Why Niche Fintech Startups Are Thriving in South Africa

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. 

South Africa is a major fintech hub on the African continent. As of 2023, South Africa had 140 fintech startups, representing over 20% of the African total. This number has significantly grown since then.

Vertical Fintech Models Outperform Broad Platforms

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.