"FinTech is a fantastic thing, but lenders must be responsible and conduct proper creditworthiness assessments," says Benay Sager, chief operating officer at Intelligent Debt Management. Benay will be on the panel of experts during our upcoming FinTech Africa event in Cape Town on 20 October. Our journalist Ebrahim Moola spoke to him about FinTech's benefits and barriers. "My hope is that many more people will enjoy access to mobile banking technology and not have to go into a branch."
Tell us about your background.
"I graduated with an MBA in strategy and a PhD in engineering in the USA. I worked for McKinsey & Company for six years as a consultant. While I was there, I did a lot of work in energy and financial services across Africa, developing a passion for individual empowerment, particularly in an African context. Two years ago, I joined the Intelligent Debt Management (IDM) group, overseeing growth of our workforce from 150 to 300 people and the doubling of our client base in a dynamic industry in which we have helped more than 40 000 people get out of debt and get the right type of credit."
You have a 3D printing patent. Is innovation important to you?
"What I do today has nothing to do with 3D printing, but I've always been interested in new ways of doing things, which is why I chose to study engineering. My work in 3D printing was ground-breaking - 10 years ago the process was still in its infancy."
"IDM is an innovative company. We are the first and only company in the industry to set up a low-income division, an automated system that sends status reports to the top 25 credit providers, a debtometer that measures the pulse of the debt management industry and a client self-service portal. We want to stay ahead of the curve by offering innovative solutions."
What is behind the FinTech boom?
"There are a few drivers. First and foremost, there is the ability to bypass established infrastructure through the use of mobile phones and other devices. The second is the ability to reach a wide audience through social networks. You can reach a huge mass of people through clever advertising, SMS campaigns and so on. Then there is the ability to mine large sets of unconventional data to assess people's worth when it comes to granting of credit."
What barriers are there to the FinTech revolution in Africa?
"One of the biggest challenges is the lack of human capital, be it from an IT perspective, individuals who understand how to use financial services products or managers of these products. While one does not need formal education to be an innovator, there is a need for basic education to be able to grow the pie. I worry about the skills shortage in South Africa. There is also concern over the availability of capital in an underperforming economy. The flow of capital into the country is restricted as a result and this makes it difficult to grant credit to individuals."
"Another challenge is information security. South Africans tend to be lax about protecting their personal information. The Protection of Personal Information Act may be coming into place, but a mindset shift is needed because this information means money and capital in the long term. There are thousands of ATMs and bank branches in this country - probably too many of them - and innovation in the big banks is pegged back because they want to protect existing infrastructure. Regulation is another issue. Someone who may want to launch a mobile payment platform, for instance, may have difficulty obtaining a banking licence."
What does the FinTech boom mean for the man on the street?
"There are positives and negatives. The increase in the number of people who have access to credit - assuming they use it responsibly - is a good thing. However, if you grant credit too quickly in a country like South Africa where many people do not have much financial education, many consumers will find themselves in difficult situations. FinTech is a fantastic thing, but lenders must be responsible and conduct proper creditworthiness assessments."
Benay Sager's free advice for FinTech startups -> Focus. Don't get distracted by too many ideas. Find a mentor. You need a sounding board before you invest time and energy in a product or service. Seek out education. You need to know the basics of running a business - managing your funds and cash flow, etc."
What does the future hold for FinTech?
"My expectation is that FinTech will push the envelope in terms of integrating more people into the financial ecosystem and allow them to participate in the formal economy, particularly in Africa. I'd also expect that we would gain more insight into the financial behaviour and transactions of consumers on a large scale. My hope is that many more people will enjoy access to mobile banking technology and not have to go into a branch."
Are there any FinTech businesses that stand out for you?
"I admire any company that is able to match supply and demand as closely as possible. Companies like 22seven, which is able to use a platform built on other existing platforms to offer something unique, Nomanini, which offers a payment platform for airtime and electricity, and FNB, which has been innovative in extending the number of banking channels for its clients. We are fortunate enough to have an excellent financial services system in South Africa that entrepreneurs are tapping into. I hope that we can export some of these ideas to the rest of the world."
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