditional insurers’] plans will be several times that much,” she says. “If you’re struggling to make ends meet, paying a lot for insurance just doesn’t make sense.”
According to Greybe, about 30% of those who buy Naked Insurance’s comprehensive car coverage have never had auto insurance – a notable figure in a country where up to 70% of vehicles are uninsured. Yet the most profound change the three are driving might revolve around a give-back programme they call “The Naked Difference.”
The company is legally structured so that, if it pays less in claims than expected each year, the excess funds go to causes chosen by customers. These range from early childhood development programmes to animal welfare initiatives.
“Insurance is about community upliftment,” says Greybe. “Sending additional money back into the community just made a lot of sense for us. It also aligns our incentive with that of our customer.”
Naked Insurance has so far contributed to community initiatives every year.
“The Naked Difference … aligns our incentive with that of our customer,” says Greybe. “We hope it will go a long way in restoring the trust relationship.”
Image courtesy of Naked InsuranceCreating a more inclusive financial future
From the rural US to parts of Europe, cash is still king in much of the world. That’s especially true in Africa, where most people live and do business in cash-based economies. In South Africa alone, there are millions of SMEs, but fewer than 40% of them are formalised, leaving them unable to access credit or process card payments.
Fintech start-ups like Yoco are trying to level the playing field for them.
In 2015, Yoco launched its first mobile card payment machines, allowing thousands of SMEs – cafés, hair stylists, street vendors, plumbers – to process cashless payments for the first time. According to Yoco’s CEO and co-founder, Katlego Maphai, 80% of its merchants had never accepted card payments, but now more than 150,000 customers trade on its platform each month.
“Small businesses are a critical engine of the economy. Any act of support for small businesses is an act of growth for South Africa.”
He adds: “We wanted to democratise access to card payments, and that’s what we did. The Yoco machines were affordable and accessible to anyone who wanted one. A business owner could have card payments up and running within a few days.
As card and mobile penetration increase across South Africa, Yoco’s mission is evolving. The start-up offers cash advances, instant access to money made using a Yoco machine and point-of-sale information on the Yoco app. In the future, Maphai wants to add sales insights to the app as well. Recently, Yoco released a fourth machine that doesn’t require magnetic stripe card payments – an industry first, according to Maphai, that “[introduces] an additional layer of security to protect both customers and consumers while bringing down the production cost of the hardware.”
But, Maphai says creating an inclusive economy requires more than technological advancements. With Yoco, he has organised events, sponsorships and workshops to create a network in which SME owners can learn from one another – lessons that can be applied in emerging markets everywhere.
“An important component of the transition from cash to digital payments will be financial education,” says Maphai. “Real growth comes from managing your money well – making smart decisions, taking calculated risks and being able to plan for the future.”
