For Dave van Niekerk, the founder of MyBucks, fintech is filling a huge void – the space left by the legacy banks that have inadvertently perpetuated Africa’s lack of financial inclusion.
“In the African space in which we play, there is going to be a lot of room for traditional players for many years to come,” he says. “But Africa has got a very high cost of data, and that has always been a barrier to entry to many people trying to access financial services.
“However the smartphone is showing substantial penetration, and that is allowing fintech to be adopted, accessing lending services, banking, insurance, etc.” In fact, there are already over 362m smartphone users in Africa and the smartphone market is expected almost double to over 720m users, by 2020.
At the moment, MyBucks is in 13 African countries (as well as three European countries and Australia) and predominantly offers banking, loans, insurance, money transfer services, credit tools and budgeting tools. “If you put money in, you can bank with us, we can lend to you, we can insure you, we can provide you with various services and tools. And we have developed a number of algorithms or artificial intelligence (AI) services that support our activities,” Van Niekerk explains.
Among the AI tools MyBucks has in its technology armoury is Dexter, which detects and prevents fraud by building digital identities of clients according to their online behaviour. Since May 2017, this tool has identified more than 65,000 client actions as potentially fraudulent. MyBucks’ proprietary AI programme, Jessie, provides a credit scoring function, determining what products a client can afford. This reduced defaults by 23% in South Africa, on loans MyBucks made from January to October 2017.
The MyBucks Haraka App offers clients nano-loans in real time by using AI based algorithms to predict an applicant’s credit risk, using alternative data sources. This means the client does not need a bank account, credit history or paperwork to get a loan, and this enables total financial inclusion. Haraka (the Swahili word meaning “speed”, or “to hurry”) was initially launched in Kenya with great success and has since been rolled out to Tanzania, Uganda, Zimbabwe and Swaziland.
Still being piloted, the Donte loan uptake predictor is a deep learning model that predicts the probability that a client will actually take up a loan that has been approved. For those potential customers who do not have ready access to a smartphone, there is the Wakala offering (again, a Swahili word, that means “agent”), which enables greater financial inclusion by employing remote agents using smartphones and tablets to complete an application for clients who need a loan or banking facilities.
There is also a backstop AI system, called Maica (shorthand for the MyBucks Artificial Intelligence Collections Algorithm), which predicts, on a weekly basis, which clients (who are not currently in arrears) have a high probability of missing their next loan repayment. These customers are automatically contacted with loan re-scheduling offers.
These, and other technological initiatives, allow MyBucks to operate successfully. MyBucks keeps its banking charges low and relies on auxiliary services, like insurance products, to generate its revenue. The latest audited annual results, for 2017 released in August 2018, show that MyBucks has loans disbursed amounting to €500m ($587m). It has also achieved a 39.8% operating profit margin.
So it may seem surprising that MyBucks’ share price since its IPO in June 2016 has hardly sparkled. The share price is down by around a third. Van Niekerk remains reasonably sanguine about the share price performance. “We’ve done a number of positive things since the IPO [including a further share issue] and that’s not really reflected in our current share price – but I think it is just a matter of time.”
In any case, MyBucks can lay claim to a credible social impact story. The MyBucks business model carries an inherent social mission by providing financial solutions to people that would otherwise be financially excluded. MyBucks is proud to have received validation of three of the subsidiaries within the group with the social impact ratings from international ratings agency MicroFinanza.
The completion of a new headquarters building in Gauteng has also seen MyBucks initiate a “training of the trainers” scheme, whereby each of the African countries in the MyBucks network send trainers for a 60-day course in financial literacy. Subjects covered are an understanding of insurance products for rural farmers, and even life insurance for householders to guard against the loss of breadwinners. The trainers then return to their home countries to further this knowledge transfer, training more advisors.
MyBucks has bucked the trend and retained a network of 84 bricks and mortar branches that they acquired from the US development NGO, Opportunity International. Indeed, MyBucks continues to work closely with Opportunity International by taking over their banking operations while the NGO concentrates on promoting financial literacy.
However, it is fairly clear that the company’s growth strategy is strongly aligned to the continuing penetration of the mobile smartphone and internet connectivity. And MyBucks has an important initiative in this regard. It is rolling out a smartphone distribution programme, initially to account holders in Mozambique and Malawi. The free smartphones are preloaded with the MyBucks app.
“For the initial rollout, its orders of 10,000 handsets for Mozambique and 10,000 for Malawi,” Van Niekerk confirms, adding that it will be up to the customer to choose which telecom network to join.
“We are fairly network agnostic,” he clarifies, “but we are talking to the networks to ask them to provide reverse billing on data charges on our apps. So the client uses our app, but we would pay. “At the end of the day we don’t want a customer to change networks based on his bank. Rather, the customer should choose the network that can offer the best service and tariff.”
And as for competition from the legacy banks, he points out that, “these days everybody is in the app space. If you don’t have an app, it is almost as if you are not even in the banking space.” And Van Niekerk insists that speculation that some fairly heavy-hitters are about to enter the South Africa fintech space means there is a reason to be optimistic. He believes that there is plenty of space in the sector, and the more players there are the greater will be the pressure on regulators to get and keep this sector in order.