In South Africa’s fast-evolving fintech sector, smaller, agile and hyper-focused startups are thwarting larger players by focusing on specific customer pain points. Rather than attempt to serve everyone with broad offerings, these startups are winning by solving one problem exceptionally well and investors are taking notice.
At a recent panel discussion at LeaderX, Alex Forsyth-Thompson (Float), Dov Girnun (Merchant Capital) and Gordon Little (FirstRand), unpacked why niche fintechs are outperforming broader platforms.
“We’ve always believed in being very focused in our offering,” said Alex Forsyth-Thompson, founder of Float. “That means light-touch onboarding, very little integration required, and products that are purpose-built for one specific use case. That’s what our customers want, tools that work out the box, no friction.”
This approach is enabling fintechs like Float to scale vertically within underserved markets. These include township retailers, informal traders, gig workers and small to medium-sized enterprises (SMEs). By specialising, they are able to shorten product cycles, reduce overheads and deliver solutions with a tighter product-market fit.
Why Banks Are Partnering with Niche Fintechs
According to Girnun, the success of niche fintechs has started a shift in how traditional banks approach the market. “Fintechs like ours entered the market because there was a huge portion of SMEs that banks simply weren’t serving,” he explained. “Now, we’re seeing banks actually partner with fintechs to access those markets - offering the reach of traditional institutions with the user experience of modern platforms.”
Rather than disrupting the banking sector entirely, fintechs are complementing it. Banks bring trust, compliance and customer reach, fintechs bring speed, UX, and deep relevance in specific domains. The result is a hybrid model where innovation thrives through collaboration.
How Niche Fintechs Solve Real SME Problems
What ties successful niche fintechs like Merchant Capital and Float together is their deep understanding of their target customers’ reality. Whether its cash-strapped informal traders or overstretched SME owners, these entrepreneurs don’t have the luxury of time to navigate clunky onboarding or wait weeks for funding.
“These entrepreneurs are time-poor and cash-strapped,” Girnun added. “They need funding that’s fast, flexible, and doesn’t take them away from running their business. If your product doesn’t deliver that, you’re not solving the problem.”
In short, winning fintechs aren’t just building flashy tech—they’re engineering fit-for-purpose tools designed around the constraints and demands of everyday business in South Africa.
South Africa’s Fintech Regulation: A Competitive Edge?
For fintechs operating in South Africa, the regulatory environment – while imperfect – has become more enabling in recent years. Compared to other African markets where regulatory frameworks can be fragmented or unclear, the panellists say South Africa has a relatively streamlined setup process and increasing institutional support.
“At a base level, getting operational in South Africa is relatively straightforward,” said Forsyth-Thompson. “Getting your banking relationships in place is faster than many think, and it’s generally easier to launch. That ease of doing business gives founders more time to focus on building real value, not just navigating red tape.”
That said, regulation still has its challenges, particularly when startups try to scale. Alex, who has experience launching in other African markets, pointed out the contrast. “In other markets you’re dealing with a little more friction when it comes to things like KYC, cross-border payments and regulatory alignment,” he said.
Interestingly, some countries are actively courting fintechs. “Governments are inviting fintechs in, opening doors and pointing the way forward. South Africa can take notes from that,” he suggested.
Gordon Little, Executive of Platform and Payments at FirstRand South Africa, added institutional insight into South Africa’s regulatory evolution. “Look at what’s happened in crypto,” he said. “More than 200 licenses have been granted, which shows a much more liberal approach to emerging financial technologies. It wasn’t like that a decade ago.”
He attributed this shift to a growing willingness to collaborate among regulators, banks and startups. Initiatives like the National Development Plan: Vision 2030, illustrate how all players in the financial ecosystem are co-creating the future, not just reacting to change.
“The South African Reserve Bank (SARB) has become increasingly receptive to engagement,” Little noted. “There’s more openness, more structured dialogue. It’s not just about compliance anymore; it’s about co-creating the future of the financial system.”
When compared to other African jurisdictions, Little pointed to markets like Ghana and Nigeria, where innovation in real-time payments has outpaced regulatory planning, creating both risk and opportunity.
“What we’re seeing is that instant payments are driving a lot of the fintech innovation north of us. If we want to remain competitive, we’ll need to stay just as agile,” he said.
Fintech Investment Trends: Betting on Specialisation
Looking ahead, the panellists agreed that South Africa’s fintech ecosystem is unlikely to be dominated by one startup or model. Instead, the market will be characterised by a collection of vertical specialists, each addressing a distinct need.
“There won’t be one winner,” said Little. “We’ll see a wave of niche models solving for specific challenges - payments, micro-lending, remittances, SME credit, and more. It’ll be a more modular, interconnected system, much like what we’re already seeing in places like the UK and Europe.”
This modularity reflects a broader maturity in the fintech market. Gone are the days when startups tried to rebuild entire banks from scratch. Today’s winning models are more likely to focus on one service, say invoice financing or cross-border B2B payments, and do it better than anyone else.
“If you’re a fintech, your role is often to ‘mind the gap’ - fill the spaces traditional banks overlook,” Little explained. “And those gaps are not going away. In fact, they’re multiplying.”
Why Investors Prefer Niche Fintechs at Scale
For investors, this fragmentation is not a challenge but an opportunity. The new thesis is clear: niche at scale. Rather than betting on scattering, horizontal platforms, investors are finding stronger returns from startups with precision focus and clear product-market fit.
Girnun shared that Merchant Capital’s international expansion strategy was born from this realisation. “After 10 years in business, we sat down and asked: what do we actually do well? We only do this one thing, and we do it well. So we built our international strategy around that. It's not about timing, it's about clarity.”
He added, “There’s still enormous demand for credit among small businesses. The difference now is that the supply side has become competitive. That’s a good thing, for the fintechs, for the banks, and most importantly, for the entrepreneurs.”
The Future of Fintech in SA: Precision Over Scale
South Africa’s fintech ecosystem is proving that size is not the only best path to impact. In fact, sharp, focused and deeply relevant solutions are gaining traction with users and investors alike.
Whether it’s offering flexible credit to the average South African or streamlining payments for SMEs, niche fintechs are delivering value where it matters most. In doing so, they are not only rewriting the rules of competition but also reshaping the financial landscape of the country from the ground up.
Lungile is the Digital Editor for Startup.Africa, with a knack for storytelling, technology and innovative ideas. Working with Startup.Africa, she takes simple ideas and turns them into amazing stories.
Lungile Msomi
