ALEX FORSYTH THOMPSON- FOUNDER & CEO OF FLOAT

Float is a market-leading payments fintech start-up that is changing the way people do payments in South Africa by allowing consumers to use the available limit on their credit card to pay in up to 24 interest-free, fee-free monthly instalments.

The concept:

Alex was a suit-and-tie corporate in a previous life, you’d never believe it as he sits across the table in a grey knit sweater cracking jokes and speaking in a very straightforward, ‘no frills, no fuss’ way.

He explains that his main focus was heading up innovation for a listed financial services company in Johannesburg that was on the frontier of fintech advancements, particularly in the realms of money management and credit solutions.

Everyday Alex would sit in front of his proverbial drawing board, mad scientist style, and ask the question, “How do we build a more responsible credit system?”

It can be very difficult to create excess cash flow that can be used for savings and investment. In South Africa we also have a very low rate of financial inclusion.

Financial inclusion provides the opportunity for both low-income and high-income earners to be integrated into the financial system and therefore is a significant tool for enabling economic development.

Though South Africa is very well banked and we have exceptional formal financial services, not everyone has access to credit. When we specifically address the broader middle class, the reality is that many are excessively burdened with debt. The overindebtedness of this segment has become a prominent concern, highlighting the need for a more balanced and sustainable credit landscape.

A prevailing mentality of keeping up with the Joneses has taken hold and the average South African, after all their monthly expenses, are still in the red zone.

The invention of the credit card helped to bridge that gap but when researching to identify trends in credit and lending technology, Alex discovered the ‘BNPL-model.’

Buy Now Pay Later.

The BNPL model is a type of short-term financing consumer payment option that allows people to make purchases immediately and defer the payment for those purchases over time. Instead of paying the full amount upfront, users can split the cost into multiple instalments, usually interest-free.

Well-known BNPL models are AfterPay from Australia and Klarna from Sweden, but the idea of paying in interest-free instalments has been prevalent in Latin America for over 30 years and the earliest documentation of the concept can be traced back to the 19th century.

“It’s a smarter way to do credit. BNPL models turn traditional incentives of credit on their head.” says Alex.

With traditional credit you are faced with compounded interest, while the BNPL model is interest free. However, there is a massive key difference between Float and regular BNPL models like AfterPay and Klarna and it’s of paramount distinction to the shopper.

The difference:

Popularised BNPL, such as AfterPay, are all about giving people quick, fast and easy credit for everyday purchases- particularly in the fashion sector. The Latin American BNPL model is a card-linked model, using existing credit in the best way possible so as to not add extra credit into the system.

BNPL models like AfterPay and Klarna issue shoppers with new credit, potentially indebting them further. With Float, there are no new credit issuances and shoppers can truly manage existing credit in the smartest way possible, without added risk and without ever having to worry about late fees.

“Imagine your credit card was Peter Parker, the BNPL model is the spider that gives your credit card superpowers and helps you manage your cash flow efficiently.” says Alex.

We always appreciate a superhero analogy.

Float’s vision is to be an enabler of instalment payments, with a broader goal of bringing banks and financial institutions into the BNPL game. Their focus is on creating connections between shoppers, merchants, and banks to enhance the overall BNPL experience.

“We don’t want to be a lender to consumers, we want to be an enabler for responsible commerce. Our mission is to enable commerce that benefits all stakeholders of the economy, promoting financial inclusivity and responsible financial practices” says Alex.

Traditional credit is almost always a win for the lender and a loss for the borrower.

Float believes that there is a better way to do things.

“I had always envisioned myself as an entrepreneur, so once I had identified the opportunity in the market and built a sound business case, I left the corporate world and started consulting. My journey involved searching for two crucial elements: first, reliable tech partners, and second, investors with patient capital and a strong balance sheet, a rarity in South Africa.”

According to the University of the Western Cape, South Africa experiences a higher start-up failure rate, with 70–80% of small businesses failing within the first five years, exceeding global averages. Cash flow is key to keeping your startup afloat (pun intended).

Patient capital ensures that the investor provides consistent support and resources over the long term, giving a start-up the time it needs to establish itself in the market.

Moreover, a start-up needs the flexibility to adapt and pivot its strategies as it learns from market feedback. The patient capital and strong balance sheet from the investor allow the entrepreneur to make necessary adjustments without compromising the long-term vision of the venture. This support facilitates sustainable growth and maximises the start-up’s potential for success in a challenging business environment.

*Enter Platform45*

Alex got introduced to Platform45’s Founder and CEO, Shaun Richards, in 2019.

“He bent over backwards to bring it to life. He put together a design sprint on risk with no view of coming in as an investor at the time.” explains Alex.

When it comes to a challenging business environment, 2020 changed everything and when COVID-19 caused investors to step back, Shaun and the Platform45 team stepped in.

“He really did stick around from the first meeting, since the idea was just a powerpoint presentation of a pitch deck and financial model.” Alex grins haphazardly.

Platform45 came in as partners with Float and built the complex integrations; the platform that needed to connect the payment system with the back-end operating system and that then facilitated the interaction with all the merchants.

“Platform45 has been an integral part of our journey as a startup. From helping us refine our initial concept before we had raised a cent of capital, to helping us scale our business to hundreds of merchants, they’ve grown with us and adapted to our ever-changing needs. We’re super stoked to have such great partners!” — Alex Forsyth-Thompson, CEO & Founder of Float

Timeline and accomplishments:

• The official build of Float started in January 2021.
• Beta launched 12 July 2021 and went live with one merchant, Sloom- You know, the mattress people?
• Within 2 hours Float had made their first sale.
• The final product launched on November 2nd 2021.
• Within a year Float had signed its first hundred merchants.
• In 2023, Float made it to the Top 5 fintech innovations for the Visa Everywhere Initiative.

The future:

When it comes to Fintech, South Africa’s presence may still be relatively nascent compared to other global markets, but it is rapidly gaining ground, brimming with immense promise and potential. Within this landscape, South African entrepreneurs and developers have proven their mettle, displaying world-class expertise and innovation.

The future of Fintech in the country is undeniably thrilling, yet there remains a considerable journey ahead, particularly concerning regulations, open banking, and payment systems, where the expansion of application programming interfaces (APIs) to fintech companies is yet to reach its full potential.

The momentum is undoubtedly shifting, with a clear inclination among industry players to embrace open APIs, even though the journey to comprehensive implementation is not yet complete.

South Africa boasts an advanced banking industry, showcasing impressive capabilities; however, there is room for growth in the funding landscape. Presently, many startups find themselves seeking funding abroad due to the high-risk nature of the local economy and the limitations of a comparatively small market.

“We firmly believe that South Africa holds tremendous opportunities for entrepreneurs,” asserts Alex. “The market here is often underestimated, but the evidence speaks for itself. Once you identify an untapped niche, the opportunities are endless.”

As with any project, Float and Platform45 encountered their share of initial challenges, but they persevered through a rocky start. Looking ahead, Alex envisions a plethora of opportunities in the fintech space, fueled by increased access to data and the growing mainstream adoption of APIs. As these developments continue to shape the industry, the future holds immense promise for innovative advancements and transformative growth.

“We started off solving for a clear problem, now our vision is to expand to become a broader embedded finance platform. Our primary focus is on empowering both business and consumer buyers through seamless instalment payment solutions. As we expand our horizons, we aim to cater to a broader range of financial needs, establishing ourselves as a versatile and transformative force in the fintech landscape.” says Alex

Embedded finance platform refers to a fintech infrastructure or system where financial services and products are seamlessly integrated into non-financial platforms or applications. In this model, companies that are not traditional financial institutions can offer financial services to their customers by partnering with financial service providers or using APIs.

One thing is clear, Float is here to innovate. At Platform45, we share this vision and take immense pride in our collaborative efforts with partners like Float to shape a better future.