Standard Bank: Kwanele Onyango on Scale, Inclusion, Investment

Chase Le Roux (00:00)
Welcome back to the Scrums.com fintech arena. I'm your host, Chase Leroux. And today we're excited to welcome you, Kwanele, to the ultimate podcast for fintech leaders. Today we're joined by Kwanele Onyango, who is an executive in the TMT team at Standard Bank, one of Africa's largest financial institutions. A quick introduction to Kwanele. Before Kwanele became a banker, she started her career out.

as a banking and finance lawyer. And after completing her articles at Bowman's, she moved across to London, where she worked at a Wall Street firm, Sullivan and Cromwell, as well as SJ Bowman. Konele also qualified as a solicitor while working in the UK. And upon returning to South Africa, she joined Standard Bank as in-house counsel in the investment banking division and led the Africa region's Ivy legal team. She has also obtained her MBA.

from the IE Business School back in 2021 and transitioned out of legal into Stata Bank's Group Strategic Technology Partnerships, where she leads. And then she joined the TMT sector team back in 2023. Gwanele kwateresume, and really good to have you on board and sparring in the arena.

Kwanele Onyango (01:14)
Thank you so much for having me. It's really exciting to be here.

Chase Le Roux (01:16)
Awesome, Kwanele Let's kick off. Take us quickly through what your role is at TMT. What have you been up to?

Kwanele Onyango (01:23)
Sure, so my role is really to be what we call sector expert as well as a client coordinator. What we do in our coverage area at Southern Bank is that we're organized by sectors. we have financial institutions, have agriculture, we've got consumer. And as part of that, we've got the Talco Media and Tech team, that's the TMT team.

which is where I sit and here we specialize in clients which are in the telco media and tech, in the tech sector. And that means essentially clients who are working either from telcos to MNOs to fiber companies to data centers, the full sort of ecosystem of infrastructure. On the media side, clients in the covered media, television.

and as well as online media. And then in the tech space, we have a full range from software companies, as well as where we fit our fintechs in. And so I'm leading our fintech strategy. And that's where we really look at fintechs that are growing in South Africa and across the continent and how we can support them from, you know, with its balance sheet, investment or partnership as commercial partners of the bank across the board.

So that's really my role is looking at clients in those sectors and how we can add value as well as grow those companies in order for them to be mutually beneficial partnerships with the bank.

Chase Le Roux (02:49)
So there's quite a lot to unpack just in terms of what you guys do. But I think for a lot of our international listeners, they probably hear most about South Africa or countries like South Africa and Kenya leading the charge on the African continent. But I think that you've had the ability to understand the entire African or at least a lot of the markets within the African continent.

Do you see activity or least activity emerging from other countries? And what are some of those activities that you see emerging?

Kwanele Onyango (03:22)
Yeah, definitely. mean, South Africa and Kenya are some of the top countries, but really Egypt and Nigeria, you can't talk about fintech in Africa without mentioning those two large countries, I mean by population as well as their fintech offering. I mean in the Egypt side, you're seeing a lot of fintechs coming through in the payment space. Similarly in Nigeria, you've got...

in your lending space.

which are really making great strides in offering lending products and access to finance to what was previously unbanked populations in the country. So we've seen quite a lot of activities there and a lot of those companies actually branching out of Nigeria into other parts of the continent as well, including South Africa and Kenya. So I would say really those are the top four regions that you would talk about. wouldn't say South Africa and Kenya only. You'd have to include Egypt and Nigeria.

And I think what's also been interesting is seeing the changes in the rumors about changes in legislation in Nigeria for open banking that will be coming to the country, which would really change things massively in the fintech space, because that will allow transfer of data with client consent from banks to fintechs and really open up the space for further product development and better access to different financial services for what we currently have as the under large population.

of the underbanked across the continent. So you're definitely seeing a lot of development in the fintech space in Nigeria. And as well as I mentioned Egypt, where you're seeing a real growth of fintechs and also the fintechs there growing out into the Middle East and Middle Eastern fintechs also branching into Egypt.

So it's very much a regional play there as well. So I think that country also needs to be spotlighted very much. think when it comes to investment, in FinTechs in the last year, Egypt was definitely the highest for the continent.

Chase Le Roux (05:16)
Good Kwanele. mean, you know, from scrums.com's perspective, we heavily invested in the African continent as well. And, you know, we actually have divisions or offices in each of those spaces. And more often than not, you know, when we're dealing with international customers or clients, we're trying to find out.

where that market is happening. And ultimately, majority of those countries that you've mentioned there, they offer an investor there. But I think, you know, it's always good to take a real life example of where this happens. And you yourself have been involved in some high profile deals in the fintech sector across Africa. It would be good to understand and maybe you could walk us through one or two that potentially capture

the essence of where this market is heading, just to give some insights into some of our US and UK based listeners.

Kwanele Onyango (06:12)
Yeah, absolutely. So I do have client confidentiality that I need to be cognizant of. So I can speak about one that is public, which the company did give us permission to talk about the transaction. And that was the transaction that we had, where Standard Bank co-funded.

Chase Le Roux (06:16)
of course.

Kwanele Onyango (06:27)
the investment of Intersect into Moderum. And it was really a first of its kind where you had an African fintech being intersected, where they were purchasing the business of Moderum in Europe. there, I think it is indicative of the trend that we're seeing, which would be really interesting to overseas investors of South African fintech and tech companies that are now

that are branching into offshore jurisdictions. And this is really quite a compelling business model because you get the low cost base of South Africa and very highly qualified devs, highly qualified software and technology developers available here in South Africa. and then you get the benefit of having

hard currency revenues when you branch out into Europe or the US. And we've seen intersectors very successfully doing so, where they are a security fintech. So they provide authentication of online transactions. And in South Africa, that's quite an advanced vertical of online transactions and where they integrate into

into the telcos, into the banks in order to do authentication, which is 3DS authentication in South Africa, which is not necessarily, which is legislated in South Africa, but not necessarily so across the world, but a really good way to secure online payments. And so they have been a first mover in terms of providing this in markets like Europe and the US, but very much containing that South Africa cost base.

And so from an investment and business model perspective, it really does benefit the company. And also, as I mentioned, a trend that we're seeing, because you do have also fintechs like Yoco, for example, also South Africa based, but with European operations as well. So that's, think, a good trend that we're seeing that really can showcase the talents of African entrepreneurs.

African fintechs, African technology, but then you actually take advantage of that to then also get those hard currency revenues. So I think that transaction was quite an episodic one for us and also indicative of a trend that we're seeing in the fintech space that's happening in Africa at the moment.

Chase Le Roux (08:40)
Amazing Kwanele. mean, you know, in our very next episode, I want to be talking to a US based investor. And, you know, with with with that in mind, think you are faced with opportunities or you're looking for opportunities all the time. Right. And with you being specialized in the fintech sector. And if I were an African fintech startup, what do you think investors are looking for from from

African fintech startups, know, there's of course the whole AI age happening now and five years ago, our worlds were thrown upside down with COVID. You know, what's changed? What are you looking for from a fintech investment perspective? What are some of those requirements?

Kwanele Onyango (09:22)
Yeah, well, look, I think that in 2020, was some sort of wild multiples that were going around with fintech investments that has settled down quite substantially. So I think the valuations have calmed down and there are much more reasonable valuations. I think, given that it is Africa, it is a risk adjusted return which investors are looking for. And if I go back to the example of

intersect that Standard bank co-funded. That co-funding of that acquisition was also with an international investor, private equity, AKKR, who invest in tech companies. So, I mean, you see there that that is what they're looking for. They're looking for...

those strong returns, they're for strong business models, they're looking for scalable is quite important and globally so because again, those strong...

foreign currency revenues are really what would set apart an African fintech. Because obviously we've got liquidity problems in some of our jurisdictions and the currencies are also volatile. So that revenue in hard currency is what investors also find attractive in order to ensure that their investment grows and doesn't go backwards.

I think smart business models, the funding is matched.

appropriately with if you've got local currency revenues then you'd want to have local currency funding and ensure that the company is well capitalized and a good strategy. And I think one of the most important things when it comes to investment is also backing the jockey, right? So the management team is absolutely critical. the experience, the attitude, the credentials of the management team is often what wins the

day. And so I think that's really one of the key things that we've seen investors spending quite a lot of time to ensure that they've got the right management team in any company that they would invest in, particularly in a fast growing environment like fintech. So very, very strong tech stack, very, very strong.

ability, product market fit and that ability to scale. think those are some of the crucial things that they look for when they're then kind of looking at determining valuations and what the potential exit would be. So I think exits have been tricky in the African market. So there is also that thinking that the investor will look into to say, well, what is the story in five years time? You know, if they, for example, in the piece,

But you also see quite a lot of investors coming in that have patient capital where you've got to know your impact investors, your development finance investors who are in it for the long game. And so I think when you're looking at it from that perspective, then they're not looking to exit quickly. not looking. They're in it for the volatility that will occur in African markets where we have seen political instability or we've seen...

currency devaluations. When I talk of Egypt, for example, earlier, the same thing happened there.

Chase Le Roux (12:14)
You've raised some interesting points there, Kwanele. think first and foremost, I like the saying of back the jockey, right? We've sometimes seen, you know, in private equity investments that sometimes management is wiped out because they want to ensure that the right people are in those seats. But I think that specifically in a time like today where AI is completely changing everything, at least in our space, really...

we finding ourselves having to almost reinvent ourselves every two weeks, which is crazy. And I think that that can only come from a true passion of what you're doing. And therefore, I agree with backing the jockey because, you know, the idea, the initial success was all determined by where that passion comes from. So I really like that. then secondly, you know, you've mentioned

Kwanele Onyango (12:59)
Mmm.

Chase Le Roux (13:02)
a couple of things, whether it be political instability or just the ability to work in Africa is complicated. There are socioeconomic challenges that we faced with. But I think...

When looking at that, looking at yourself, looking at what you're looking into beyond returns, is there a real push to solve real challenges, whether it be accessibility, affordability, financial literacy, are those gaps, are we waiting on FinTechs to help solve some of those problems? And if so, is that an attractive investment?

Kwanele Onyango (13:37)
Yeah, look, it's absolutely an attractive investment. As we said, investors are looking for returns. And in the Africa space, if you're solving problems, you'll tend to find that there are good returns. If you think about, you know...

the accessibility to internet is a problem. The accessibility to smartphones is a problem. Accessibility to infrastructure is a problem. But when you look at some of the tech companies that are involved in solving those problems, they're doing very well. So, you know, there's various examples when I think about accessibility to mobile phones, you've got the likes of NM Kopa that is

providing smartphones to...

people who would otherwise not qualify for loans or banking or any other formal means of obtaining cell phones. But they've got business model where you get, you pay for cell phone on a daily sort of basis. And that allows people who are what you call everyday earners, as opposed to salaried employees to have access to smartphones. And then from there, you then are building up that capacity

and that capability and that smartphone penetration, and then you are actually solving some real world problems. Those phones at the end can be used for business, for education, for entertainment, but they actually are giving people a lifeline in terms of them being able to actually generate an income even off having a smartphone. So those are the fintechs where you see them developing products that actually solve real world problems.

problems. You've also seen MTN coming into that space. They've announced that they're going to be selling smartphones that cost 99 Rand.

I think a 99-rand amount or so. So there is a real problem that needs to be solved and there are business models which allow for proper returns to come through from those business models. And similarly when it comes to financing, you find that there are financing models which allow for microlenders to have access, give access to funding to people who would otherwise not qualify for traditional banking.

funding. So that's very much solving a real problem and in the back of it you get really lucrative returns. So I think particularly in the Africa context.

You have obviously technology companies and fintechs that are servicing convenience sort of offerings, but the real world problems that we face in Africa, there's definitely business models that are making good returns out of solving funding, access to technology, access to internet, and access to smartphones. I mean, I think in South Africa, ⁓

think

about the infrastructure side, you're seeing smaller players providing access to fibre internet on a prepaid basis, where it's traditionally, it was always on a postpaid and contract basis. So now, you're having players coming into the market and disrupting that model. And then as a result of that, you're getting much more wider access to internet into poorer areas, not just the suburban areas, but also

direct access to fibre in townships. And so you're finding that by solving some real-world problems, you're getting some lucrative returns for those companies that are doing so in a smart way with sustainable business models.

Chase Le Roux (16:57)
You know, some of those stories there are absolutely inspiring, right? That doesn't matter, you know, if I take working on the African continent for the last 15 years into consideration. you know, Africans have always had the ability or the uncanny ability to...

overcome problems and challenges and sort of just say, well, this is hard works, but I'm going to make life a little bit better. And that's almost led to, you know, to our ability to leapfrog technology, right? You know, we don't have aging banking infrastructure for argument's sake, because we were able to move straight into mobile banking as an example, right? And where this is going is

How do you see AI fitting into the fintech scene? We've got these challenges. We've got accessibility, connectivity-ish. But how do we see AI fitting into the African fintech scene? What does that leapfrogging look like? Is it going to happen? Do you think it's hype? Are there real use cases emerging already? I know that you're under confidentiality, but it would be good to get your perspective there.

Kwanele Onyango (18:06)
Yeah, I mean, I don't think AI is hype. I think it's very real. And I mean, it's infused in all sectors, I mean, definitely, yes, in the fintech space. But I think fintech is quite broad. So I think, you know, in some spaces, more so than not.

particularly the example that I'm just thinking about is let's say in the lending space, you're seeing...

much more sophisticated alternative credit scoring models coming through where AI has been used to put together the models to figure out affordability and to figure out customer data and how certain offerings can be provided to customers at certain seasons, at certain times of the month or certain.

and then that way you're what's essentially your customers.

personalized experience. I think AI has been used quite extensively across, I think all business models, not just FinTech, but to have that real personalized customer experience. And certainly the FinTech is in the FinTech space that's been used quite a lot. And also I think from a security perspective, there's also the dangers of deep fakes and...

and having to then figure out how to do your authentication in a much more robust way to avoid and prevent fraud, which can be caused by AI. So I think there's the good side and there's the bad side. But definitely, it's something that is assisting to make.

some of the models a bit cheaper. I think also in the Africa context, there's still very much a physical side of business. So you might have an online offering, but often there is touch points, physical touch points, last mile delivery and those type of things, which AI can assist with to a point.

So I do think that there is a limitation to some extent depending on the business model. But, so like I saying, you when it comes to last mile delivery in the Africa context, it is harder to, well, we haven't seen how AI is coming through there yet, but definitely it has improved and continues to improve the customer experience, be the speed of development.

and we'll be seeing the issues around security and how those are needed to be addressed as well.

Chase Le Roux (20:19)
You know, that, you know, in the African context is really interesting because if we had to take the example that you used, know, KYC or affordability and how AI is assisting there, you know, in Africa, it's a complicated problem to solve. It's not that every house has a street address. It's not that...

You know, they have unique identifiers, something as simple as ID documents sometimes aren't there or, you know, there's complications. And I think that really what that says to me is when looking at technology based solutions, you really have to think outside of the box, right? In order to solve this with its multiple phone numbers, whatever it may be, there's a lot of complexity. And I think for the US and UK based listeners.

Kwanele Onyango (20:52)
Yep.

Chase Le Roux (21:01)
it's not quite as simple as just, okay, well, let's just sort out KYC using AI or whatever it may be. There are some complicated things. And that's one of the examples that I was talking about around how passionate you need to be about solving these types of problems and therefore, you know, solving things in a unique manner. Talking about the investment side there from a global perspective, you know, if an investor is sitting on the fence around

potentially investing in Africa and African fintech, specifically African fintech rather. And what would your message be to those investors?

Kwanele Onyango (21:38)
Sure, I mean the opportunity is massive. I think there was a recent McKinsey report that said there's billions of dollars of the total addressable market of Africa.

and fintech. is not one big blob. You've got different countries with different unique needs, different levels of development, different societies, different languages. So, I would say to any investor that they first need to figure out which part of Africa they're looking at and then move from there. Because, as we mentioned earlier, you've got

Egypt in sort of northern Africa. You've got large, a lot of activity in Nigeria, which is in West Africa. You you've got Kenya in East Africa and you've got...

South Africa and South Africa. And those are sort of key hubs for activity in the fintech space. So I would say to an investor to kind of see which firstly, which which region they're looking to to invest in, see which products they're looking to invest in. But definitely also, think what we touched on earlier, ensuring that, you know, that whatever the product business is actually solving a real problem, because that's when you see the real returns.

I think also to think a little bit broader than fintech, because in Africa, fintech is not only online in software, as I touched on earlier, there's usually a physical element to it as well.

because you've got last mile and you've got to figure out financial education and tech education for people to use the actual products that you're offering is also a big part of often a big part of what needs to go into the considerations. And also I think the definition of Fintechs is wide because I mean you're seeing the MNOs of Fintechs you've got your

know, Vodacom SafariCom, M-Pesa, they have fintech offerings on their own. think M-Pesa is processing about $1.2 billion a day in payments. I mean, that's massive. So, I mean, that gives you a sense and they're not operating in every single...

Chase Le Roux (23:40)
huge

Kwanele Onyango (23:45)
African country. So that gives you a sense of the size of the activity and opportunity. So you've got your MNOs that are operating fintech and financial services. There's your retailers. mean, if you think about PEPCO in the South African context, mean, PEPCO, I think, announced last week that they're now selling 65 % of prepaid handsets. So I mean,

that you'd expect those numbers to come from a telco, but it's PIPCOR who is selling that number of prepaid handsets in South Africa. So you've got your retailers in the space, you've got your MNOs that are operating in the space, you've got banks also coming and swinging.

back to regain that market share as well, where the banks themselves are offering mobile money solutions and infant tech offerings outside of their normal offering. For example, you've seen how Old Mutual is coming out with an online bank.

You've also got the neo banks that have come through time and who are operating in a similar space. So when you think fintech in Africa, you've got to think quite broadly. And it's not a limited set. And then, of course, there's different verticals within there. You've got your lentics. You've got your...

infrastructure providers. You've got quite a lot of verticals within the FinTech itself. So I think it's important to understand where the strengths are, where again the product market fit is. Do you want to go B2B, B2C and...

you know, how and how to do that, partnerships, because I think that's a key thing in the fintech space. And I think we've seen that even as a bank ourselves is, you know, when we work with fintechs as clients, there's also very much a strong partnership element to it. you know, bringing that through as part of the discussion is also important to ensure that the partnerships are in place. So, you know, you don't have to build everything out yourself, but how

you acquire? mean, I think we recently saw peach payments acquiring Paydonia in Francophone Africa, and that adds mobile money to what the offering is through that investment in Paydonia. So you're seeing how fintechs are also partnering and acquiring now. So think that's the level of maturity that the fintech space is now in Africa. So I think if you're looking

from the outside, it's also a maturing market. You're starting to see the separation of which are the ones that are going to be successful and which are the ones which are going to fall off. So I think it's a good time to be looking at investment because, you know, there's the maturity, there's established business models, there's established management teams, and you're starting to see the fintechs from...

five, ten years ago now starting to turn profit and having those recurring revenues, which is what investors want to see to ensure that there's returns. So I think it's an interesting and an exciting time. You've also got, I think, the regulatory environment, which is enabling. I mentioned earlier that, for example, hear rumors about open banking in Nigeria. You've got the South African Reserve Bank has come out and said they're going to open up the

national payment system to allow fintechs and non-bank players to operate directly in the national payment system, which is a huge move for the regulators because that's the regulation and legislation has been restrictive on fintechs in not just South Africa but in many African countries. So you're seeing the regulations of the regulators starting to have those...

much more open conversations and I think some trust being built around the operators of fintechs that, you know, they are solid operators, they're responsible operators and should be given the same level or some level of access to the national payment system. So I think there's quite a lot of enabling.

factors that are coming through and comforting factors that are coming through for investors from a legislative perspective, from a maturity perspective and also as I mentioned earlier how there's quite a lot of talent in terms of devs, terms of technology and development on the continent which then also allows the fintechs on the continent to then branch out and scale.

internationally. mean, you you're also seeing some investors coming in. You've read in the news that revoluted as we're meant to be, you know, coming into South Africa and your bank operating the UK and Europe and also in the globe. You've seen Amazon. ⁓

coming into the South African market. So there's quite a lot of tech companies and fintechs that are looking to Africa to grow, to be their next horizon for investment. So I think it's an interesting time. And risk adjusted returns are definitely here for investors who are looking wisely into Africa.

Chase Le Roux (28:47)
Thank you, Kwanele. I think you've summed it up really, really nicely. And I think what I got from that really is the opportunities are massive. There's activity everywhere. And when we're looking at some of the global giants like Google or Amazon or Huawei, they are talking about the race to the last billion

and that being a mile in terms of this is the last place to sort of come in. I think that's really, really exciting. And I think opportunity and the opportunity for the African continent is massive. We are coming up to the end here. Kwanele, I'd like to ask you one final question. What's your favorite book and why?

Kwanele Onyango (29:11)
Exactly.

Favorite book? Gosh, you're taking me back to high school now. I really got into reading. But I won't tell you about any of those sort of teenage books. I mean, I recently read an interesting book called Brotherless Night about Sri Lanka. And it was really interesting and...

Chase Le Roux (29:28)
Thank

Thank

Kwanele Onyango (29:44)
about the political situation in Sri Lanka in the 80s and 70s. And it was interesting reading it also as a South African and the parallels with our history. So I think for me, the lesson there was really how history truly repeats itself and that, know, given where we are in the world, all the geopolitical issues and conflicts that are going on.

that it's everybody's, or most countries have gone through similar difficulties and watching it happen over and over again is really quite tragic. But that book really moved me because as a South African, there was a lot of similarities

with how their heroes went from being politically, how their political leaders and heroes changed and then were no longer serving the nations that they promised to and then the turnaround from there. So I think Brotherless Night was a good one.

Chase Le Roux (30:27)
will come.

Brilliant Kwanele, well thank you and thank you so much for your time. Thank you so much for sharing your expertise with us and to our listeners, thank you so much for tuning into this episode of the scrums.com fintech arena. If you guys found today's conversation valuable and you wanna stay ahead of the trends, subscribe to our podcast and join us next time as we continue to uncover the stories and strategies behind the world's most influential fintech leaders.

Until then, keep innovating and remember the future of finance is just a conversation away.

Kwanele Onyango (31:16)
Thank you so much, Chase.

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