Africa's biggest bank targets its smallest shops in fintech deal

© Reuters. Africa's biggest bank targets its smallest shops in fintech deal

JOHANNESBURG, Aug 27 (Reuters) - South Africa's Standard

Bank SBKJ.J has taken a stake in local fintech firm Nomanini

to offer credit to potentially millions of small shop owners and

other informal retailers across Africa that have limited access

to banking services.

Africa's biggest bank by assets has invested $4 million in

Nomanini, which connects informal merchants with distributors

via an e-wallet, and aims to roll the service out across 14

African countries by early 2021.

Nine out of 10 retail transactions in Africa are conducted

in cash or via informal channels like kiosks and open-air

markets, according to a 2017 report by audit firm Deloitte.

Using Nomanini technology, Standard Bank will collect and

analyse data on the retailers. Adrian Vermooten, Standard Bank's

head of digital in Africa regions, said data on just one primary

product line, such as pre-paid airtime, was enough to proxy the

risk associated to that shop, build up a financial profile and

understand its ordering patterns.

This will allow the bank to pre-empt the trader's

re-stocking needs and send them alerts offering to arrange and

underwrite its next order, for instance.

This could be done via Nomanini or Standard Bank devices

supplied to the traders or by leveraging other existing networks

or devices from third parties - whatever fits best in each

market.

Vermooten pointed to tens of thousands of informal traders

who currently act as mobile money agents in African countries.

"Those are all small little businesses that we find really

attractive," he said.

At a later stage, the bank will look to help those retailers

offer financial services, like cash deposits and withdrawals, to

their customers.

Vahid Monadjem, founder and CEO of Nomanini, said even just

100,000 retailers could reach between 50 million and 150 million

people.

Standard Bank hopes that its licences to lend and offer

other products, such as insurance, will give it the edge over

mobile operators that currently dominate financial services in

markets like Kenya.

Kenyan telecom company Safaricom SCOM.NR has pioneered

offering Kenyans without bank accounts a network to transfer

cash via mobile phones with its M-Pesa mobile payment service

platform.

Standard Bank will also face competition from traditional

rivals such as FirstRand FSRJ.J , which has also teamed up with

a fintech firm to target informal businesses. New players are entering the fray too. Digital-only lender

TymeBank, which launched this year, is planning to offer

business accounts, while a bank set up by money transfer service

Hello Paisa and lender Sasfin is specifically targeting informal

retailers.

Hello Paisa's Managing Director Ahmed Cassim told Reuters in

an interview on Monday that the bank, launched in June, would

offer retailers point-of-sale devices in order to collect data

that would allow it to sell them products like loans and

insurance - a strategy similar to Standard Bank's.

"I think the penny has dropped that the opportunity exists,"

Cassim said, adding that moving a retailer away from cash also

allows its customers to shift towards other methods of payment,

further expanding the addressable market for financial services.

LONG-TERM OPPORTUNITY

Africa is the world's second-fastest growing banking market,

according to a 2017 McKinsey report. Standard Bank and Nomanini will roll out their service in

South Africa, Zambia, Mozambique, Malawi, Angola, Zimbabwe,

Namibia, Ghana, Nigeria, Kenya, Tanzania, eSwatini and Lesotho.

Other products it will offer the retailers include

short-term savings and insurance.

Nomanini is open to partnerships with other banks elsewhere,

but says its partnership with Standard Bank alone will give it

substantial geographical reach and product range.

"The scale of the opportunity for Nomanini within Standard

Bank's footprint can keep us busy for a very, very, very long

time," Manadjem said.