By Alwyn van Wyk Chief Wrangler of Cowboy Aliens

The marked increase in activity around the disruption of digital currency and Fintech in South Africa is partly due to two factors: firstly, large banking is waking up to the fact that more nimble and versatile finance platforms will soon start eating into their bottom line, and secondly, the very real needs experienced by the man on the street are driving developers to find clever and innovative Fintech solutions to meet those needs.

Fintech and big banking

The reality is that large legacy banks are simply not the right place for innovation. Taking risks, breaking things, inventing things, and thinking outside of the box are phrases that nobody wants to hear from their local bank.  Rather, stability, reliability, accountability are more what we are looking for. Hence, the quandary banking finds itself in today – these huge organisations are not agile enough to innovate and now stand the risk of becoming extinct in the near future if they do not adapt, and fast.

Start-ups, on the other hand, are small, nimble, fast and ready for anything. Start-ups are not afraid to break and create things; rather they are usually there to do just that. Start-ups fail fast and move on, and that is what big banking is in desperate need of.

As a result, many large banks are forming partnerships with start-ups that operate in the Fintech space. This is mutually beneficial for both parties; the start-ups get funding and support from a big name and the bank gets the latest bleeding-edge tech.

Fintech and township economies

If necessity is the mother of invention, then South Africa is low hanging fruit for inventors.  Based on findings by The Sustainable Livelihoods Foundation – an organisation that immerses itself in townships across South Africa to research the constraints and obstacles the residents face – the majority of businesses in townships are informal, unregistered, and thriving. This means, a very large portion of this finance and fund management is basic to the extreme, is being handled by the unbanked, and is a daily challenge and frustration to the bulk of these traders.

Leif Petersen, MD of The Sustainable Livelihoods Foundation says “Our team maps out and quantifies each and every segment of a township. We hop on a bicycle and ride the streets, documenting what industry and commerce we see, how frequently it occurs, and what the people experience, in order to deeply understand the very real challenges and opportunities of our emergent cities – our townships.”

The only way for Fintech developers to know what tech to develop is for them to either immerse themselves in these communities for up to three months at a time in order to gain an understanding of what to build – which costs a lot of time and money – or to partner with a subject matter expert, like Leif, who has already done the deep dive into these communities, who can steer their tech innovation journey in the right direction.