Banking On Fintech

Banks’ antiquated legacy systems create a business opportunity for fintech companies, believes investment firm Capital Appreciation.

- Lloyd Gedye

Technology is affecting every business in the world,” says Bradley Sacks, joint CEO, with former Macsteel CEO Michael Pimstein, of fintech investment firm Capital Appreciation (CAPPREC). “But there is no greater impact than in the banking and financial sector.” In this sector, he says, the “impact is huge” because so much of the work is already technology dependent.

At the time of listing, in October 2015, CAPPREC was the first special purpose acquisition company (SPAC) to list on the JSE. In terms of the rules, a SPAC cannot have its own operations at the time of listing and has 24 months in which to make its first deal.

CAPPREC – with a heavyweight board that includes the likes of former Netcare chairman Michael ‘Motty’ Sacks; Bidvest Bank CEO Alan Salomon as chief financial officer; former SABMiller CEO and chairman Meyer Kahn; former Registrar of Banks Errol Kruger; and former Old Mutual executive Kuseni Dlamini – raised R1bn through a private placement. Of this, R250m was invested by the Public Investment Corporation (PIC) and R50m by African Rainbow Capital.

“We told investors that when we do make acquisitions, we would be looking for good fundamentals for growth,” he told finweek in an interview following the group’s results announcement in May. CAPPREC did due diligence on many companies and sectors before deciding on a fintech positioning.

Working with banks

Banks have antiquated legacy systems, which creates a business opportunity for fintech companies like CAPPREC, Sacks believes.

But he says that fintech companies that think banks are dead, and believe they’d be able to take over banks’ customer bases, are “naïve”.