Forbes2021-86

Nigeria’s Fintech Frenzy: Onwards And Upwards

Sweden-based Klarna is Europe’s biggest privately held fintech company with 4,000 employees and a $31 billion valuation, pumped up by investors like Softbank, General Atlantic and BlackRock. The company has become elephantine in such a short time by offering customers the ability to make purchases and pay later, making money by charging merchants to utilize Klarna’s payment technology. Today Klarna names a new investor: rapper, designer and producer A$AP Rocky.&nbsp;



“It’s a radical way to approach the crediting system,” says Rocky (real name Rakim Mayers), 32. “It helps people with financial literacy.”



In addition to the company’s tremendous growth, Rocky was motivated to invest in Klarna from his own experiences growing up in Harlem. He notes the difficulties making payments, especially on student loans with interest, for people from low-income backgrounds. “You’re setting yourself up for financial debt,” he says. “There’s no system that helps us deal with things when it comes to student loans, the IRS, banking or credit.” He describes Klarna as a “layaway plan” at a global scale.



This is a new chapter in the “funny history” (Rocky’s words) between the performer and Sweden. In August of 2019,&nbsp;<a href="https://www.forbes.com/sites/isabeltogoh/2019/08/14/aap-rocky-found-guilty-of-assault-handed-suspended-sentence-over-stockholm-brawl/?sh=24f16c994ebf">Rocky was released</a>&nbsp;back to the United States after the country held him in pretrial detention—on an assault charge—after a post-concert fight in Stockholm. Rocky’s cause sparked international outrage, fueled in-part by then-President Donald Trump, who lashed out on Twitter to advocate for the rapper’s release and return to the U.S.&nbsp;



Now, reclaiming his relationship with Sweden as an investor in one of the country’s most significant companies, Rocky (who starred on the&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2016/02/09/aap-rockys-sequel-a-cash-prince-aims-for-the-fashion-crown/?sh=4c5f206a6052">2016&nbsp;Forbes&nbsp;30 Under 30 cover</a>) will curate upcycled and vintage fashion experiences in the Klarna smartphone app.&nbsp;



For Klarna’s&nbsp;<a href="https://www.forbes.com/profile/sebastian-siemiatkowski/?sh=599119366e25">billionaire CEO and cofounder Sebastian Siemiatkowski</a>, bringing Rocky to his cap table is a strategic brand move. Klarna prides itself on being the anti-bank bank: its color is bubblegum pink and it rans ads in major cities with investor Snoop Dogg surrounded by Afghan Hounds. “We’re a very diverse group of people with over 50 nationalities represented, speaking multiple languages that have a very different approach to business,” says Siemiatkowski. “We wanted our brand to represent that—to represent approachability and availability. We also did want to add a portion of fun to it.”&nbsp;



The company’s trajectory has been anything but relaxed. Making the bulk of its revenue from charging merchant fees between 3 and 7%, revenue grew 37% from 2019 to 2020 to $1.2 billion. Klarna has over 90 million active users around the world who make an average of 2 million transactions per day with over 250,000 merchants like Nike, Amazon and Sephora.







Buy now, pay later, however, has led to backlash by critics who say Klarna encourages overspending. “A decade on from the financial crisis, a new generation—some of whom were barely out of primary school during the last credit crunch—is being courted by new types of lenders who are rewriting the language of debt for the Instagram era,” said the&nbsp;<a href="https://www.ft.com/content/8c751ac6-bb63-11e8-94b2-17176fbf93f5" target="_blank" rel="noreferrer noopener">Financial Times</a>&nbsp;in 2018 of Klarna.&nbsp;



The company insists it’s an antidote to the credit system. A representative for Klarna says: “Each new transaction is evaluated before it gets approved, and we have limits in place on how much shoppers can spend when using our services. Every time a customer makes a transaction using Klarna, we reassess their ability to repay and evaluate if the payment option they wish to use is suitable for them at that time.” They also note that customers are banned from using Klarna until their outstanding balance has been paid. The company also rarely charges interest to customers, unlike creditors.



For all these reasons, Rocky believes Klarna is his best investment yet. “I’m really hands-on involved,” says Rocky. “It’s a no-brainer.”



By Alexandra Sternlicht, Forbes Staff

2019 Rolling Loud LA

A$AP Rocky Becomes The Latest Investor In $31 Billion Fintech Platform Klarna

Stay-at-home consumers and stimulus checks have been a boon for online installment financing, digital banks and day trading.



In 2015, Nick Molnar was living with his parents in Sydney, Australia, and selling jewelry from a desktop computer in his childhood bedroom. Hocking everything from $250 Seiko watches to $10,000 engagement rings, the 25-year-old had gotten so good at online marketing that he had become Australia’s top seller of jewelry on eBay, shipping thousands of packages a day.



That same year, he teamed up with Anthony Eisen, a former investment banker who was 19 years his senior and lived across the street. They cofounded Afterpay, an online service that allows shoppers from the U.S., U.K., Australia, New Zealand and Canada to pay for small-ticket items like shoes and shirts in four interest-free payments over six weeks. “I was a Millennial who grew up in the 2008 crisis, and I saw this big shift away from credit to debit,” the now 30-year-old Molnar says today. Either lacking credit cards or fearful of racking up high-interest-rate debt on their credit cards, Molnar’s generation was quick to embrace this new way to buy and get merchandise now, while paying a little later.



Five years later, Molnar and Eisen, who each own roughly 7% of the company, have become billionaires—during a pandemic. After initially tanking at the start of lockdowns, shares of Afterpay—which went public in 2016—are up nearly tenfold, thanks to a surge in business tied to ecommerce sales. In the second quarter, it handled $3.8 billion of transactions, an increase of 127% versus the same period a year earlier.



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<h3 class="has-text-align-center has-vivid-red-color has-text-color">Buy Now, Pay Later</h3>



<blockquote class="wp-block-quote">After a steep drop in Afterpay’s stock in March, the eCommerce boom and credit card-weary Millennials have propelled the installment payment company’s stock to record highs, nearly doubling its value in six months.</blockquote>



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They are not the only ones whose fortunes have taken off in the last few months. According to Forbes’ analysis, at least five fintech entrepreneurs including the two Aussies have been vaulted into the billionaire rankings by the pandemic. Others include Chris Britt, founder of digital bank Chime, and Vlad Tenev and Baiju Bhatt, the co-CEOs of “free” stock trading app Robinhood. Several other founders from such companies as Klarna and Marqeta have also gotten boosts and are suddenly approaching billionaire status.&nbsp;



As in other sectors, the Covid recession has created both fintech winners and losers. For example, LendingClub, which offers personal loans to higher-risk consumers, laid off&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/21/lending-club-is-laying-off-460-employees-or-30-of-staff/#4ddcb1bc3c7e">30% of staff</a>; small business lender On Deck was sold in a&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/05/11/fintechs-for-sale-post-covid-its-partner-or-perish-for-many-startups-heres-a-buy-list/#2747c79f6b3b">fire sale</a>.



But for a sizable crop of consumer-facing and payments-related fintechs, the virus has delivered a gust of growth, just as it has for e-commerce behemoth Amazon and&nbsp;<a href="https://www.forbes.com/sites/greatspeculations/2020/09/14/zoom-docusign-okta-work-from-home-stocks-poised-for-further-gains/#76e7336611b2">work-from-home players</a>&nbsp;Zoom, Slack and DocuSign.&nbsp;



“Consumer fintech adoption was already strong pre-pandemic, especially among the 20s to early 40s age group,” says Victoria Treyger, a general partner who leads fintech investing at Felicis Ventures. “The pandemic has become a growth rocket, fueling the rapid acceleration of adoption across all age groups, including 40- to 60-year-olds.”



Several Covid-driven developments are helping specific types of fintech players. For example, consumers’ shift to more online spending and delivery services is a boon to certain companies powering payments. Marqeta, a specialized payments processor whose clients include Instacart, DoorDash and Postmates, has been in talks to go public at an&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/07/17/pandemic-power-payments-company-marqeta-could-fetch-8-billion-in-ipo-doubling-value/#3a7e25491c9e">$8 billion valuation</a>, four times&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2019/03/26/it-took-three-tries-but-this-entrepreneur-transformed-his-struggling-startup-into-a-2b-unicorn/#4cdfdd23706d">what it was valued at in March of 2019</a>. That would give CEO Jason Gardner, who owns an estimated 10% of Marqeta, a stake worth $800 million.



Meanwhile, the $2 trillion-plus CARES Act Congress passed in March, with its $1,200 per adult stimulus checks, student loan payment holiday and (now expired) $600 a week unemployment supplements, helped many Americans keep financially above water—and some digital banks like Chime to prosper. 



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<h3 class="has-text-align-center has-vivid-red-color has-text-color">Debit It!</h3>



<h4 class="has-text-align-center has-white-color has-black-background-color has-text-color has-background">Spending on the travel and luxury items U.S. consumers typically put on credit cards has fallen with the pandemic, while spending on debit card necessities is up.</h4>



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In the second quarter of 2020, amid Covid lockdowns and fears, consumers slashed spending on travel, restaurants and luxury items they usually put on their credit cards, but continued to spend on necessities and smaller items—the sort of things they’re more likely to pay for with debit cards. During that quarter, Visa credit card transaction volumes were down 24% from the year before, while debit card transactions were up 10%, according to research firm MoffettNathanson. And debit cards (rather than checks or credit cards) are the spending vehicle most frequently offered by fintech neobanks like SoFi, Dave and MoneyLion.



San Francisco-based digital bank Chime, in particular, has used the stimulus payments to its advantage. In mid-April, about a week before the $1,200 government-stimulus checks started hitting Americans’ accounts, the company&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/09/digital-bank-chime-now-offering-stimulus-check-advance-to-100000-users/#40758dfb1c10">advanced customers that money</a>, eventually extending over $1.5 billion. “Following the stimulus advance, we had the largest day for new enrollments in the history of the company,” CEO Britt reports.



The pandemic has depressed total consumer spending, and the unemployment rate remains at a high 8.4%—two factors that affect Chime’s middle-income customer base. Yet on a per-user basis, “average spend per customer is up over last year,” Britt says. “Part of the reason for that is the government programs around stimulus payments and unemployment.”&nbsp;



Today, Chime’s annualized revenue is running at a $600 million rate, according to a person familiar with the private company’s numbers. At its eye-popping new valuation of $14.5 billion announced along with a $485 million fundraise in mid-September, venture capitalists are valuing the company at 24 times its revenue. Some investors are asking if Chime should get such a lofty value when Green Dot, a publicly traded fintech that offers checking accounts and prepaid debit cards for low-income customers, trades at two times revenue. “We really look more like a payments-processing business,” answers Britt. That’s because virtually all of Chime’s revenue comes from interchange—the fees merchants pay when Chime’s users swipe their debit cards. The company doesn’t make money on interest through its new secured credit card (that’s a starter card where the holder puts up money to cover his or her credit limit), although Britt says he doesn’t rule out lending in the future.&nbsp;



Now Britt himself has sailed into the “three comma club.” Forbes estimates his Chime stake is at least 10%, meaning his holdings are worth $1.3 billion-plus (Forbes applies a 10% discount to all private company holdings). And he’s planning an IPO. “Over the next 12 months, we have a number of initiatives to get done to make us even more IPO-ready,” he says.&nbsp;



<div class="wp-block-image is-style-default"><figure class="alignleft size-large is-resized"><img decoding="async" loading="lazy" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg" alt="" class="wp-image-47930" width="286" height="360" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg 812w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-300x379.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-600x757.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-238x300.jpg 238w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-768x969.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1218x1536.jpg 1218w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1624x2048.jpg 1624w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled.jpg 2029w" sizes="(max-width: 286px) 100vw, 286px" /><figcaption>Robinhood Co-Founder and Co-CEO Baiju Bhatt. (Photo by Steve Jennings/Getty Images for TechCrunch)</figcaption></figure></div>



Then there’s the Robinhood phenomenon. The boredom of being stuck at home, wild stock market swings, and government stimulus checks have turned some Millennials and Generation Zers into day traders and options players. Robinhood’s most recent fundraising round in September gave it an $11.7 billion valuation and its cofounders a paper net worth of $1 billion each. But considering Morgan Stanley’s $13 billion February acquisition of E-Trade and Schwab’s earlier purchase of TD Ameritrade for $26 billion, some think Robinhood could garner a $20 billion valuation if it went public or were acquired. 



If there’s one fintech segment that has been an unalloyed pandemic winner, it’s the business Afterpay is in: online point-of-sale installment financing. It’s benefitting from both consumers&#8217; shift to online buying and their reluctance, in these uncertain economic times, to take on new credit card debt.



While Afterpay’s Nick Molnar and Anthony Eisen hit billionaire status in July, their competitors aren’t far behind. Take Klarna, which was founded in Stockholm in 2005 and entered the U.S. market in 2016. Two of the three founders, Sebastian Siemiatkowski and Niklas Adalberth, met while flipping patties at a Burger King in Sweden. They pioneered the buy-now, pay-later model in fintech, calling it “try before you buy” and letting people own products for 30 days before making their first payment. (That’s a lot more attractive than old-fashioned layaway, the store system once popular for Christmas gifts and large appliance purchases, in which buyers had to make all their installment payments before getting an item.)



Klarna charges retailers 3% to 4% of each transaction—slightly lower than the 4-5% Afterpay charges—to offer its service. One key difference that separates the two companies: Klarna is becoming a full-fledged financial services business. It became a licensed bank in Sweden in 2017 and offers longer-term financing of up to 24 months, with interest charged, for high-ticket items like laptops sold through a small number of retailers. Siemiatkowski has already turned Klarna into a digital bank in Europe with a debit card for spending on everyday purchases. He’ll likely do the same in the U.S. soon.



<div class="wp-block-image is-style-default"><figure class="alignright size-large is-resized"><img decoding="async" loading="lazy" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg" alt="" class="wp-image-47928" width="350" height="233" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-2048x1365.jpg 2048w" sizes="(max-width: 350px) 100vw, 350px" /><figcaption> Co-founder and CEO of Klarna Sebastian Siemiatkowski . (Photo by Noam Galai/Getty Images for TechCrunch)</figcaption></figure></div>



The pandemic has catapulted Klarna’s business onto a steep trajectory. By the end of 2020’s first half, its U.S. customer base hit nine million, up&nbsp;<a href="https://www.klarna.com/assets/sites/15/2020/08/27060125/Press-release-Klarna-interim-report-January-June-2020.pdf" target="_blank" rel="noreferrer noopener">550%</a>&nbsp;from the same period the year before. Globally, 55,000 consumers are downloading the Klarna app every day, more than two times last year’s pace. Klarna is now available in 19 countries, has 90 million users and expects to bring in more than $1 billion in revenue this year. When it raised a new round of funding last week, its valuation nearly doubled from a year ago, hitting&nbsp;<a href="https://www.klarna.com/international/press/klarna-announces-650m-funding-round-to-further-accelerate-global-growth" target="_blank" rel="noreferrer noopener">$10.7 billion</a>.



Cofounder Victor Jacobsson has a 10% stake, while Siemiatkowski’s has 8% in the still-private company. (Niklas Adalberth retains just 0.4% after selling some shares to fund his philanthropic organization and investing in startups. Neither he nor Jacobsson are still involved in Klarna.)



<blockquote class="wp-block-quote is-style-large">&#8220;Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, and it now finances purchases of Mirror </blockquote>



Not surprisingly, as the installment purchasing fintechs gain more customers and attention, they’re also facing additional scrutiny from regulators. In March, Afterpay agreed to fork over&nbsp;<a href="https://dbo.ca.gov/2020/03/16/point-of-sale-lender-afterpay-agrees-to-cease-illegal-loans-pay-refunds-in-settlement-with-the-department-of-business-oversight/" target="_blank" rel="noreferrer noopener">$1 million</a>, including $905,000 in consumer refunds, after California’s Department of Business Oversight (DBO) concluded the&nbsp;<a href="https://www.afterpay.com/en-AU/terms-of-service#:~:text=Late%20Fee%3A%20%2410%20Late%20Fee,the%20payment%20is%20still%20unpaid." target="_blank" rel="noreferrer noopener">late fees</a>&nbsp;Afterpay charges meant it was running an unlicensed lending business. “Afterpay rejects the view that the Company operated illegally,” the Australian company said in a&nbsp;<a href="https://www.afterpaytouch.com/images/17032020-US-Regulatory-Settlement.pdf" target="_blank" rel="noreferrer noopener">statement</a>. “While Afterpay does not believe such an arrangement required a licence from the DBO, Afterpay has agreed to conduct its operations under the DBO licence as a part of this settlement.” A spokesperson adds that Afterpay “has been applying for, and has been granted licenses [in other states] where needed.” In 2017, Klarna was fined $15,000 in New Hampshire for operating without a lending license. Today Klarna has such licenses in every U.S. state.&nbsp;



Another fintech winner in the installment-payment business is Silicon Valley-based Affirm, the creation of serial entrepreneur Max Levchin, a founder of PayPal, which itself<a href="https://www.forbes.com/sites/jeffkauflin/2020/08/31/paypal-enters-installment-loan-business-targeting-fintechs-affirm-and-afterpay/#1b1568291478"> jumped into the installment business</a> just last month. Between <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/4VcgC4xW0MfEm41WiO1FBR?domain=affirm.com" target="_blank">November 2019</a> and <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/f0yMC5yAGNi3xkGKtO8dp_?domain=affirm.com" target="_blank">July 2020</a>, Affirm nearly doubled its U.S. users to 5.6 million. It raised $500 million last week at a valuation of more than $5 billion, up from $2.9 billion last year. While Levchin’s exact stake is undisclosed, it’s likely worth hundreds of millions. 



<figure class="wp-block-image size-large is-style-default"><img decoding="async" loading="lazy" width="1024" height="683" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg" alt="" class="wp-image-47929" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-2048x1365.jpg 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption> PayPal Co-Founder &amp; Affirm CEO Max Levchin. (Photo by John Lamparski/Getty Images)</figcaption></figure>



Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, whose sales have surged as affluent young consumers, missing the motivation of group exercise classes, have flocked to buy the $2,000-plus stationary bikes with their streaming workout classes. Affirm also now finances purchases of Mirror, the hot $1,495 in-home fitness coaching device acquired by Lululemon this summer.&nbsp;



Of course, the fintech companies’ current lofty valuations depend on consumer spending staying strong and consumers retaining some of the online shopping habits they’ve developed over the past six months. With a pre-election agreement between Congress and the White House on a new stimulus package looking unlikely and the future course of Covid-19 unknown, there are no guarantees. But for now, these fintechs are riding high.



By Jeff Kauflin, Forbes Staff &amp; Eliza Haverstock ,Forbes Staff



With additional reporting by Max Jedeur-Palmgren.

TechCrunch Disrupt NY 2016 – Day 2

The Pandemic Plutocrats: How Covid Is Creating New Fintech Billionaires

People’s safety concerns about transmission through contact has resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.  



While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.



This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.



Derek Cikes, Commercial Director at Payflex, says the pandemic represents a watershed for the payments industry.



“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments&nbsp; to the fore including lower fees,&nbsp; convenience, seamless delivery, greater security, and more flexible payment options,” says Cikes who adds that what makes this trend so interesting, is that historically, people used to hoard cash in times of crisis. Now, the opposite is occurring.



<a rel="noreferrer noopener" href="http://newsroom.mastercard.com/mea/press-releases/mastercard-study-shows-south-african-consumers-make-the-move-to-contactless-payments-for-everyday-purchases-seeking-touch-free-payment-experiences/" target="_blank">A study</a> by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and eight percent for transport.



Similarly, recent figures from <a rel="noreferrer noopener" href="https://www.bain.com/insights/the-covid-19-tipping-point-for-digital-payments/" target="_blank">Bain</a> echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 &#8211; 10 percentage point increase globally, above what was previously anticipated at 57% before Covid-19 to 67% after Covid-19.   



Are contactless payments here to stay?



Cash is perceived as a vehicle for the transmission of the virus.&nbsp;As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.



 “Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers.&nbsp; Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” says Cikes.



Creation of new payment habits



From banking facilities like tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking&nbsp;and&nbsp;e-wallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.



“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” says Cikes.



Retailers drive adoption of digital payments



Both online and brick and mortar retailers are helping to accelerate this trend with stores like Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods.&nbsp;There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.



Another contactless payment method driving this trend is e-wallets with over&nbsp;<a href="https://www.theafricareport.com/25846/africa-over-500-million-mobile-money-users-expected-in-2020/" target="_blank" rel="noreferrer noopener">500 million mobile money</a>&nbsp;users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.



 Flexibility needed more than ever



According to&nbsp;<a href="https://www.transunion.com/blog/financial-hardship-study/South-Africa" target="_blank" rel="noreferrer noopener">TransUnion’s Financial Hardship Survey</a>,&nbsp;conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82% of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R 7 542.90 when paying bills or loans.



“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” says Cikes.



A report by&nbsp;<a href="https://blog.globalwebindex.com/trends/coronavirus-international-study/" target="_blank" rel="noreferrer noopener">GlobalWebIndex&nbsp;</a>shows that 83% of South African consumers are expecting flexible payment options from brands.



“We have seen this play out in the increased uptake of our Payflex&nbsp;Buy Now Pay Later&nbsp;payment solution, which allows people to make interest-free payments over two paychecks,” says Cikes.



With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.



“Digital payment solutions provide an avenue which safeguards against physical interaction, enabling both consumers and business to navigate the environment as the economy is restarted.&nbsp; These digital adoptions will not only help manage the current situation but will also have far-reaching benefits, facilitating a more customer-centric, efficient and resilient economy,” concludes Cikes.



-Derek Cikes, Commercial Director, Payflex

Financial technology concept.

Op-Ed: From Cashless To Digital: The Covid-19 Tipping Point

The billion-rand spaza shop (township tuckshop) industry in
South Africa is not a regulated sector. Most transactions at these shops are in
cash, and not electronically tracked. This makes it difficult for spaza shops
to be financially credited in South Africa.



But there are now fintech solutions such as Zande Africa offering financial and distribution platforms, operating out of warehouses, to assist these spaza shops in their townships, by delivering daily necessities to them.



READ MORE: <a href="https://www.forbesafrica.com/economy/2019/02/20/in-pictures-the-occupation-of-unemployment-in-south-africa/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">IN PICTURES | The Occupation Of Unemployment In South Africa</a>



&nbsp;In this image, Tedy
Tizedo, the owner of Thandabantu, a tuckshop in Ermelo in the Mpumalanga
province of South Africa, pays a local Zande Africa agent for delivering bread
from its distribution warehouse. 



&nbsp;The fintech company
provides cash and credit service offerings to all spaza shop owners and creates
relationships with them for better pricing and service.&nbsp;

Credit

Cash, Credit  And Community

Venture capital-backed financial technology companies raised a record $39.57 billion from investors globally in 2018, up 120 percent from the previous year, according to research by data provider CB Insights published on Tuesday. 



Funding was raised through 1,707 deals, up from 1,480 in 2017, the research said.



The surge in funding was due in large part to 52 mega-rounds, or investments larger than $100 million, which were worth $24.88 billion combined, the research said.



A $14 billion investment in Ant Financial, the payment affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd, accounted for 35 percent of total fintech funding alone last year, the research said.



In the last three months of the year, five companies joined the coveted ranks of fintech “unicorns”, or companies valued at more than $1 billion. These include credit card provider Brex, digital bank Monzo and data aggregator Plaid.



Venture capital investors have been pouring billions of dollars into fintech companies, in the hopes that they can gain market share from incumbent financial institutions by offering easier to use and cheaper digital financial services.



Fintechs have emerged globally across all sectors of finance, including lending, banking and wealth management.



While the large rounds minted new unicorns and led funding to hit a record high in 2018, CB Insights estimates these will likely delay initial public offerings.



“IPO activity is likely to remain lackluster in 2019,” the research reads.



Asia saw the biggest jump in number of deals in 2018, growing 38 percent from the previous year and accounting for a record $22.65 billion, according to the study.



In the United States, fintechs raised a record $11.89 billion through 659 investments, while the number of deals dropped in Europe, but funding reached a record $3.53 billion. -Reuters



-Anna Irrera

1096088158

Fintech Companies Raised a Record $39.6 Billion in 2018: Research

In its research report on financial technology (FinTech), The Future of FinTech and Banking, Accenture signalled that the revolution is well under way. The report indicated that global investment in FinTech companies had tripled to $12.2 billion last year, up from $4 billion in the previous year. Although it said Africa was lagging behind, the continent holds a lot of promise.
In the latest report by WorldRemit, Currency Cloud and Ixaris, titled Payments Innovation Jury Report 2015, Africa is seen as more promising than the traditional financial capitals of the world.
The digital revolution is not new in Africa. Mobile payment systems on the continent have set the pace internationally. The extraordinary story of M-Pesa, which in just six years enabled more than 15 million Kenyans to send and receive money electronically, is a good example. With more than 140 million registered accounts, mobile payments in Africa are quickly becoming mainstream. M-Pesa’s recent innovations, such as M-Shwari, a mobile bank account which facilitated loans worth of more than $200 million in Kenya last year, is set to continue blazing a trail in global FinTech innovation.
The remittance market is another important area for African FinTech. With the amount of money sent to sub-Saharan Africa via mobile phones set to hit $33 billion this year, it is easy to see why this market is attractive. Innovation is expected to bring down remittance charges, which currently stand at twice the global average according to the Overseas Development Institute, an independent think tank. Innovators, such as MFS Africa, are honing in on the intra-African remittance market, where remittances can rise up to 20% of face value. World Bank figures indicate that $11 billion is sent within Africa each year and African companies are taking advantage of the 650 million mobile phone subscriptions to tap into this field.
Agriculture is another sector being invaded by FinTech. Already, several innovations are bringing financial access points closer to the farmer. E-wallet in Nigeria allows farmers to receive subsidised seed and fertiliser vouchers on their mobile phones. Likewise, Intellect Tech in Kenya is helping farmers and insurance firms track compensation claims. With proven success, it’s not surprising that funding has followed. In June, two start-ups were awarded $50,000 through Village Capital FinTech for Agriculture: East Africa 2015.
Despite the obvious success, there are still many barriers for FinTech in Africa. One key obstacle is regulation. Africa has more than 50 countries, each with their own regulations, resulting in restricted capital flow, like the exchange control that is still in place in South Africa. Another issue is the focus on local problems – innovators need to realize that FinTech is part a global ecosystem. Nonetheless, Africa still faces a massive opportunity to lead the way in the FinTech evolution.
Although funding was a major barrier in the past, the situation is slowly improving. Incubation hubs have sprung up all over Africa, kick-starting the next generation of technologists. Rand Merchant Insurance (RMI) in South Africa has a club called AlphaCode that helps provide networking opportunities for the local FinTech entrepreneurs. Recently, Barclays Bank Kenya launched an innovation lab that will provide a base for local developers to come up with game-changing ideas that will change the future of the financial industry. All this makes the sector an attractive option for investors. Investment in FinTech companies is expected to double to $8 billion in 2018, according to Accenture.
With a young population set to explode in the coming decades, Africa is positioned to benefit from financial innovation. FinTech is making essential services more accessible to the wider population. The African companies providing these services are on the march and there doesn’t seem to be any way to stop them.

Tag: FinTech

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Cash, Credit And Community

Fintech Companies Raised a Record $39.6 Billion in 2018: Research

A Revolution on the march