Lesaka's Innovative Solutions

Lesaka Technologies, a champion of financial inclusion, is an expert when it comes to SA's informal market.

The company, listed on the Nasdaq and the JSE with a market cap of R4.5bn, is one of the largest technology-focused companies in SA.

Lesaka uses proprietary banking and payment technologies to distribute low-cost financial and value-added services to small businesses, primarily in the informal sector, and to consumers — the majority of whom are grant beneficiaries and have largely been excluded from financial services.

More than 72,000 informal retail merchants use the group’s cash management solutions, bill payment technologies, value-added services, business funding and card acquiring solutions. These allow merchants to become a stand-alone financial hub, where their value-add products and services drive customer growth.

For consumers, Lesaka provides unsecured credit, transactional banking and microinsurance to 1.3-million customers through its EasyPay Everywhere brand.

“Lesaka aims to help merchants in the informal and township economy compete and grow their businesses. We work hard to help grant beneficiaries improve their lives and are devoted to understanding their needs and creating relevant and affordable products and distribution networks for them,” says Lesaka SA CEO Lincoln Mali.

“Competition to serve grant beneficiaries will change the grant payment space for the better and enable customers to choose their bank based on factors that matter to them such as service, products, price or convenience.”

SA’s economy is still largely cash driven, accounting for 60% of all transactions. That figure is higher in the informal sector where about 90% of transactions are cash-based.

“Most of the 12-million grant beneficiaries are withdrawing their grant in one transaction. That can’t be regarded as financial inclusion as grant beneficiaries still don’t enjoy access to the financial system for their payment, transactional, credit, savings and insurance needs,” says Mali.

Lesaka, a fintech leader

Lesaka’s acquisition of the Connect Group has been a game-changer for its merchant business. Connect Group CEO Steven Heilbron led a private consortium in 2013 in acquiring a cash solutions business, then oversaw the successful acquisition of Kazang in 2020. This provided an exclusive highway into SA’s informal markets through which the business could deliver multiple product and service opportunities.

Heilbron is says SA’s prosperity lies with small businesses. “Our focus at Lesaka is to resolve the pain points that micro, small and medium merchants experience by using financial technology as an enabler.”

The company provides merchants with a point-of-sale device which is linked to a digital wallet from which they can pay their suppliers and sell many products, including airtime and electricity. Customers can settle municipal bills and pay via card, providing instant settlement to the merchant’s digital wallet.

They are also able to access funding and an electronic smart vault via the device. Lesaka’s smart vaults are processing and digitalising up to R10bn a month. Kazang Pay, a spin-off of Kazang, which launched in late 2021 with 300 clients, now has over 42,000 clients.

“We’re providing a complete ecosystem which merchants are quickly becoming dependent on," says Heilbron.

“Key to the success has been an obsession with innovation, disruption, execution, and a willingness to explore potential opportunities. The business is obsessed with fintech, not for its own sake, but for its ability to enable financial inclusion in the informal market.”

Lesaka recently released its third-quarter results for the three months ended March 31 2023, which demonstrated a significant improvement in profitability. Operating income (before purchase price allocation amortisation) came in at R134m for the quarter, compared withan operating loss of R147m in the same period last year.

“With our innovative technologies, leading distribution network and relevant product set, Lesaka is well positioned to take advantage of the opportunities arising from the transformation of SA’s informal economy” says Mali.