Kiaan Pillay, the CEO of payments company Stitch, says South Africa’s robust financial sector is providing fintech companies with opportunities to bring in new payments platforms, but regulatory issues are holding operators from speedily scaling up and introducing new formats that bring added convenience.
Stitch has just announced a new $25 million (R485 billion) funding raise to roll-out new payment platforms for MultiChoice, MTN, Foschini and users under Standard Bank’s SnapScan.
The South African fintech start-up is also pursuing omni channel payments and earmarked expansion as its clients grow across the rest of Africa segment.
At a time when other fintech ventures in markets such as Ghana, Kenya and Nigeria were folding up, Pillay said, the robustness and highly sophisticated nature of South Africa’s financial services sector was providing some clout for fintech companies such as Stitch.
“Our experience in SA has in many cases been that South Africa is very robust, there's this gigantic financial ecosystem, but people have very little access to it, like how do you connect to that infrastructure? And that's really the role that we play, it's like making it very simple, very easy for everybody to connect to that infrastructure,” Pillay said in an interview.
There were also opportunities in creating infrastructure, even “from scratch,” which may be difficult in other African markets, Pillay noted.
But even in a market like South Africa, “there is a ton of challenges,” explained Pillay. This makes “moving at the speed we want to always be difficult,” mostly from a regulatory perspective.
“We are fortunate to have really good bank partners, but at the end of the day, it's an incredibly regulated and compliance-heavy space, before you do anything, you need a lot of approvals, you need licenses, you need to be really thoughtful about flow of funds and money movements,” Pillay explained.
As much as R3.2 billion worth of transactions every month go through Switch platforms in South Africa. That means transaction volumes over the platforms – ranging from card payments, merchant and bank payments and electronic funds transfers – now surpass 4 million payments per month.
Research by Statista shows total transaction value for South Africa’s digital payments market reaching $17.22 billion (R334bn) by the end of this year. This represents an annual growth rate of 12.8% per year to reach $28bn by 2027, adding up to opportunities for Fintech companies in the country.
Digital commerce is expected to be the leasing payments category for South Africa, with projected total transaction values of $12.58bn this year
To capitalize on this, Stitch has in the past week launched WigWag, a platform that allows small and growing businesses to accept local and international card payments without the need for a website or developer resources. Companies can simply “send a unique payment link to customers in any chat or email” and this enables them to accept cards payments.
“This is a payments industry and you have to be really mature about things. So we do see some kind of difficulty in getting everything out to a huge space. We have tried though to be thoughtful about how we stagger things and partnerships do a lot of work up front, so that when we have a customer that wants to go live, we're ready to do so,” said Pillay.
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