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Although Absa already owns 49% equity in RainFin, the bank will now incorporate the online lending marketplace’s offerings into its suite of products. This will allow the bank to offer SMEs unsecured working capital loans within 48 hours after application.
CEO of RainFin, Sean Emery (pictured top left), says: “This is the first real example of how a bank in South Africa is embarking on a journey to incorporate something across the whole scale.”
According to Paul Nel (pictured top centre), Head of Open Innovation at Barclays Africa Group, this partnership is a solution to the traditional bureaucratic nature of banks.
“The RainFin story is a great example of Barclays’ Rise Africa mandate, which is to connect, co-create and scale tomorrow’s products and services, faster and cheaper,” says Nel.
The company connects over R1-million per day between lenders and borrowers through its marketplace. “This has created a new financial ecosystem, something which only 18 months ago was considered highly improbable,” concludes Emery.
“Our hope is that this relationship with Absa is very significant one in the scaling that we require to make the business grow even stronger,” says Emery.
Emery says RainFin stands out from other fintech funding institutions as the company is governed by the FSB, NCR, and is a loan provider. He says other services tend to be more expensive on an APR basis, and RainFin’s aim is to reduce the cost of funding for a small business.
If an SME approaches their Absa banker for financing, such as short-term working capital, the banker can pre-register the company and introduce them to RainFin. Going through this channel means the customer will have slight preferential treatment due to Absa already knowing about all of their details.
“We have seen an increasing number of South African consumers and businesses adopt online services to overcome the past challenges of accessing financial services, especially debt products,” says Paul Nel.
Read more: Lending goes peer-to-peer with RainFin
RainFin is also a member of Barclay’s Rise accelerator programme. This has helped to accelerate the partnership between the two entities. After an initial investment in 2014, RainFin and Barclays worked together to refine the RainFin offering, operations, and more to align with the regulatory framework. This enables RainFin to be available across all operations.
RainFin’s ‘intelligent’ SME-specific credit scorecard reviews an applicant’s transaction history, financial health, and other aspects. It can also look at an entity’s social media profile as part of the verification process. A credit profile is then generated for the SME and presented to lenders in the marketplace as an asset class.
“This significantly reduces the effective cost of finance for SMEs, which speaks to both the value proposition of RainFin and Absa,” says Emery.
Nel says the banking services we see today won’t be the same in the future. Banks may not be able to grow offerings themselves, which is where a company such as RainFin comes into play.
We won’t be able to do it ourselves so this open innovation part of bringing together the entrepreneurs, the tech, all of these things around fintech who have a disruptive idea or concept is fundamentally part of our strategy of solving for the future,” says Nel.
Emery says there is still a long way to go. While the aim of fintech is to make banking cheaper, there will always be a limited number of early adopters. “People still trust their brands, they have a lot of inertia with whom they bank with and to break through that is quite difficult,” says Emery.
“All fintech in South Africa needs to be supported as much as possible to do innovation. We have to do it with the mind of an SME. We have to do it responsibly. We have to do it with the mind of an SME and I think it’s very important that an SME can afford to back what gets lent otherwise we have a systemic problem for all of us,” adds Emery.
Nel says the primary goal is to help and support the economy by looking at different ventures, such as RainFin. “And where does this go from here? Into making sure that our clients from Absa and RainFin benefit from this partnership and from this scale.”
Update: clarification of article heading.