Financial technology (fintech) is transforming the financial services sector across the globe. It can improve efficiency, reduce operating costs, and allow seamless and real-time customer transactions.
Fintech also drives hyper-personalisation by improving an understanding of the needs and behaviours of customers. This extends financial services to those previously excluded and underserved, enhancing their financial health by meeting their needs to manage risk and to grow their wealth. Supporting fintechs not only solves payment, credit and remittance problems, it also provides accessible and appropriate financial products such as investments, savings and insurance at scale.
South Africa has a small but fast-growing fintech industry, presenting considerable benefits but also significant risks. The opportunities for fraud and cybercrime are increasing as digital channels and products expand. The rapid adoption of new technology by financial service providers can also bring systemic risk if the technology fails. Financial regulators need to manage these risks so that they do not stifle innovation.
To enable growth of the fintech sector while minimising risk and protecting consumers, the National Treasury, in partnership with the World Bank, commissioned Genesis to conduct the first full market diagnostic and sizing of the local fintech sector.
The analysis began by capturing all active fintechs in South Africa and segmenting the fintechs by function (e.g payments). The fintech market size of each segment was then estimated and compared with the total addressable market size (e.g payment market). International trends and fintech business models were assessed to determine the potential growth of each segment. A sample of fintech entrepreneurs was interviewed to understand the journey, the challenges encountered and the perceptions of the regulatory environment.
Using this as an input, the analysis focused on financial services regulation in South Africa. It presented priority segments that needed immediate attention, and concluded with recommendations on how regulators could support the fintech sector.
An online portal was created to display results of the report and engage with fintech entrepreneurs by allowing them to edit their information (e.g company name and financial data) and submit themselves as a new fintech. This serves as a first step in understanding the fintech market in South Africa and increases stakeholder engagement, especially between regulators and fintechs.