As South African businesses emerge from the pandemic, Addendum reflects on its evolution over the past 24 months. The Funding Solutions business grew substantially during this time, and we identified key factors and market trends that impacted our business trajectory for the good. 

Financial technology companies reported growth across the board during the pandemic

Research suggests that the pandemic led to a global shift in the willingness of the financial services industry to embrace modern technologies. A World Bank study showed Fintech firms reported strong growth for the first half of 2020 compared to the same period in 2019 (which was before COVID 19). The study gathered data from 1,385 Fintech firms in 169 jurisdictions and revealed that emerging markets and developing countries experienced faster growth than developed markets. A study by Cambridge Centre for Alternative Finance (CAFF) showed “a strong increase in the use or offering of many FinTech products and services since the outbreak of the pandemic.”

At Addendum, we observed early in the pandemic that businesses were unable to conduct traditional face-to-face debt roadshows to raise debt funding because employees were forced to work from home. As a Fintech business operating in the debt capital space, Addendum Funding Solutions was well-positioned to help facilitate funding processes for companies through its platforms.

Addendum Funding Solutions recap: COVID 19 and beyond

In line with this global fintech growth-trend, Addendum Funding Solutions experienced expansion during the pandemic.

In January 2021, Addendum announced plans to launch a brand-new Funding Solutions product. The Marketplace platform was successfully launched in September of the same year. The new platform saw movement of more than R100 million in bonds in its opening week.

Since then, the business has grown on all fronts. It now has more users, facilitates more transactions and employs more people than it did before the pandemic. Both Debt Solutions and Marketplace have continually been releasing platform-enhancing product features in response to user requests. Real-time chat, Price Discovery through Analytics and Flag Alerts are three much anticipated and equally well received recent releases. Listed bond activity on the Marketplace platform doubled between February and March 2022 and at the same time our Debt Solutions division celebrated its 100th issuance.

To summarise the key trends and factors that kept the Funding Solutions division resilient during COVID 19, we highlighted four areas.

1. The acceleration of digitisation in financial services

Digital Transformation has seen a greater urgency globally as a result of the pandemic. A study by KPMG (via Forrester Consulting) targeting digital transformation strategy leaders, showed that “67% of respondents said they have accelerated their digital transformation strategy and 63% said they’ve increased their digital transformation budget as a result of COVID-19.”

The financial service industry has become more aware of what Fintech businesses, like Addendum, can do to facilitate their digital transformation objectives. A Gartner research report echoes this sentiment and encourages leaders to partner with Fintech companies as an “alternative option to explore when considering priorities related to new products and services, as well as modernizing and upgrading the technology infrastructure of their organizations.” “Fintechs are no longer simply ‘disruptive competitors’ and can instead be ‘symbiotic collaborators,’ offering mutually beneficial partnership options to more established financial services organizations.”

At Addendum this has been especially prevalent over the past twelve months. An increasing number of large local banks are partnering with our business to assist in their own business growth.

2. Transparency

Transparency is at the core of Addendum’s principles. We encourage full transparency between users.

For example, on the Debt Solutions platform corporates have one centralised document folder to which all funders have access so that everyone sees the same information. If a single funder requests anything over and above what is provided, the rest of the funders will also be able to see this information once it has been added to the folder.

The debt utilisation graph ensures that any funding raised through the platform both aligns with the corporate’s internal limits and is made visible to prospective funders. In other words, a corporate’s debt limit can be set at a particular amount and the platform will ensure that this limit is not exceeded. This maintains transparency as any funder user can navigate to the corporate profile to view the outstanding debt at any time. Funders can also have more awareness of what else the corporate has done through the platform.

On Marketplace, transparency is most apparent in how all platform activity is anonymised and distributed to users daily, to ensure that everyone has access to the same market information at the same time.

The day-to-day benefits that greater transparency offers our clients are clear: “Given the lack of transparency in pricing and illiquidity in the trading of corporate credit, we are thrilled to have been one of the first to trade via this platform. We believe this is a step in the right direction towards developing a fluid and more modern way of trading, while potentially creating liquidity and price discovery.” (Quote from Nadia Ismail, Portfolio Manager and Fixed Interest Dealer at Futuregrowth Asset Management as featured in “Addendum Marketplace aims to boost liquidity of corporate bond market.”, Business Day, 14 November 2021).

3. Customer focus

Simplicity and ease of use is another guiding principle at Addendum. We believe this focus on superior customer experience has become a differentiating factor for us.

As with digital transformation, the pandemic has increased awareness of the importance of Customer Experience with decision makers. In a KPMG survey of CEOs, 72% of respondents said customer experience is a higher priority since COVID 19.

Cultivating relationships with clients through personalisation and frequent contact has been instrumental in developing useful features for our platforms. Staying curious about what clients say and conducting frequent user acceptance testing is critical to improving user experience.

Research and Development and User Experience lead (R&D and UX) at Addendum, Cara van Schalkwyk, believes that “listening to client feedback is fundamental to creating user-centric experiences.” Usability specialists Nielsen Norman Group concludes: “Whether you use the term ‘UX’ or ‘CX’ is not important…. Designing the experience should not only take place at the interaction level. When individual experiences are designed and evaluated in silo, they will often pass acceptance criteria. But when you put independently designed interactions together into a realistic user journey, things often begin to break down….”’

4. Automation

The Funding Solutions platform makes use of proprietary technology to make processes more efficient, as we believe in using technology to automate processes that save users time and effort. A good example is the “request meeting” action button on the platform, which automates the process of setting up a meeting between the lender and the corporate, making it quicker and easier to engage directly with someone you might otherwise not know how to access.

COVID 19 has created an awareness of the benefits automation brings in reducing routine tasks. In a global survey of eight hundred senior executives conducted by Mc Kinsey in July 2020, two-thirds of respondents said they “were stepping up investment in automation and AI either somewhat or significantly.”

A report by McKinsey named Automation as one of the “Seven technologies shaping the future of fintech” in the next 10 years. It states that “Replacing manual work with automation not only improves efficiency, but also reduces human errors, and allows businesses to respond to fluctuations in demand.”

Sources:
https://www.worldbank.org/en/news/press-release/2020/12/03/fintech-market-reports-rapid-growth-during-covid-19-pandemic
https://www.weforum.org/agenda/2020/10/covid-19-financial-technology-fintech-regulation https://home.kpmg/xx/en/home/services/advisory/management-consulting/kpmg-connected-enterprise/going-digital-faster.html
https://www.gartner.com/en/financial-services/research/fs-firms-effectively-partner-fintechs
https://agilemanifesto.org/
https://www.mckinsey.com/featured-insights/future-of-work/what-800-executives-envision-for-the-postpandemic-workforce