The head of financial technology company Paymentology says the business will be profitable by the end of 2024, a development that is likely to improve perceptions of the business by investors looking for returns from fast-growing technology players.
Technology businesses are notorious for burning through huge cash piles as they develop and scale their platforms. The most famous example is Jeff Bezos’ e-commerce business, Amazon, which went years without turning a profit.
This is no different in the world of fintech. But rising interest rates, which makes the cost of capital higher, together with a more bearish sentiment around the world, have shifted investors’ mindsets to seeking profitable businesses to back.
“We, as a business, will hit profitability this year,” Jeff Parker, CEO of Paymentology, told Business Day.
“We’re probably one of the rare fintechs which ... will be profitable and self-sustaining, which obviously gives us a lot more room for freedom and investment, especially in the current markets. There’s much greater appetite for profitable businesses right now, rather than those that burn cash.”
Originating in SA, Paymentology was formerly known as Tutuka. It’s a cloud-based digital payments company that works with banks, fintech companies and telecom operators to issue and process physical and virtual cards, including debit, prepaid, credit, buy-now-pay later, revolving and more.
SA businesses it works with include Standard Bank, Access Bank, Adumo, Santam, Massmart, Pick n Pay, Liberty Group, Achievement Awards, Altech, Mukuru, Mama Money and Spar.
In 2021, Tutuka and a number of other businesses were acquired by fintech business Salt Pay to form what is now Paymentology. Salt Pay, now Teya, is owned by a number of private equity players, together with the founders of Brazilian payments business, Stone.
Teya, which counts Lesaka’s executive chair Ali Mazanderani as a founder, is reported to have raised more than $1.1bn in its lifetime. Part of this was used to fund the acquisitions that now make up Paymentology. Teya has helped Paymentology to fund its business, with Parker expecting his business will be profitable by the end of 2024.
This comes as Paymentology recently announced a collaboration with Standard Bank and Sandton City that launched SA’s first instant issuing digital gift card. This allows for gift cards that can be used across a mall at multiple shops as opposed to being tied to one specific retailer or chain.
Parker sees a world where traditional bank cards, as well as gift cards and loyalty and rewards programmes, can all exist as one product.
“We’ve done quite a bit of research on this. Psychologically, consumers like to see gifting, loyalty and rewards and day-to-day spending in three separate locations so they can compartmentalise,” he said.
“If you put a loyalty and rewards solution on a gift or debit card, it doesn’t mean as much to individuals because the value of the reward is typically smaller. What we expect to see is a single app but with three separate cards attached to the app, so that you can actually see how much you’ve earned from the rewards, what your day-to-day spend is and what you’ve been given on a gift.”
Fintech continues to be an area attracting much investment in SA and the broader African continent.
In March, local fintech start-up Float raised $11m (about R212m) in new funding from Standard Bank to push its SA growth. The company offers shoppers a way to use their credit cards by splitting payments over as many as 24 interest-free, fee-free monthly instalments using their existing credit.
In February, global payments giant Mastercard invested R3.8bn in MTN’s fintech business as part of a plan to partner with industry experts that will help to grow this fresh revenue line. The investment, for a 3.8% equity stake, valued MTN’s fintech outfit at R100bn.
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