How Meerkat’s fintech platform aims to lower debt counselling service for clients [Q&A]

SA fintech startup Meerkat has been selected as one of six startups to take part in US fintech accelerator Catalyst Fund‘s latest cohort. The accelerator aims to advance financial inclusion in emerging markets.

Meerkat, which uses a fintech platform to lower the cost of offering its debt counselling and savings product to clients, is one of six startups chosen to take part in the current cohort, which kicked off last month.

The six include South African (including fintech Spoon Money), Nigerian, Indian and Kenyan participants and the cohort kicked off in London on 20 January and will run for six months.

SA fintech Meerkat was one of six startup selected to take part in the Catalyst Fund’s latest cohort

Last month the US fintech accelerator Catalyst Fund secured $15-million in funding from JP Morgan and UK Aid.

Fintech startups in Kenya, Nigeria and South Africa that target financial inclusion, are among those set to benefit from grants of up to $100 000.

Meerkat will receive mentorship from the fund and global tech consulting firm BFA and help to launch their innovative low-cost savings product to the SA market.

The startup, which offers debt counselling and insurance, was founded in 2016 by David O’Brien (pictured above).

Its simple savings product aims to assist the South African mass market reduce their reliance on debt and improve their financial health. The startup uses digital technology to reduce the cost to service the customer and then shares the value that is created.

In addition to the funding, Meerkat will share learnings with the local and international cohort members and the fund’s impact investor networks and investor advisory committee that includes Quona Capital, Flourish and Accion Ventures.

In this emailed question and answer (Q&A), O’Brien responded to various questions on his startup’s platform, what makes it a fintech business and how the platform is able to reduce costs for indebted clients.

When was the business founded?

The business opened for debt counselling in late 2016. We sold our first insurance policy in 2017, our first savings plan in early 2019, and we are launching our funeral plan in Q1 2020.

I founded the business. My initial co-founder had a stroke and exited. Early joining co-founders are Guy Platt and Chris Howarth. Chris has extensive operations history. Guy has Silicon Valley experience and has built a fintech businesses in Sweden. The staff own 20% of the business.

How far along are things with the platform?

We have 1500 debt counselling customers, as it is a call centre based business. We manage R40-million per month on their behalf. We have 1000 policyholders without a single piece of paper in the business.

The pure fintech element is the savings product that we are bringing to market. Revenues are around R1-million a month.

Have you secured any funding?

I have invested over R5-million in the business. We secured an early stage loan from the Asisa ESD fund of R7.5-million (the fund, managed by Edge Growth, gave the company debt funding in April 2017). We have just secured the Catalyst fund support.

We are currently in talks with some large SA financial services groups about further funding rounds. However, the business is Ebidta-positive, so any funding will be for specific international expansion plans.

What makes the company a tech business?

We are a financial services firm that is using tech to reduce the cost to serve our customers, and return the value to them. As we build out the tech elements of our proposition we will increasingly morph into a fintech. But the product grounding allows us to generate revenues in a traditional way.

The fintech element is coming through with the portal and the launch of the savings product, as the debt counselling process is a traditional face-to-face business.

We will be offering a single place for the customer to understand the breadth of their personal finances, with value adding products to help them to do more with their money.

We also offer a bot experience where you can engage with the bot and acquire your credit report.

How do you source customers?

Debt counselling as a regulated process is unique to SA. We mainly source customers through digital advertising across multiple channels.

How do you lower the cost for clients?

Our insurance products are completely paperless for the customer. We then translate these administration savings into reduced premiums.

We also have reduced our distribution costs within the business model, which are ultimately shared with the customer.

Our savings product has no surrender penalties or lock-ins, which are often linked to the cost of traditional distribution models. As we increase scale and launch further products we will also share scale efficiencies with the customer.

A component of the Catalyst journey will be for us to integrate our fintech offering with our products.

Read more: African fintech startups to benefit after Catalyst Fund nets $15m from UK Aid, JP Morgan
Read more: UK government pledges £10m to Catalyst Fund to invest in fintechs
Read more: Catalyst Fund selects three Africa-focused fintech startups for accelerator programme

Featured image: Meerkat founder David O’Brien (Supplied)