Banking on a new logic

It takes courage to de­clare war on con­ven­tional ac­count­ing logic, but in the banking and ac­coun­tancy pro­fes­sions, courage is an oc­cu­pa­tional re­quire­ment.

Finweek English Edition - - THE WEEK - Edi­to­rial@fin­

in­voice­worx, an on­line repos­i­tory for fi­nan­cial in­for­ma­tion founded by two for­mer bankers, is in the process of cre­at­ing a plat­form that will en­able small- and medium-sized en­ter­prises to have quick and trans­par­ent ac­cess to lines of credit. Siya Ntutela and Mdu Tha­bethe de­cided to start In­voice­worx af­ter spend­ing a num­ber of years in the lo­cal banking in­dus­try, and iden­ti­fied a gap in the mar­ket. Says Ntutela: “We met by chance. In 2010 I left in­vest­ment banking to start Bon­sai Cap­i­tal, a con­sult­ing com­pany work­ing in the en­ter­prise devel­op­ment sec­tor, and dur­ing that time I met Mdu (who has over 20 years of ex­pe­ri­ence in the banking in­dus­try, in­clud­ing as re­gional head: Absa Small Busi­ness Credit) through a com­mon client. We then started dis­cussing the lo­cal banking en­vi­ron­ment and dis­cov­ered that we shared the same views on how it could be im­proved, and that’s how the idea for In­voice­worx be­gan.”

Through their dis­cus­sions they dis­cov­ered that de­spite some of their clients get­ting big or­ders, banks re­mained in­ef­fi­cient when it came to ac­cess­ing their work­ing cap­i­tal ap­pli­ca­tions. “Our clients were be­ing re­jected be­cause they were not big enough or [didn’t have] the re­quired credit his­tory. What we wanted to do was to build a plat­form that could help them se­cure work­ing cap­i­tal, col­late all the rel­e­vant doc­u­men­ta­tion and en­able the credit provider to get an ac­cu­rate credit score of the po­ten­tial lender,” says Ntutela.

Apart from im­prov­ing credit score as­sess­ments us­ing tech­nol­ogy, In­voice­worx hopes to digi­tise some of the credit ap­pli­ca­tion pro­cesses that are cur­rently be­ing done man­u­ally, and peo­ple are start­ing to no­tice.

In Oc­to­ber, In­voice­worx won R1m in en­ter­prise devel­op­ment fund­ing at a black eco­nomic em­pow­er­ment pitch­ing event spon­sored by Mer­rill Lynch South Africa and Al­phaCode, a Rand Mer­chant In­vest­ments (RMI) club for fin­tech en­trepreneurs.

In­voice­worx man­aged to im­press an ex­pe­ri­enced panel of judges con­sist­ing of RMI’s se­nior in­vest­ment ex­ec­u­tive, Do­minique Col­lett, chief ex­ec­u­tive of Mer­rill Lynch South Africa Richard Gush, chief ex­ec­u­tive of Royal Bafo­keng Hold­ings Al­bertina Kekana and prin­ci­ple part­ner at Iden­tity Part­ners Sonja Se­botsa.

Col­lett says the win­ning busi­nesses were se­lected be­cause of their abil­ity to meet the judg­ing cri­te­ria, which in­cluded their pric­ing and rev­enue-gen­er­at­ing mod­els and how de­liv­ery and im­ple­men­ta­tion would oc­cur.

While the global fin­tech start-up scene is a lot more advanced in both the US and Europe, South Africa is slowly mak­ing some in­roads, a view Gush shares. “SA has the po­ten­tial to be­come a fin­tech cen­tre of ex­cel­lence as it has an in­cred­i­bly advanced fi­nan­cial ser­vices in­fra­struc­ture. This pro­vides an em­pow­er­ing con­text for emerg­ing fin­tech en­trepreneurs and fi­nan­cial tech­nol­ogy in­no­va­tors to de­velop so­lu­tions that meet the needs of dif­fer­ent com­mu­ni­ties, many of whom have pre­vi­ously had lit­tle ac­cess to safe and re­li­able fi­nan­cial ser­vices,” he says.

Un­like some of its Euro­pean and Amer­i­can coun­ter­parts, In­voice­worx does not see it­self as a chal­lenger bank, though if the com­pany suc­ceeds it will have a dis­rup­tive im­pact on ex­ist­ing job de­scrip­tions.

“With any dis­rup­tive tech­nol­ogy, there will be ca­su­al­ties, but at the mo­ment we’re not go­ing to see jobs be­ing re­placed by our plat­form. Ours will be a com­ple­men­tary tech­nol­ogy for ex­ist­ing credit man­agers. Our view is not to re­place banks; we will al­ways need banking in­fra­struc­ture so we’re not try­ing to re­place banks. In my view banks, at least for now, can­not be com­pletely re­placed,” ar­gues Ntutela.

If In­voice­worx suc­ceeds, the fu­ture credit man­ager will have a more re­li­able plat­form backed up by solid data to help him or her to make bet­ter credit grant­ing de­ci­sions. But does this spell the end for ac­coun­tancy pro­fes­sion­als? Not yet, says Ntutela.

“Ac­coun­tants will still have a role be­cause in the South African mar­ket peo­ple still pre­fer and rely on hu­man knowl­edge. So, in my view what we’ll see is an in­creased col­lab­o­ra­tion be­tween tech­nol­ogy and hu­man tal­ent. The other prob­lem with South Africa is that data costs con­tinue to be high, which lim­its the pen­e­tra­tion rate for our fi­nan­cial ser­vices in­no­va­tions. That said, there’s a big mar­ket out there for pro­vid­ing free ac­count­ing ser­vices. In­creas­ingly the SME sec­tor is go­ing to start ask­ing tough ques­tions of the ac­coun­tancy pro­fes­sion as more and more of that knowl­edge can be ac­cessed for free.”

In­voice­worx is try­ing to re-imag­ine the fu­ture of banking in SA, and if their track record is any­thing to go by, this is a start-up worth keep­ing an eye on.

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