An interview with Darren Franks, interim CEO of the Fintech Association of South Africa.

Over the course of the last few months, a couple of interesting developments have been happening in the South Africa fintech ecosystem. Payshap was launched, purporting to revolutionise real time payments in South Africa. The Financial Sector Conduct Authority (FSCA) also decided to recognise crypto assets as financial instruments, paving the way for their regulation. 

Other developments in the sector include the reserve bank ordering banks to be more friendly to crypto asset service providers as well as mobile network providers like MTN, doubling down on their fintech value propositions.

Amidst all this activity, TechCabal caught up with Darren Franks, interim CEO of the recently formed Fintech Association of South Africa, to get a more in depth idea on not only the mandate of the association but also the fintech landscape in South Africa.

TechCabal: Please share more about the Fintech Association of South Africa and its mandate

Darren Franks: The association serves to engage with the regulators and other associations within the South Africa fintech ecosystem. These include the payments Association, the Banking Association, the Reserve Bank, FSCA, and have a conversation about the state of fintech in South Africa.

We are a non-profit organisation and officially opened calls for membership about five weeks ago and so far, the response has been very positive. We have onboarded a couple of fintech startups, as well as banks.

TC: What was the reason for setting up the association?

DF: I think there’s a couple. One is that fintech is quite a broad category. You have payments, lending, cryptocurrency, and others, and the consensus was that there wasn’t a representation or a central voice for all of these entities together. I mean we had the banking association, which obviously represents the banks in South Africa, the payments association, which again, represents the payment players, and there was really this void of representation which we felt had to be filled.

When we spoke to the reserve bank, one of the biggest challenges that they stated was that they get lobbied and get asked questions all the time from fintechs either domestically or those coming into South Africa, and they simply didn’t have the people power to get back to everyone and answer these questions. 

So, from a lobbying and advocacy perspective, that’s the value that the association will be adding, creating one unified voice of the sector.

TC: Relative to the continent’s major hubs, fintech in South Africa has been falling behind over the years, especially with regard to attracting venture capital. What role will the association play in remedying this situation?

DF: Unfortunately in recent months, the downturn has been due to global macroeconomic conditions which no one in the ecosystem has control over. But what we can certainly do as an association and what we’ve been working hard on, is promoting South Africa’s fintech scene internationally. This can be through helping startups secure investors and scaling beyond SA’s borders.

I was in London last week, meeting with a number of different associations and stakeholders within the fintech ecosystem, and talking about what’s happening in South Africa. Even despite the downturn, we are still seeing some South African startups like Lulalend raising some pretty significant rounds so that’s a welcome development.

All in all, our role is to ensure that viable businesses who demonstrate a clear path to profitability are able to secure decent funding rounds which will put some wind in their sails.

TC: In terms of what’s happening in the fintech scene in South Africa at the moment, what are the standout developments to look out for?

DF: I think that there is a lot that’s happening behind the scenes with things like open banking, real-time payments, and regulations around crypto. Over the next few months, I think we’ll see quite a bit of consolidation in the market through M&A activity.

Also, I think we will see a lot of activity around challenger banks like neobanks like TymeBank and Discovery who have done exceptionally well. With the traditional banks or the incumbent bank, we’re also seeing a big move there towards digitising their processes banks, not just from a technology perspective, but really, from a mindset perspective. We are finding that a number of the key banks here in South Africa are developing API platforms to effectively offer banking as a service which is a welcome development.

TC: What would you say are the main challenges facing fintech in South Africa at the moment?

DF: I think for those pushing boundaries when it comes to either alternative payment methods, or it comes to different sorts of KYC or AML requirements, regulation is a bit of a challenge. This does not necessarily prove that regulators are throttling innovation because, in whatever market you are, if you’re trying to disrupt, the regulator has to ensure that you are not doing so at the expense of the consumer.

I think the second area that is a bit of a challenge would be talent. Now, there’s a lot of extremely talented people in South Africa but what we’ve seen over the last few years is that big tech companies setting up shop here tend sucking up a lot of the talent, which means that there’s a lot of inflation when it comes to salaries in South Africa and that’s sometimes very difficult for local fintechs. 

The other challenge, which I think is starting to become perhaps slightly less so, is around that sort of integration where fintechs can work with banks without both parties seeing each other as competitors. The reason I’m saying we are starting to see less of this is because I think the adoption and the integration of banks within fintechs is really starting to become more positive, which is a good thing for the whole sector. 

Thirdly, perhaps this is more of an opportunity than a challenge, is the rise of mobile network operators like MTN and Vodacom in creating their own flagship fintech products. I think their growth will disrupt some of the more traditional fintech players but in the same breath, I also think that smart fintech startups can use this growth to partner with the MNOs and really scale up their product offering at an accelerated pace.