This year has been a huge success for South Africa and Africa in general as well in terms of gaining a reputation for innovative technologies, embracing financial innovations and producing unicorn startups. This year we’ve seen many services and products come out of South Africa that have impressed the rest of the world and now we’re seeing more and more investors pouring their resources to Africa instead of US or China because of this trend. But as the year comes to an end, we’re seeing a lot of sudden changes in the fintech industry, with the major shift being the more openly hostile attitude coming from the authorities. 

South Africa has done a great job with contemporary technological advancements and has become an example for the rest of the world to follow. Let’s take a look at all the major highlights for South Africa this year and what to expect from the country in 2020.

What happened in 2019 in SA

South Africa started on its journey towards economic development a while ago and since then it has identified the key industries that work the best for the country. One of them would definitely be forex trading. There were a lot of factors that went into that but the defining moment was the change in regulations across Europe which caused them to try and look for a new home. South Africa became a perfect place for those wanting to escape the strict regulations and since then Africa has seen a huge rise in the number of forex brokers in the country. One of the main attractions for brokers to choose South Africa specifically, was that the market was not strictly regulated, so it became a perfect place for those wanting to avoid all the possible hardships surrounding trading. This, in turn, has caused South Africa to embark on another journey of trying to regulate the trading scene as much as possible without losing all the valuable forex brokers in the country. The list of SA brokers now consists of trustworthy brokers and overall It has done a great job of decreasing crime rates in the country, at least in this specific field and continues to develop and adapt to the demand of the market.

The financial sector has really played the leading role in SA’s development in the last couple of years and we are already seeing the results and the benefit for the country. The forex scene will likely continue to grow and develop but this time in the right direction and with the appropriate regulations in place, which will be way more beneficial for the country in the long run will help to rebrand it from just an easy entry market to the market that actually healthy, function well and is safe. This is a crucial part of the development strategy for South Africa and it is unlikely that we’ll see a major change in this direction in the following year. It is possible that South Africa will become even more invested in trying to create one of the best markets for forex trading by ensuring even more security while keeping the entrance barrier pretty low to keep the new brokers coming in and interested in the South African market. 

What about fintech?

The rate at which fintechs took off all-around Africa was surprising for a lot of people, but what they may have not considered is that the majority of the African population was unbanked. South Africa would even qualify as having more banked people compared to other countries in the region which is why the demand for fintechs was so high and urgent in these regions. South Africa is one of the leaders in this department as well along with Kenya and Nigeria and likely we will see a continued rise of adoption rates in all three of these countries. What is next for fintechs, not only in South Africa but all around the world is the increased sense of legitimacy within the startups and outside of the fintech bubble as well. It has been one of the main challenges that these firms continue to face today. South Africa has been onto this fintech trend way before it became a mainstream thing for media outlets to discuss and try to understand. But unlike the west, the need for fintechs came about out of necessity more so than out of the innovations. 

Fintechs around the world now try to learn from the experience coming from African and Southeast Asian countries to follow the guidelines tested by these firms. Whether or not Africa and specifically South Africa will maintain its spot as one of the innovators, with the high fintech adoption rate is an easy question to answer because these technologies have become so deeply rooted that even if there will be more traditional banking options in the future, it is not likely that people will want to switch.  

South Africa fintechs like JUMO and YOCO  are prime examples of successful South African fintechs. But South Africa has a larger population of those who do have access to credit cards and different financial services so the need to expand and develop is not necessary as strong as in some other African Countries.

Where South Africa can improve

While the adoption rates and the success of forex trading brokers point to the fact that Africa is on the right track, there are some areas that the country could improve upon to ensure better results. And one of the major things that SA can improve on, specifically the financial industry is to ensure that they are covering all possible demographics. Right now the majority of those who use fintechs are younger than 30 years old, but it may be that those 40 and older may actually have a higher demand for these financial services, but due to the nature of fintechs, they might sometimes stay away from technology or not trust it. But in Africa, since choices for traditional banks and services are limited it’s easier to convince users to use these available technologies to get the financial services they want. 

Another thing the SA financial scene could improve upon is the types of loans that they give out. Right now the SA fintech scene is safer than for example in the USA because they focus on the smaller loans that can be paid off in six months or less and stay away from risky lending all together. And while this may be a part of the reason why Africa’s fintech scene has taken off faster, because it is associated with less risky lendings and transactions, in general, the entire South African fintech scene could be missing out on a different sort of revenue by issuing larger loans across the risk spectrum with the appropriate risk pricing. This would be a right move towards placing fintechs on the same level as the other financial institutions and services and while the market for these types of services might not be as big, it's still a worthy step to consider if South African fintechs want to move away from the status of being the “less official” financial institutions and actively try to establish themselves on the financial market as the first choice for all sorts of services. 

Predictions for 2020

While South Africa is definitely a front runner in the financial sector across the continent it has still been lacking in innovations compared to some countries, which is somewhat surprising considering it has the potential and the financial means to be on the same level as for example Kenya. South Africa has been great at adopting these innovations and implementing the changes but producing innovations hasn’t been their strong suit. In 2020, when the fintechs are supposed to become an essential part of industries across the board and South Africa might get a chance to become the leader in fintech across Africa. The venture capitals are looking closely at the fintech startups in Africa and trying to invest in the next best thing. This year Africa has a chance to become a frontrunner in innovations and bring even more funding to fuel the industry. The Startup scene will likely continue to maintain its speed and efficiency in South Africa, contributing greatly to the country image across borders.This year has been very transformative for the entire industry. 

We’ve seen a lot of challenges come to surface and a lot of unwillingness from both sides to adapt to the needs of the other. The next is, will likely center around solving the issues because we already know all the positives about fintechs and general financial innovations but that rarely fixes the main issues that government officials and regulatory bodies have when it comes to these financial transactions. It has become evident that fintechs and the startup culture are not going anywhere, more so than ever they have a loyal user base that will likely not return to the regular banking procedures and service any time soon. This is why the fintech startups hold the superior positions when negotiating with banks, for example, because they know that in reality, they have got the upper hand even if banks think it’s the other way around. The traditional way of thinking about money and financial services are becoming outdated and even the least technologically advanced people are catching up to this idea. The major task that fintech across the world needs to tackle is security and establishing trust not only between them and the customer but between official bodies as well. The conversations around fintech will likely not stop the following year either. Their popularity is as high as it has ever been and the interest seems to peek from the companies on a daily basis. The momentum that the African community gained this year will likely take them further than other regions in that direction. They have the funding they have the demand for it and they have the motivation. It is unlikely that major change in the world wide dynamic about this will change. Africa will maintain its status as one of the prime innovators and South Africa might have a chance to become a frontrunner as well. We’ve seen a lot of talk coming from China about gaining a technological edge but we’ll have to wait till January of 2020 to see the actual proof of whether or not China is serious about this topic. But it’s hard to imagine beating African and Southeast Asian regions when it comes to fintech adoption since the environment is completely different there. 

To Finish up South Africa has had a great year when it comes to financial innovations of all sorts. It has brought a major boost to SA’s economy and will likely continue to do so next year. Tha main challenges that the local startup scene faces in the country is the expansion of their market and focusing more heavily on innovation rather than adoption rates.