Covid-19 accelerates digital advancement, bringing opportunities to investors and start-ups
The Covid-19 outbreak has altered the needs of consumers who, under the ‘new normal’, have been forced into new ways of consuming, learning and communicating. This has given impetus to digitisation in emerging markets and new demands are pushing the boundaries of innovation forward.
As consumers become increasingly reliant on digitised platforms to conduct daily activities, companies are treating digital transformation as a tactic to survive the crisis. Digital has always been one of the biggest opportunities within the area of financial services, and this has become more pronounced amid challenges posed by Covid-19.
Financial services organisations across the globe have strongly encouraged their clients to make use of digital banking features during the pandemic’s enforced circumstances. The ability to make payments digitally has become critical. And the fact that Africa has leapfrogged the developed world in terms of mobile connectivity, puts us in a good position to take advantage of fintech solutions that will bring more individuals into the banking system.
With a presence in 20 markets across the African continent, Standard Bank has been exposed to digital economies that are both dynamic and active. Now, with restrictions on physical movement, they have become more fundamental than ever. This does not only apply to the area of financial services and we are seeing accelerated digital enablement within the areas of healthcare and infrastructure.
This opportunity has given rise to entrepreneurs and start-ups, who are developing platforms and solutions in response. While these businesses are nimble and agile enough to develop tech quickly that offers a solve for existing challenges, they do not have access to larger networks to roll out their solutions at scale.
This is where investors – from large institutional to venture capital funds – have a role to play. By supporting and investing in tech start-ups, solutions can be taken to market at scale. But with heightened uncertainty and reduced liquidity, there are questions around the ability of investors to take advantage of new opportunities.
In the current investment environment, Standard Bank has had to consider two elements. The first is to ensure that the fintech companies we are already working with are sufficiently capitalised so that they can manage their developers and workforce. The second is to be on the lookout for potential opportunities and companies that we believe to be dynamic and resilient now and in the post-Covid future.
The start-up funding ecosystem has not been unscathed by disruption brought about by the health pandemic. While some investors have been supportive of investee companies, others have had to pull funding or are targeting it towards later-stage businesses as opposed to those in start-up phase.
However, if we are to solve one challenge for the continent it is important to note that dynamic support of early stage entrepreneurs to get them into viable business mode is fundamental. The key to success is creating a fertile founding environment for early entrepreneurs to get access to what might not be large amounts of money, but just enough for them to flesh out their idea and get one or two customers on board.
In recognition of this challenge facing entrepreneurship on the continent, and with the aim of helping the sector to grow, Standard Bank partnered with Founders Factory Africa to invest in and scale fintech companies across the continent. Recently, Standard Bank invested in two new technology start-ups, one from Nigeria and another from SA, who have been selected and accepted into the FFA Venture Scale programme.
Standard Bank’s investment thesis of financial inclusion remains. The Covid-19 outbreak has accelerated the need for financial inclusion across all markets and this has strengthened the case for companies that can provide solutions that help to bring more individuals into the banking system.
There are corporate funders who are willing to get into the start-up phase, but they need to understand the business and see how it contributes to the current environment. If entrepreneurs can make that clear, there will be funding available.