CROSSFIN TECHNOLOGY: Ambitious Acquisitions Assist Crossfin

The African fintech space is a hotbed of innovation. As the continent looks for solutions to meet its very unique demands, invention and creativity have been widespread as ideas help customers across Africa to carry out all manner of financial transactions. Whether its peer-to-peer payments through the likes of M-Pesa or business-to-consumer transactions through Sureswipe, Africa has proven its worth in fintech.

South Africa in particular is becoming known for its fintech ingenuity. Its financial market is advanced, its population is more knowledgeable than most in Africa when it comes to formal financial activity, and its economy is crying out for innovation that creates smoother movement of cash and builds employment opportunities in the digital world.

In 2019 some reports labelled fintech as one of South Africa’s fastest growing industry sectors, accounting for around 4-5% of FDI. As global companies from Europe, America and Australia look to take advantage of the large numbers in South Africa, and across Africa, they must first solve problems and this is why investment into local businesses to understand regional conditions has become popular.

It is expected that 2020 and beyond will see fintech players look at the commercial market, specifically SMEs. Strong and established structures are now in place in the digital payments space and taking advantage of business payments is the next logical step. Tyme Bank and Discovery have launched as fully digital, and Capitec signified its intentions by taking over Mercantile Bank for R3.56 billion recently. Bank Zero will soon join the market and FNB has launched its First Business Zero account, a fully digital experience for small businesses. Technology is also penetrating other markets; like property, insurance, and stokvels; and data is becoming more and more important for decision makers.

For all of these reasons, South Africa has become one of the biggest fintech destinations in Africa and the hope is that with continued growing interest and involvement, the number of unbanked in the country will fall, and those that operate outside of the country’s formal financial space will make the change and find life to be easier and more efficient.

One company with big ambitions in fintech is Crossfin Technology. Based in Cape Town, with offices in Johannesburg and Durban, Crossfin Technology is hoping to become Africa’s leading independent Fintech group as measured by both the volume and value of transactions processed through its platforms by 2022.

This will come through “continued introduction of products, services and customers facilitating the ongoing growth of the digital commerce ecosystem,” the company says.

Established in 2017, Crossfin invests in high growth, high value companies that can benefit from the expertise in fintech that already exists across its group. Today, the Crossfin Technology portfolio processes over 134 million card and 20 million mobile-enabled payment transactions per annum with an aggregated value of over R79 billion ($5.64 billion).

The company portfolio has been growing strongly since inception and now includes a raft of different fintech businesses, all experts in their field.

Two of the most recent and notable acquisitions into the Crossfin stable include Sureswipe and TruID. In May 2019, Crossfin announced it would acquire Sureswipe – a leading card payment acceptance business with more than 8000 independent retailers using its devices – creating the largest independent payments card acquiring company in South Africa.

AMBITIOUS ACQUISITION

Featured in Enterprise Africa in April 2019, MD Paul Kent explained that the company managed to start out successfully by offering better customer service and faster delivery than its rivals.

The acquisition by Crossfin resulted in the combination of three industry leaders with Innervation Pan African Payments, Emerge Mobile (under the brand iKhokha) and Sureswipe coming together to form a group with over 25,000 active clients, 50,000 active card machines over US$5 billion in transaction value processed.  

Kent said of the deal: “Although the three strong brands have been consolidated under one entity, they will continue to operate independently within their distinctive markets. We believe each provides a distinctive client solution, but that by layering a common shared services platform across the three businesses CTS will provide merchants a ‘one-stop shop’ to help them grow their business.

“If we are to accelerate the migration of South African consumers to a cashless and financially inclusive society, the payments industry must focus on improving accessibility to payment channels and educate consumers and merchants on the true costs and dangers of cash. This new consortium looks to do just that.”

Crossfin CEO Dean Sparrow said: “We see the companies working together to address the different tiers of the South African payments market comprehensively with a value proposition that will be very beneficial to their respective clients, as well as provide sufficient resources to develop best-of-breed technologies that can be brought to market faster than at present.”

Anton Gaylard, Co-founder and COO at Crossfin, added: “We are extremely excited to finally be working with the team at Sureswipe. This acquisition is the perfect complementary fit to the Crossfin portfolio and further extends our distribution ‘rails’ in the payments landscape. We will continue to invest in complementary businesses to support the team as well as partner with, or invest in, other exciting fintech companies with products and services that can be distributed across our ‘rails’ and which add value to our customers and their consumers, such as our recent investments in Retail Capital and Nobuntu.”

CONTINUED GROWTH

In June, amid the challenges faced by the global economy through the coronavirus pandemic, Crossfin through its Ventures arm announced that it would acquire TruID. The move was designed to further enhance the Crossfin customer base, bringing banking and financial institutions on board by giving access to data through a unique API.

TruID was established in 2017 and Gaylard said the acquisition will bring more convenience to customers.

“Their vision for enabling consumers to take control over their banking information creates immense opportunities for fintech innovation. There are also exciting synergies with some of our other portfolio companies which we hope to explore over the coming months,” he said.

TruID’s Dmitry Drabkin said that the acquisition would help change the industry for the better.

“By giving consumers control over their own banking data, we hope to spur a new wave of customer-centric innovation in the banking and financial services industry.

“Instead of providers developing products, we believe consumers are more interested in what third-party providers can develop using our API, resulting in products that meet their specific needs.

“We expect this to change banking in the same way that ‘app stores’ changed the mobile phone landscape, by creating a platform for wide-scale innovation that will transform banking,” he said.

LOCKDOWN LIFE

Following the announcement of lockdown in South Africa in March, resulting in the majority of the population asked to stay home and isolate to stem the spread of the coronavirus, a big problem was presented to Crossfin. Most stores had to cease trading and the flow of money around the country dried up. This is the very lifeblood of the Crossfin business and with few or no transactions occurring, the company had to adapt.

A survey on SMEs by Retail Capital found that 85% of businesses had reported a drop in turnover because of the lockdown restriction in place in South Africa. This impacted society’s poorest first and hardest. Of course, the solution for Crossfin comes through technology.

“Crossfin’s portfolio of companies can assist by combining their extensive capabilities, expertise, functionality and knowledge to channel relief to where it’s needed most.

“Crossfin can offer a technology-based solution to roll out assistance through the effective and rapid distribution of funds, vouchers and coupons on a massive scale and to ensure that through this, help reaches those who need it, quicker and more efficiently,” the company said.

As Crossfin helps clients through the crisis, the hope is that more and more will look to the formal financial system for ease of doing business, and remain in the space in the future.

“Fintech groups are well-positioned to support broader industry and government efforts to improve trade and transacting across the formal and informal markets. Funds from initiatives such as the Solidarity Fund can be distributed via group company ‘rails’, for example in grocery store till lanes with appropriate payment devices.

“These same rails can be used to distribute third-party payments, vouchers and coupons, for example food vouchers given to vulnerable communities that can be redeemed using the tech that fintechs have implemented at the point of sale.

“Loans can be distributed to SMEs via the digital channels fintechs have established. Cash can be displaced through cashless payment solutions to help the most vulnerable with accessing funds without having to go to cash points.

“Payment acceptance devices such as mobile point of sale terminals can be issued to SMEs, spaza shops and informal traders to encourage contactless and cashless payments among communities.

“There is huge potential to remake the South African financial system to better serve all communities,” said Gaylard.

As one of the continents major fintech players, and with ambitions to strengthen its position in the future, Crossfin remains staged on a robust platform. As life returns to a more normal and recognisable state, and the government eases the level of lockdown, Crossfin and its subsidiaries will be able to continue growing and delighting customers with its fantastic product and service range.