Financial services and technology group Lesaka Technologies is looking forward to inclusion in SA’s new inter-banking banking platform that makes it easier for consumers to send and receive money between banks.
Fintech continues to be one of the big areas of innovation and technology investment in Africa. But how do new and fast-growing fintech players, particularly those providing payment solutions, integrate with established banks?
Open banking refers to platforms that provide third-party service providers access to consumer banking, transaction and other financial data from banks and other financial institutions using application programming interfaces (APIs).
BankservAfrica — the largest automated payments clearing house in Africa — has been working for years to implement a system that will make it simple for people to send and receive money across banks as part of the SA National Payments System. This is part of a wider plan called the rapid payments programme (RPP), which also includes cross-border payments.
Together with the Payments Association of SA, BankservAfrica recently launched PayShap, which offers consumers cheap access to instant payments across participating banks using cellphone numbers.
Lesaka, which operates one of the country’s largest payments networks for the informal market, says it is excited about the platform as it will create an opportunity to grow its business. Unfortunately, nonbank fintech companies are still unable to participate.
“We are quite excited about getting a seat at the table and our ability to participate. At this particular stage, fintechs don’t actually have a seat at the table,” said Steven Heilbron, CEO of Connect Group, which Lesaka acquired a year ago, who is now driving its merchant unit.
“The ability to participate, at this point, has been limited to the banking community. This something that we would like to see change very quickly,” he said as Lesaka reported third-quarter earnings on Wednesday.
PayShap is available on the Absa, FNB, Standard Bank and Nedbank banking applications, with efforts to secure partnerships with Capitec, Investec, TymeBank, Discovery Bank, Sasfin and Standard Chartered.
“We see opportunities to reduce our cost case, to create new revenue streams. We do anticipate that some of our revenues streams may come under pressure, but this will be offset by abilities to reduce and create new revenue lines.”
This comes as the fintech group, formerly known as Net1, narrowed its loss in its latest quarterly results while the inclusion of Connect boosted sales.
The company, valued at R3.5bn on the JSE, improved its net loss close to one-fifth year on year to $23.2m and operating loss by 71% to $8.7m in the nine months to end-March.
“Another quarter of growth and profitability for Lesaka driven by the transformational acquisition of the Connect Group in our Merchant Division, and the successful turnaround in our Consumer Division, despite the persistently challenging economic environment,” Lesaka Group CEO Chris Meyer said.
But the period is not directly comparable as the Connect lifted the sales of the Merchant Division, which generated 88.2% of all revenue, more than fourfold; there were lower operating losses and a stronger dollar.
The group, valued at R4.9bn on the JSE, has a primary listing on the Nasdaq and a secondary one on the local bourse, and uses its banking and payment technology to distribute low-cost financial and value-added services to small businesses and consumers. The company’s new strategy focuses on growing its SA operations.
Lesaka bought Connect in April through a R3.7bn deal meant to expand its footprint in the small, medium and micro enterprises (SMME) sector in Southern Africa. Connect, founded in 2006, provides fintech solutions to nearly 44,000 SMMEs.
The company reaffirmed its guidance for its 2023 financial year to end-June with R8.7bn-R9.3bn in revenue expected and group adjust core earnings of R480m-R525m.
With Mudiwa Gavaza
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