Fintech taking on the big banks
● The battle lines have been drawn in a war of payment platforms as traditional banks seek to stave off the threat of innovative fintech companies muscling in on their turf.
One of the reasons why fintech companies have been able to gain wide adoption in a number of markets has been their focus on customer experience and efficiency, on which banks have previously failed to focus.
Alain Raes, CEO for Europe, the Middle East, Africa and Asia Pacific at the Society for Worldwide Interbank Financial Telecommunication (Swift), this week said traditional banks have been spurred into action by the threat of these new entrants, such as Discovery’s recently launched bank. “Many innovations come as a result of competitive pressure.” But he thinks South African banks don’t have much to fear — for now.
Swift is the leading financial messaging services provider, operating in 212 countries.
Raes was in SA to advise the financial services community on an initiative called Project Future aimed at modernising SA’s payments system, which has been championed by the Reserve Bank.
Despite fintech’s growth, the Payments Association of SA, which regulates the National Payment System, says traditional players have largely ignored new entrants: “The appetite from banks to integrate these systems to deliver an interoperable domestic money-transfer system has been minimal.” As a result, the regulator has no way to measure full industry money transfer statistics.
Raes thinks transaction costs in SA are still too high. But South Africans may benefit from lower banking charges from improved systems. “As more people in the economy are banked and [are] making more payments, prices should go down,” he said.
On the rest of the continent, Raes singles out successes in East Africa, in particular MPesa in Kenya, a mobile payment platform outside the formal banking system, allowing person-to-person transactions.
MTN last week announced the launch of its Mobile Money service across its markets, with Nigeria offering the best opportunity.
Raes says Swift’s reach is its most valuable asset. “We connect just less than 12,000 financial institutions around the world. That is massive. No-one else can do that.”
Swift has invested in developing platforms as it tries to ensure its relevance. “We’re actually also in the business of mobile payments,” Raes explains. In Australia, Swift launched a platform allowing real-time person-to-person transactions, with about half a million payments made a day.
Asked if Swift would consider working with South African fintech companies to develop better systems, Raes said: “If there is a way in which we can partner to achieve this — why not? Perhaps with the likes of MTN.”