FinTech entrepreneurship 'tough, painful and unhealthy', says Perry Blacher

The challenge for African FinTech entrepreneurs is "doing things that are big enough", says seasoned FinTech entrepreneur Perry Blacher. According to him the best ones focus on the bottom of the pyramid. "A lot of entrepreneurs start businesses solely for the four million South Africans with money, while ignoring the 51 million who don’t have much in their bank accounts," he says. We spoke to Perry in the run up to our big FinTech Africa event in Cape Town tomorrow.

Tell us about your background.
"I've built and run web-based businesses for the past 20 years from all sides of the table. In the past 10 years, I've worked in FinTech and financial services, with a stint at McKinsey & Co and running Microsoft businesses in Europe. I was also a venture capitalist with Chase Episode 1 Partners. I've built and sold businesses in healthcare and financial services - Covestor, which was an early robo adviser and online asset manager. Since then, I've been involved in non-executive advisory roles in building businesses in payments, credit, mobile money, remittances and other types of FinTech enterprises all over the world. I am based in Cape Town for lifestyle reasons."

What is behind the FinTech boom of the past couple of years?
"There's been a tipping point where some of the stuff that has frozen up in the financial system and banking has been taken up by new players. Things like crowdfunding took off because the banks weren't active in the SME space. A few of these startups started gaining traction and regulators began to take notice, as did governments. A number of areas began to be deregulated and more and more opportunities opened up. FinTech was always around. We've had PayPal and other early businesses."

Do you think South Africa has the entrepreneurial talent to support this boom?
"I work with a local venture fund, which has a big investor in MTN, and what we're seeing is that there is plenty of talent around the country, but there is a gap in the middle. There are plenty of bring young kids coming out of school and very strong, experienced heads, but you don't have a lot of people who have had an education in product and project management."

What are some of the challenges that FinTech businesses face in Africa?
"The biggest challenge is just finding and doing things that are big enough. Everyone tells you this big African story about the continent having seven of the nine fastest-growing economies, rapid urbanisation and so on, but the entire economic output of Africa is still smaller than Russia or Brazil. The issue is that if you build something just for South Africa, that is okay, but not necessarily big or interesting enough. Dealing with regulations, operational complexities legacy systems is a problem everywhere in the world. In Africa, when you do anything with a dependency on a bank or mobile operator, they may have the distribution channels and be in a good position to help you, but, to be honest, working with some of these guys is extremely painful. Financial services, in general, is slow, tough and complex."

"On this continent, usually what happens is that two years not much changes, but in 10 years, there is a dramatic evolution."

Are there any local businesses you've been impressed by?
"Definitely - the ones that do good stuff concentrate on the bottom of the pyramid. A lot of entrepreneurs start businesses solely for the four million South Africans with money, while ignoring the 51 million who don't have much in their bank accounts. I work with a fantastic business called Zoona, which helps emerging entrepreneurs provide money transfer and other payment services to low-income consumers, and then there' s Prodigy Finance, which helps students to finance the fees of the world's top business schools."

What do you see in FinTech's future?
"Different things in different markets, really. It is a lot crazier in Europe. It is a little overheated, but will keep going for another year or two. Some of these spaces are already saturated, such as P2P lending. When the interest rates in the West, some of these enterprises will fall out of the market. However, with big disruptive technologies like the block chain, depending on how we build on it, it will result accelerated disruption on the institutional side. On this continent, usually what happens is that two years not much changes, but in 10 years, there is a dramatic evolution."

Do you have any advice for aspiring FinTech entrepreneurs?
"My main advice is don't do it. It is tough, painful and unhealthy. You could just get a job and get well paid and enjoy your life, having built a few of these businesses myself. If you insist on doing it, find a big problem here and do something about it."