Rehabilitated Net1 UEPS eyes fintech for the unbanked
Payment processing company Net1 UEPS is positioning itself to be a fintech services provider for the lower-income market, including social grant beneficiaries and small businesses, offering them loans, insurance, cardless cash withdrawals and bill payments.
The company, which is recovering from the reputational fallout from a controversial multibillion-rand social grants distribution contract, is shifting focus from being what its CEO Chris Meyer described as a logistical company moving cash for social grant payments to one that will be a one-stop shop for financial services products for the low-end market.
Net1 has suffered massive losses since the termination of its social grant distribution contract three years ago.
The contract was held by subsidiary Cash Paymaster Services (CPS), which is being liquidated.
The loss of the contract, which was declared invalid, and the backlash the company received led to an overhaul of its executive leadership and board in a bid to salvage its operations and position.
The R10bn social grants contract, which was awarded in 2012, was found to have been awarded unlawfully after one of the unsuccessful bidders, AllPay, challenged it in court citing an irregular tender process.
CPS continued to pay the grants after the South African Social Security Agency (Sassa) was unable to finalise the new tender process as required by a court order.
In 2018, the Constitutional Court ruled that the contract be terminated. This resulted in massive revenue and profit losses for Net1, as CPS was its biggest contributor.
Since 2020 the company has appointed new board members and a new executive team, with Meyer joining the company in June. The month before Net1 appointed Lincoln Mali to the new position of CEO of Southern Africa.
Mali said this week Net1 has been under siege for a while, but that is changing fast. New management has brought a new mood and energy into the company, which is now “getting a seat at the table”.
“We have spent time rebuilding our relationship with Sassa at all levels on a transparent basis.”
Mali said there is a common cause to help solve the challenges faced by the underserved market when it comes to financial services.
“We are reaching out to all who may be hurt and trying to mend bridges … all organisations go through difficult times. It will be up to people to assess if there is change or not,” he said. The company is “getting a good reception”.
Mali said some of the company’s former social grants clients are returning to it — an indication that it is offering better products and services.
The new leadership has spent the past few months reorganising the business by, among other things, hiring sales teams across the country, providing training, ramping up its client acquisition and rolling out new services.
Net1 had plans to register 1.4-million accounts for its EasyPay Everywhere banking product by December this year, but it has taken longer than anticipated to hire new sales people. The civil unrest in July also slowed down this process.
Meyer said: “We are no longer targeting that any more. We don’t believe we can achieve that by December. We want to take time and will come back to the market with new targets. But what’s important is that we are seeing good momentum in new account openings.”
It added 50,000 new accounts in August. In total, Net1 signed up 61,000 new customers in July and August in addition to the 23,000 in the three months to June. Net1 has 1-million active accounts.
Meyer said the company’s vision is to offer a full-service fintech platform as there is a gap in the market for that, especially for formal and informal small to medium entities.
“A full digital service is not yet offered to merchants,” he said.
Net1 is focusing on 2-million small businesses that it said are not fully covered with the relevant financial services products.
It said of these 2-million merchants, 1.4million are formal entities and the rest are in informal trading. There are also 26-million adults in the lower living standard measurement that are largely underserved.
“Think of us as a fintech platform for the underserved market. We want to provide financial inclusion and access,” said Meyer.
Net1 will also deploy more stand-alone ATMs. In retail stores such as Boxer and OBC, its ATMs will enable customers to buy airtime, electricity, Lotto tickets and vouchers, and apply for loans, in addition to withdrawing cash.
It has also exited most of its offshore businesses to focus on SA and the rest of the Southern African region.
Net1 has a 15% stake in Cell C, which recently raised funding as part of its recapitalisation programme.
Though Net1 has written down its Cell C value to nil, it is optimistic about the company’s future prospects, said CFO Alexander Smith.
Meyer said Net1 will seek Cell C as a potential partner in terms of providing airtime as part of the value-added services the group is offering its customers. “That’s the lengths we would look at Cell C, [as a] platform facilitating access to airtime.”
Meyer said there is an urgent strategic imperative for Net1 to make its consumer business profitable.
Net1 reported a 9% decline in revenue to $130.7m (R1.89bn) and its headline loss per share narrowed to US0.28c from US0.92c.
Think of us as a fintech platform for the underserved market