Fintechs to watch in 2020

 The year 2019 saw traditional usage of banking channels steadily dwindling, while digital channel usage remained firmly on the rise.

 

Financial institutions are fast realising that working in silos is not the best approach in the fast-changing environment, given the test case of initiatives such as agency banking.

 

"There has been a significant decline in the number of transactions carried out in bank branches to just under 15% of total volumes, down from 37% three years ago. This is a significant shift in how customers are choosing to transact," Patrick Mweheire the chairman Uganda Bankers Association, said recently.

 

Experts say this turn to digital is being accelerated by younger, tech-savvy generations who are quickly becoming the banks' largest addressable market. Commercial banks are intensifying their digitisation efforts in the face of changing consumer demands and growing competitive pressures.

 

But as the fintechs or financial technologies disrupt the traditional banking sector, innovations within the fintech space is also threatening their very own emergence.

 

Fintech is the technology and innovation that aims at competing with traditional financial methods.

 

Companies such as Userremit, Paypal and Worldremit are some of the innovations that put financial institutions and money transfer players (Western Union, MoneyGram) on the backfoot in the recent past. Their launch in the last couple of years gave customers more choice, flexibility and better service.

 

For instance, Useremit, a Ugandan founded firm, joined the market in 2013 offering peer-to-peer money transfer services. But in 2017, its founder Stone Atwine, rebranded the company to Eversend, making it one of the first locally-founded neobanks.

 

In an interview with New Vision, Atwine believes that 2020 is the year where most fintech companies could be forced to merge.

 

"We are going to see more bundling of payment of applications (or companies) this year. Today, people have a money transfer app, a loan app, internet and airtime app, utility app. We are thinking why not do all these things in one app," he said.

 

"What we are trying to build is a real digital banking alternative. It's not a bank but it can do 95% of what you can do with a bank," Atwine added.

 

The use of mobile money in East Africa has been a key enabler in the financial inclusion drive. First, it was payments, then online lending and savings platforms, and now its neobanks.

 

Underlying this explosion in the fintech space is new infrastructure that makes starting a neobank cheap and easy, plus a rising generation that prefers to do everything from their smartphones.

 

According to Atwine, lowering costs and expanding banking services to the unbanked are the two prime reasons for the birth of neobanks.

 

"The only reason we exist is because the existing financial platforms are horrible. The thing with the banks is that everything is very expensive. Everything you touch, they have to charge you. The difference in what we are doing is that sending money to say Kenya costs you almost nothing," he said.

 

Since its launch eight months ago, Eversend has completed more than 20,000 transactions, moving about $1m. For instance, sending money in the region can go for 70 US cents.

 

"The business sense is there because we do not incur the costs that banks have to pay in money transfer. We make little money, but get very many customers. The banks cannot compete with these rates because they are entrenched in the old system," he adds.

 

Japheth Chiki Kawanguzi, founder and CEO of The Innovations Village, predicts that

2020 will see some of the most radical changes in the industry as digital entrepreneurs create endless possibilities.

 

"There will be more tech-based products and solutions, including mobile money, online payment processing, lending and investing in 2020 and beyond — all driven by hungry and enthusiastic startups seeing opportunities in the ever-evolving financial service industry," he predicted.

 

For the banks, companies such as Eclectics, Fintech Company of Uganda and Efficiencie Uganda, running the agent -shared banking platform by Uganda Bankers Association has been fundamental in bringing together players in the industry.

In response, banks are looking for solutions that can bring their costs of doing business down.