South African fintech company RainFin.com has announced a strategic partnership with Absa that will see Absa incorporate the RainFin offering into its suite of products, effectively offering SMEs unsecured competitively priced working capital term loans within 48 hours of application.
Sean Emery, RainFin CEO, comments: “In so doing, it gives Absa’s business bankers the opportunity to offer clients a very efficient digital mechanism to complement their present SME customer value proposition, while RainFin can significantly scale the volumes on its credit marketplace.”
It also addresses the challenges that have traditionally faced SMEs when acquiring finance, he adds. “Accessing unsecured working capital at cost effective rates has been very challenging – especially for those in their early years of growth,” says Emery. As a consequence they often resort to higher cost alternatives such as invoice factoring and merchant cash advance services which can have effective interest rate charges of over 60% per annum.
The partnership has been accelerated by Barclay’s global innovation programme, Rise, of which RainFin is a member.
“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 Paul Nel, head of open innovation at Barclays Africa Group. “After the initial Barclays Seeker fund investment in RainFin in 2014, spearheaded by Eugene Booysen, chief innovation officer of Barclays Africa CIB, the two companies worked closely together to refine the original RainFin.com credit marketplace offering, its supporting operations, credit scoring methodology, and collections capability, to align to the regulatory framework. This enables Barclays Africa to scale the RainFin offering by making it available across its operations.”
“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 Nel. “When RainFin.com launched in 2012, it entered the lending market alongside incumbent financial institutional lenders with an innovative business model i.e. connecting lenders directly with borrowers. Their objective: reduce all the costs associated with borrowing.”
By using RainFin’s online application process – the intelligent SME-specific credit scorecard that reviews not only an applicant’s transactional history and financial health but also includes additional non-traditional data points such as procurement history and social media – a credit profile for SMEs can be determined. Thereafter they can be presented to lenders on the marketplace as an attractive 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.
In two years RainFin has grown organically, connecting well over R1-million per day of lenders and borrowers through the credit marketplace. “This has created a new financial ecosystem, something which only 18 months ago was considered highly improbable,” Emery says.