02 December 2020
Capital Appreciation looks to mobile phones for payments growth
Business Day

Mudiwa Gavaza

Halo, developed by Capprec’s Synthesis unit, is a “tap-to-phone” contactless payment product for use on Android devices 

Fintech group Capital Appreciation (Capprec) is pinning its hopes on a future of digital payments through a new partnership with Nedbank. Capprec’s business includes providing technology that banks and other financial services companies use to add more features to their digital platforms, such as integrating loyalty programmes and the sale of prepaid vouchers. Its blue-chip clients include the big four banks, as well as Discovery Vitality, TymeBank and some asset managers. The Covid-19 pandemic has helped increase adoption of digital payments as physical cash is seen as a possible vector for spreading the disease. Capprec's Synthesis unit has developed Halo, a “tap-to-phone” contactless payment product for use on Android devices. “Synthesis in one of only a handful of Mastercard and Visa certified providers of this capability globally, and the only one in Africa,” the company says. The group has partnered with Nedbank to introduce the service in SA. Despite much adoption of cashless and contactless forms of payment in 2020, driven in part by the pandemic, Michael Pimstein, Capprec's joint CEO, told Business Day that “cash is still in SA”.

However, they see the pandemic causing a permanent shift in how consumers and businesses use cash. “It needs time but it does appear that the value of cash transactions are becoming smaller and smaller,” Pimstein says. The group is hoping to replicate the success of its payments terminals with the new smartphone application. In the six months to September, payment terminal sales increased by 26.6% to R125.3m. During the period Capprec sold 17.6% more terminals, while the number of these devices in the hands of customers grew by about a third to 202,000 — up from 154,000 by September 2019. Pimstein said there are “new opportunities in payments for including debit cards, EFT’s and e-commerce platforms — all of which excite us. All these are non-cash.” He added that the growing number of mobile devices in the hands of South Africans was a big opportunity of which to take advantage. “When you take this into the e-commerce initiative, I don’t think this can stop. It’s irreversible. It’s now a move towards a far better, mature and less costly interchange for payment,” he said. Capprec said that while the Covid-19 pandemic has not left its clients unscathed, growing demand for digital and electronic services helped underpin a double-digit growth in revenue during its half year to end-September. The escalating demand for digital, cloud-based and data services benefited the group, Capprec said on Wednesday, adding it is also an advantage that much of its revenue is generated from blue-chip, well-capitalised clients.

Revenue rose 15% to R323.7m in the group’s six months to end-September, with headline earnings rising 7.8% to R54.2m. Capprec increased its interim dividend by 11.11% to 2.5c — a R32.7m payout — but warned that its second-half performance may not match the first half. Significant uncertainty prevails as to the duration and effect of Covid-19, as well as the rate of economic recovery after the pandemic, the group said. Capprec expects clients to adopt a judicious, less expansionary approach in capital allocation and expenditure. Capprec shares were marginally firmer on Wednesday, up 0.96% at R1.05, giving the company a R1.38bn market value.

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