May 20 2017

At a recent digital banking conference in Africa, I was asked if fintech is sustainable. The response was simple – fintech is not singular. It is an amalgamation of multiple digital financial services trends across regions, and across payments, lending, and banking

The question is which of these are solving a real problem vs those solving a perceived problem. There are a few trends out here that I like, which are solving real issues, which will sustain, and merge with the overall financial services ecosystem:

Disintermediation of the lending value chain – Banks would traditionally source, acquire, underwrite, onboard, collect and service customers. Most would do some parts well, and a few parts not so well. This is increasingly now being solved by the entry of new ‘customer owning’ entities into the game, who will acquire, owners of data who can underwrite, and the lenders who can lend and collect. This makes partnerships key.

However, the cost of acquisition, collections and data partnerships is turning out to be quite prohibitive (upto 6-8% in some cases), especially in telco-dominated markets, for example Kenya, which is driving the fintech business models towards non-feasibility.