FinTech innovators and capital need to partner - Charles Savage, GT247.com
In South Africa entrepreneurs tend to be very poor at articulating or selling their ideas to capital, that’s according to Charles Savage, Chief Executive Officer at online trading company GT247.com. “When it comes to valuing an income statement, we can compete with the best in the world, but when it comes to valuing a business plan, not so much, because it requires a greater leap of faith,” says Savage.
Just like FinTech Guru Nicole Anderson and to a lesser extent FinTech investor Dominique Collett (RMI), Savage fears that Africa might miss the boat. That is why FinTech Africa was recently established.
In a world where financial technology is becoming a buzzword, with Bitcoin and block-chain technology playing a major role in disrupting the financial services space, there is some concern that South Africa might miss out because of our inability to think differently.
According to Savage, also CEO of mother company Purple Group, a derivatives trading and asset management business, some reasons for this are historic. "It is not just about the access to capital. Part of the problem in South Africa when it comes to innovation is that for a long time our economy was closed off to the world, which meant that we had to get used to presenting to ourselves and as a result our venture capital market remained under developed."
This has serious consequences, Savage thinks. "In South Africa most investors are quite happy to overpay for a proven concept than to invest in a start-up. What we should be doing to promote innovation is to ensure that the big incumbent players partner with the small innovators. That's the only way we're going to start seeing fin-tech gaining some traction."
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Savage also blames a restrictive regulatory framework for the lack of innovation in the financial services industry. "In some ways we're still lucky because we can still change this situation, but it will take a change in mind-sets. We still don't have any regulation for the over-the-counter market, which is where some of the innovation is taking place."
"Around the world innovation largely takes place in small companies, but that's not always the case. In South Africa FNB under Michael Jordaan deserves to take some credit. It was admirable to see a big business embrace innovation in the way that FNB did, but we need to see more. Where is the innovation the asset management industry?" asks Savage
So what are the chances that South Africa will see a new FinTech start-up developing into the next Discovery?
"To build the next Discovery you need deep capital, naturally there will always be an arm wrestle when it comes to how much stake the innovator gets to keep compared to the capital provider, but in order to scale up, Discovery's Adrian Gore needed a lot of capital, and the question is could he have done it without that capital, we'll never know," says Savage.
- Join the FinTech Africa Event 'Challenges and Developments' this afternoon at 16h00 at GIBS Business School in Johannesburg. For last minute RSVPs contact us on [email protected] or +27 11 0837515.
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