🎙 F-Squared Podcast #9 - Building an SME Neobank for Africa with Zazu CEO Rinse Jacobs
Why the future of SME banking isn't a better account, but a unified financial platform.
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Why I Wanted to Have This Conversation
There is a fundamental mismatch between how modern small businesses operate and how traditional banks are built to serve them. The rise of the platform economy, freelancers, and digital-first SMEs has created a massive, underserved market. While headlines often focus on consumer neobanks or payment gateways, I wanted to understand how the core financial operating system for these new businesses is being built in Africa and if there’s any logic in thinking about an operating system.
So I spoke to Rinse Jacobs, CEO of Zazu, a South Africa-based neobank building a comprehensive financial platform for SMEs. Instead of launching with a single "wedge" product, Zazu has chosen a platform-first strategy from day one, aiming to "rebundle" best-in-class services into a single, cohesive hub. They are building for the tech-savvy entrepreneur who uses Slack and Notion and expects their bank to be just as smart. Whilst this type of business may be more prevalent in South Africa given higher disposable incomes, there’s a growing trend of tech savvy solo-preneurs in the continent. From global knowledge workers, remote software developers and people running small businesses like cafes.
This conversation unpacks the real-world challenges of building for this segment: moving beyond a simple account and card to create genuine financial workflows. We cover their Banking-as-a-Service (BaaS) architecture, the "jobs to be done" that SMEs actually face like incorporation, bookkeeping, and expense management; and why a transparent subscription model is critical for building trust. This is not a story about displacing banks with a cheaper product. It’s a grounded discussion on building a true financial partner for the modern African business.
PS - I first spoke with Rinse and Germain about three years ago when Zazu was still a concept. It’s fantastic to see their progress and have them back to discuss their journey from research to a live product.
In This Episode, You Will Hear
How walking into small shops in South Africa revealed the "horror stories" of SME banking;
Why traditional banks seem to fail SMEs through poor service, opaque fees, and one-size-fits-all products;
Zazu’s strategy to "rebundle" financial services, creating a hub instead of just another single-purpose app;
The logic behind using a Banking-as-a-Service (BaaS) partner to focus on customer experience and speed. Whilst there are complications, it’s the most logical jump-off point for an SME Neobank;
How they are building a "Stripe Atlas for Africa" by integrating digital incorporation with banking and bookkeeping;
Why a transparent, SaaS-like subscription model builds more trust than a complex web of hidden fees and why it’s important to charge customers from day one. No free-rider problem;
Why Zazu measures business complexity by the number of employees (FTEs), not just by revenue;
The vision for using AI as a "financial co-pilot" to help founders understand their business health in simple terms.
Key quote:
"That customer then said, 'But actually guys, are you saying that I can build out my whole business on top of Zazu and manage it from there?' We were like, 'Well, actually, why not?' Then we started to think about this a bit more and said, 'Why don't we build this out a bit more broadly and really make sure that all of these streams are captured instead of just the neobank side of things?'"
🔑 Key Lessons for Fintech Builders
Technology and Infrastructure
An account and card are table stakes; true value and defensibility lie in the financial workflows built on top.
BaaS partnerships can accelerate time-to-market and allow you to focus capital and talent on the customer experience layer, which is the key differentiator. However you have to handle the downsides of reliability and compliance overhead. A key insight is that the c-suite of tier 2 and 3 banks see the value in BaaS and are committed to make it work.
A marketplace model for third-party services (like lending or payroll) allows you to serve diverse customer needs without taking on the direct complexity and risk.
Regulation and Compliance
Partnering with a licensed bank offloads the initial regulatory burden but requires diligent management of the partner relationship and their compliance overhead.
Solving tax complexity and simplifying bookkeeping for SMEs is a powerful, sticky feature that drives long-term retention.
Integrating digital business incorporation into your onboarding flow solves a major customer pain point and creates a loyal, fully KYC'd customer from day zero.
Product and Commercial Strategy
The next wave in fintech is not "unbundling," but intelligently "rebundling" best-in-class services into a single, seamless user interface.
A transparent SaaS subscription model can be a powerful competitive advantage against incumbents who rely on opaque, transaction-based hidden fees.
Define your ideal customer profile by their operational needs (e.g., number of FTEs, workflows) rather than blunt metrics like revenue, which may not reflect their actual problems.
🧠Strategic Takeaways
For Operators
Focus on solving the entire "job to be done" for your customer. For an SME, this isn't just "banking"; it's "managing the financial side of my business." The integrated platform that solves the whole workflow will win against single-point solutions.
For Investors
Look beyond payment volumes and customer numbers. The convergence of SaaS and fintech is creating a new, more resilient business model. Companies that can orchestrate a valuable ecosystem of services will build deeper moats than those competing on price alone.
For Policymakers
The primary barrier to SME formalization may not be unwillingness, but complexity. Enabling seamless digital pathways between incorporation, tax registration, and financial services can significantly boost formal economic participation and provide a richer data set for economic planning.
🧾 If You Are Interested In
How to build a digital bank that goes beyond basic accounts.
Why the "platform and rebundling" model is the future for SME fintech.
The operational pros and cons of a Banking-as-a-Service (BaaS) strategy.
How technology can help solve the SME formalization gap in Africa.
→ this episode is worth your time.
Transcript
Samora Kariuki: In this episode of the Fqu podcast, I speak with Rinse Jacobs, the CEO of Zazu, an SME-focused neobank based in South Africa that's gearing up for its public launch this August. Zazu isn't just building a digital bank; they're building financial workflows designed specifically for small businesses. We explore their journey from concept to execution, their banking as a service architecture, and how they've approached product development in a way that prioritizes real SME pain points. Rinse also shares their perspective on the evolving South African fintech landscape and what it takes to build a scalable platform in a market that's still underserved yet full of potential. I think we spoke three years back, and you guys were still doing your research, still trying to figure things out.
Samora Kariuki: Now you're in Cape Town. I think you've made significant progress. Before you tell us more about the journey, maybe walk us through what you felt at the time was the problem specifically that SMEs are facing, the specific SMEs that you're trying to target, and why that problem persists. I think you released a report the other day with Whitesight – great report, by the way – and it seems like a global problem, but I'd want to hear it more from your perspective, the South African perspective, and why that specific SME problem persists in South Africa.
Rinse Jacobs: Indeed. We did quite a bit of research because it's not unknown that globally there's a mismatch between what banks have been offering traditionally and what SMEs actually need. We said to ourselves, instead of just assuming we know what it looks like coming from the European market, let us go to different places and talk with SMEs to see what they are all about, what tools they are using, and what kinds of stories they have to tell when they are talking about banking. Unfortunately for South African banks, no good story was being told; everybody was talking about how they had some kind of horror story that was haunting them. That was literally us walking on the shopping streets and knocking on the doors of boutiques and random small stores, sitting in co-working spaces and talking around the coffee machine with different founders, just having an open conversation on what is it that you are missing. Also, then opening up our own SME banking accounts in various of the banks in South Africa, it leaves a lot to the imagination.
Samora Kariuki: You were saying that you walked across the streets of South Africa, in co-working spaces, everyone was just complaining about their SME experience, at least what banks were offering. I was just digging into what was it specifically? Was it just a kind of mismatch between the way an SME operates now versus how banks are set up from an SME perspective? Was it a credit issue, that you're not accessing credit? Was it just the payments or was it just a combination of all those factors?
Rinse Jacobs: I think it's threefold. The three main arguments that we heard were: customer service is not where it should be – you are the one who has to follow up and change over different channels with the bank. It is the opaque fees, not knowing what you end up paying at the end of the month. If you start to do some digging and open up that fee book of a bank, first of all, they have a fee book of six, seven, eight pages, and you will never really understand what it is, what you're paying when. But most importantly, it is that especially the traditional banks have a very one-size-fits-all proposition which obviously doesn't meet the very particular pain points that you see in different micro-segments. A graphic designer has a very different pain point around banking than maybe a taxi driver or a plumber may have. So, just by solving that through one product or one proposition, you are not doing yourself a favor in capturing all the pain points that you otherwise can. That's what you really see being the big mismatch between SMEs and their banks.
Samora Kariuki: It's interesting you say that. I wrote some time back about the exact same thing, and my main point was that a lot of new businesses are forming, a lot of new SMEs are forming, and they're all very platform-oriented – gig workers, graphic designers, taxi drivers, all on these platforms. This is to a large degree the new kind of employment nowadays, and there needs to be a separate group of banks or digital financial service providers that are serving them because the banks are just not set up to do that. It's interesting you say that, one of the questions I had is now given that problem, how did you come across it? The funny thing is that there's also an element from the bank's perspective where compliance and regulation make it difficult for them to actually build the right types of products because you have to stick to so many compliance boxes when you're launching a product. Do you think that's what's driving that kind of mismatch, or is it just a cultural or commercial lack of fit?
Rinse Jacobs: In our thinking, innovation comes from two dimensions. It comes from the set of products that you're offering at a company, be it a bank, but it also comes from the mindset that the people in that company have. Do they care for really pushing the envelope and going that next mile in understanding that customer? Globally, banks have been doing quite a bad job at how you can further visualize the data that is available through your transactions and through how you as a customer are using their products. So it is not always about how you can get more compliant, tight products out there, but how you can go beyond banking to actually help those customers do things that are perhaps liaising with banking or adjacent to banking, but are not per se touching upon your license. Therefore, building out your own platform as a bank is what needs to be done, and that requires a bit more of a tech DNA. That's what you see tech companies do quite well in expanding their product portfolio, and banks have been typically quite traditional in keeping with what they know and continuing to do that.
Samora Kariuki: But I think nowadays we're seeing more of that. I think we have some banks that are trying to do that. I think Sterling Bank in Nigeria has kind of had a VC-type portfolio approach to innovation. I think NCBA in Kenya has Loop, which is their tech house. So it's happening, but maybe not at the scale at which it should happen. But now back to Zazu. This problem is there. What were the steps and the sequencing to actually get something on the ground beyond the research?
Rinse Jacobs: We believe in adding a lot of attention where we believe we can make the biggest difference. For us, looking at the banking stack – you have the regulatory side with the core banking and reporting side, and you have the product orchestration and then the experience layer – we believe in adding a lot of value on the very top side of this, which means the experience and the partnerships that you can have with other fintech providers or tech providers. What we don't have a lot of value or see as a lot of value for us right now is going very deep into the machine room where the actual plumbing of the banking sits, the core banking systems, the regulatory reporting, the license side of things. That is why we decided to partner with a bank so that we can plug into their existing systems, which also gives right away a certain trust to the market that we are not just a random wild west new bank out there that is trying to do things differently, but actually are guided by somebody who knows how the market operates regulatory. So that's where we play on the experience and orchestration side of things, and that's where you can be a bit more free in how you are designing these products.
Samora Kariuki: That raises two questions, I think. The first one is, usually with such frameworks, let's call it Banking-as-a-Service, a BaaS provider, and in this case, a bank is offering their rails on which you build on top. Of course, the experience layer is where at least the biggest friction point for SMEs is. They don't care about the ledgers in the background; they care about how you orchestrate their services. But one challenge that's emerged is, number one, lack of reliability of the underlying banking rails and sometimes compliance overhead from your banking partner that usually manifests in slow time to market, slow product releases. Have you experienced that?
Rinse Jacobs: We definitely have experienced this ourselves as well. Without naming too many names, it is something that is what happens, and you need to go through this. Luckily, it helps that I come from the banking side where I was on the other side of the table in the European space, so it helps to facilitate that conversation a bit more because I roughly know what they are expecting and how they are looking at opportunities. But indeed, you can see, coming back to that mindset aspect of innovation or driving the envelope, that's where a lot of people are just doing their job and not really caring for pushing that innovation through their license. On the C-level side, it is a bit different from most of these banks because they understand, "We are perhaps a tier two or tier three bank. So it is very difficult for us to grow our balance sheet or to grow our portfolio by competing directly with the big banks." So the only real way that they can compete and get significantly more volume on their system is by partnering with non-banks, fintechs, telcos, insurance companies and whatnot. That's that embedded finance or alliance banking play that some of them are really pushing for. But it's not without its own challenges, that's for sure.
Samora Kariuki: That leads to my second question because we've seen a number of models in Africa, at least even globally. There's the full license approach that some people are taking, Revolut in some markets, NuBank specifically has taken, despite it not being purely SME, but it's taken a full license approach. Then there's the BaaS play. And then there are players that are coming in from a payments perspective, saying, "We'll offer a payments product first, and then once we get your flows, we can now move deeper into the product stack, into savings and stuff," like MoneyPoints and players like that. Do you think any of these have a specific right to win, at least in the context of the African market, or do you think that all of them can thrive because fundamentally it depends on what specific market you're targeting?
Rinse Jacobs: Looking at Revolut or similar full bank owners, they started out often as a neobank without a license, and then as their volume grew, they said, "How can I incrementally improve my margin rather, on each customer, because my customer is now of significant value?" That's when that overhead cost of maintaining a license starts to make sense. But you need to get over that first hurdle, because otherwise you spread yourself too thin very quickly. It often makes sense, or a lot of people say, "Start with a very simple wedge, it could be payments, it could be lending." There are a couple of different players in Africa, of course, who have done that successfully. But what you often see also on the global fintech world is having started out as a wedge and becoming quite big as a payment provider, in this case, to then transform yourself into a full neobank is quite difficult because a lot of companies already know you and use you and plug you in a certain way. They have set up their own orchestration or architecture of their finance world. This is also the reason why an Adyen or a Stripe never became Mercury, for example, in the US. This is why I think it's quite difficult for many specialists who started out as unbundling some of these fintech services or some of these banking services as a fintech, to become a horizontally broad product offering.
Rinse Jacobs: That's why we are starting out more as a platform from the beginning and plugging in different players. This is more what you see in Africa, what has happened in Europe and in the US a couple of years ago with that unbundling and now rebundling of services. Traditionally, you had banks that said, "Look, we're offering everything, and we are a big monolith, and therefore you're not really a specialist in any area." That's why fintech said, "Well, slowly but surely, I'm going to pick different services off your system," that could be payments acquiring, lending pieces, card issuing pieces. But what you haven't yet fully seen in Africa is that rebundling – people saying, "Let's partner up and actually use those best-in-class services to bring that back together so that an SME doesn't end up with 20 different logins to actually figure out their systems." And really making sure, that's what we are building for specifically, is how you make sure you have one login, can use multiple services and through that can very easily reconcile your financial flows and understand what your SME's financial health actually looks like, and how can you improve that by using AI, of course.
Samora Kariuki: It's very true, I feel that pain as an SME myself. It's usually because there's so much going on, you need very clear insights into how money is coming in and out. You need potentially accounting support, can you automatically classify this income or expense so that I can now do proper analytics? But then that is a specific type of SME, especially in the African context, because I think the statistics from South Africa show only 23% of SMEs are formally registered. Of course, the bigger they grow, the higher the percentage of formalization. But that speaks to a specific type of SME. From your perspective, you have some clients. Are you seeing any kind of archetype emerging, that this is the typical Zazu archetype, and this is the archetype that we're going to scale with? From what I hear, it's very urban, at least past a specific threshold in terms of income and also digital sophistication.
Rinse Jacobs: So, we are indeed looking at the very lower end of the SME bucket, in terms of the companies that effectively have been forgotten by the big banks back in the day because they couldn't bank them profitably. But on top of that, we also know that typically the tech-savvy entrepreneurs and business owners are the ones that are early adopters of such new products. These are companies that are using Slack and Notion, and they're just demanding a bit more design and experience from their bank. So what we are expecting is to grow more with e-commerce players, B2B services, and various types of freelancers.
Rinse Jacobs: But for the go-to-market, we have also said to ourselves, let's not dig our heels too deep into this hypothesis of our ICP, but rather talk with a lot of different micro-segments – graphic designers, e-commerce owners, tech entrepreneurs, taxi drivers, really – and take 30, 40 of them and sit with them for a day to really talk about what they like about their banking, what are their biggest pain points. And through that, having them onboard, see how their retention goes into the system, how active are they on your platform. Only then can you start looking at how you can put some paid marketing on top of that to see if that actually sticks and the conversion rate increases for that segment. So we are not saying we're particularly focusing one segment right now because we're too early to really say that. We are working very closely with different types of companies to see for whom we are solving the biggest pain point, for whom we are providing the biggest relief at the end of the day, so that they remain customers.
Rinse Jacobs: What you see indeed is a handful of early tech entrepreneurs. There might be one or two co-founders, they may have one or two people or engineers with them who just need an account and a card and want to know that if I want to get my payment systems up and running, I can do that through Zazu, because Zazu partnered with somebody. If I want to grow with my payroll at some point, I can connect different payroll providers through Zazu in there. So we are typically focusing on the companies, or for now expecting to focus on companies that have a higher likelihood to kind of grow up, up to 50 FTEs max. That's where we see our sweet spot. We don't really care too much about, and banks often classify based on revenue types or revenue amount. We don't care for that. We really look at the number of FTEs that are in your organization because that typically shows what kind of workflows are needed in your organization. Do you have a finance team, a dedicated access for them? Do you have an HR team who may want to have a specific payroll account and deal with payroll providers for that? So we're looking at that a bit differently, but at the end of the day, the tech-savvy guys and girls is what we are focusing on right now.
Samora Kariuki: From that, would it be wrong to say it seems like you're evolving towards a Mercury-type business because Mercury kind of does the same thing? It focuses on that tech-savvy, grows with them, but also a lot of digital businesses that are setting up globally even just use Mercury. And that seems to be your emerging sweet spot. Would that be an accurate classification?
Rinse Jacobs: Mercury for us is a big inspiration, just like Konto in France and Tide in the UK. What we are seeing is that from that informal market, which is indeed quite large, there is roughly 15% that wants to become formal. They just lack the know-how or the confidence that they get the right support because they feel if I mess up with the SARS or with the tax authorities or if I mess up with some kind of regulatory stuff, I don't know what to deal with and what I'm getting myself into. So, they want to have a guiding hand not only for the bank account, but also for how do I incorporate a business and how do I make sure I pay my taxes on time, and these are all these small features that we are building in. That's why in South Africa we're working with Guffchain who are digitally incorporating companies, which also, as soon as they get incorporated, we get back that data, so the KYC becomes smoother, and they truly feel that they're being walked through a funnel and being supported by that. Then we give them heads up, like, "Hey, your tax bill is due on X date," or "You have this money coming in, we would automatically save 30% of that into your tax reserves account," so that all these small pieces help them understand not to spend too much money and at the end of the day sit with big bills that they cannot afford to pay.
Samora Kariuki: You're absolutely right. I've raised that question to quite a number of bankers because fundamentally everyone talks about low incorporation rates. It's 20-something percent in South Africa; in markets like Kenya, it's much lower. The fundamental issue is that at the very core level, people want to formalize. They have no problem with formalizing, but they're just intimidated by the workflows for formalization. So you're absolutely right. Doing everything for them is like I always say, Stripe Atlas, you incorporate, it gets you a bank account, it gets you bookkeeping support. I think it's a very big factor in terms of customer acquisition, but more importantly, in the long term, customer retention because now the switching cost is no longer just an account; it's your entire financial life. It's the heartbeat of the entire business. I wonder why more people don't look at it full stack like that.
Rinse Jacobs: I totally agree with that. It's not about launching new features, but about jobs to be done or pain to be taken away from customers. What you see in South Africa or across the continent is that the majority of these people are still doing their bookkeeping on pen and paper, and obviously you're going to make mistakes because a computer is simply much better at recognizing the different patterns than you would be able to do so yourself, or being able to figure out what benefits or what subsidies you might be able to apply for. All of these things are very intimidating, especially if you're a first-time entrepreneur. So you want to make sure you have somebody there that can indeed support you with this, and not just about it. It might to some degree be a vendor lock for some of these SMEs, but for us, it's more about we need to make sure we provide the best service continuously to make sure that we have a right to exist for these customers. That is why we want to go beyond banking because an account and a card is not cutting it. That's where it starts, that's where your data gets generated, but how do you then actually work with that data instead of having to export that from a CSV, let it sit in the system, and actually let the system work with you and help you make decisions? In the future, you can really automate a lot of crazy things, but we need to start with getting people used to being able to trust the system to help them set up the right things.
Samora Kariuki: For you as a financial service provider, do you have a strong opinion, at least, does your system have a strong opinion on how someone gets paid? I think there's a recent report that NowPay is growing in South Africa, Capitec Pay is growing, card payments have always been a major thing. But despite all that, cash is still a major mode of payment in South Africa. If you're automating a lot of this bookkeeping and everything, it's one thing running on, let's say, Konto Mercury, where you're pretty sure that a huge chunk of your payments are going to be digital. There are ways to reconcile those payments and make sense of them. At least within a South African context, are you seeing good enough legibility of a business's inflows that all this advanced tech can actually now work the way it's supposed to work?
Rinse Jacobs: There are, of course, some industries that are much more cash-heavy than others, think of handymen or people on the road, or convenience stores to some degree. That is where more education is needed because for us it would be much better if as much of it is digital payment flows, because then we can make sense out of it. You can actually build the patterns around this and get the metadata from those transactions. When it's cash, the good thing is that all the big global players, Visa, Mastercard for example, but also the big banks, are all pushing for this. In various jurisdictions, you see more and more mandatory e-invoicing coming in, so it kind of forces the companies to become more educated in this. That's where for us it's important to say, let us be at the right place at the right time. We might not yet be the preferred provider for a very cash-heavy business, but they will at some point go more and more into digital services; they have to. This is also where phones are turning into acquiring systems over time, so more and more solutions are coming that are more easily inherited by those smaller SMEs. But that is indeed still a topic where it kind of leaves a gap of insights, because cash just is limited in what you can do with that for a digital bank like us.
Samora Kariuki: From a monetization perspective for all these services, traditionally Africa, GDP per capita is an issue. South Africa is much better in terms of GDP per capita compared to Nigeria, Kenya, and other markets. But it always speaks to a willingness to pay issue, especially for financial services. Transactional services always have a ceiling to how much you can charge for payments and other transactions. How are you looking at it from, at least what are you seeing from the market in terms of willingness to pay for these services?
Rinse Jacobs: We see three key revenue streams for us in the now and in the future. It is the subscription fees. I love product bundles, the typical SaaS bundles that you would see with your essentials, premium, pro packages, with more features included in the more expensive packages. Secondly, that's the good thing as a bank or as a neobank, is what we would call network revenues. A share of the interest rate of the deposits, a share of the interchange of the card activity, which the customer doesn't feel per se, but it's a nice revenue stream on top. Because of that marketplace that we are having around the banking proposition with Radic Zero and Eoka and many other players, we would get a revenue share from every contract that we are selling to our customer base. That helps a lot.
Rinse Jacobs: We don't believe in variable fees. We believe in having one fee and that covers all your basic needs that you would need for banking. That is where again, we did actually three weeks ago, we launched a very simple comparison of some of the main banks in South Africa and what their hidden fees actually look like, because they might be touting that their account is just one or two US dollar equivalent. But if you then look under the hood, you might pay for an SMS transaction or an SMS message, or you might pay for a balance request or for a changing of the PIN of your card. All those two or three rand here and there, a couple cents, at the end of the month or the end of the year, add up to actually paying much more than a subscription fee. So it is a bit of an education, of course, that needs to come through, but that is where I think transparency is so critical, of being very open in what you're charging for and how our model comes together. Globally, this has worked very well, and people need to understand that the big banks charge you much more for it without you really seeing it. So how much can you truly trust those banks with them sneaking in more and more hidden fees? At the end of the day, we believe that that will be setting us apart because they have been quite relying on those hidden fees. If they would need to transform that business into a subscription fee, then all of a sudden they're missing out on some revenue. That makes it more difficult for them to compete with the neobanks that you see in the market today.
Samora Kariuki: There's a lot of replatforming. If you know how some of these major banks' underlying systems work, for you to now provide the full digital experience, there's a lot of replatforming that needs to be done that's quite painful, especially in the context of the nature of the organization. I was reading about Macadi Libre, and 13 years ago, they needed to do a full replatforming because they had built using Oracle databases, and now the likes of Facebook and Amazon were coming up, and they needed to build a full platform. They said, "We're going to build an entire platform from scratch." It's one thing for a startup like that to do, but it's another thing completely different for a major bank to do. So there's also an underlying limit. Now speaking to your product, do you see any chance of, and let me set the context, a lot of fintechs, Stripe for instance, started off saying that we are serving SMEs, or we're serving this type of entrepreneur. In fact, Stripe was really built for software developers who want to collect payments. But then all of a sudden you find yourself now dealing with large enterprises that are, "Actually, we need these services." Do you see that at all in your wheelhouse, that this might actually happen where you speak to some moderately sizable companies and they are keen on what you're building and want to have that service?
Rinse Jacobs: We're definitely not going to say no to them, for sure. But it is not that we are, at least for now, I don't see ourselves really focusing on the bigger and larger corporates. I think there are very strong tools out there already; look at an Xero or Sage, for example, on the accounting side. For very large corporates, you really have to go into the larger Oracle-like systems probably. But we really look at the smaller guys and the people that have indeed been forgotten for a long time. I don't see us adding a lot of value and going into that very red market of corporate, and that is where the big banks make their big money. Then you really start to compete with very deep pockets, which we obviously don't have. So that's a big thing. We rather look at how we in the future make sure that some of these smaller players can grow up enough or have the right foundation to become fully sustainable themselves and do that across the continent, instead of doing that regionally, enabling them to do that cross-borders, not just through payments, but actually managing and supporting their supply demand, looking at import-export documentation. So, we'd rather look at how we grow with our existing customer base rather than jumping to another customer base that we have yet to unlock.
Samora Kariuki: That makes a lot of sense. Prior to you, entrepreneurs in South Africa were either using something or they had specific workarounds, and that actually speaks to your main competition. Maybe walk us through what your core competition is. If Zazu doesn't exist, how do you do all this together?
Rinse Jacobs: A lot of it is done through the old but very reliable Excel. What we're hearing from customers is that they're saying, "I often need to go through, I log into my one bank account, to my other bank account. I download the CSV or maybe sometimes just a PDF, and they need to convert that into a CSV file myself, and then I build monthly or quarterly my own pivot tables." Some people might really do and like to tinker with numbers like that, and they should be allowed to do so. But the majority of the business owners, they don't have the time for that. They don't want to figure all of these things out, and actually they would rather inherit a product that is solving a critical need or critical problem for them, and they're willing then to pay for that a bit more.
Rinse Jacobs: This is why it is for us not important to have the most on the platform. For us, it is more important that every SME that's on the platform is actually solving a certain pain point, for whom we're solving a particular pain point. That is where it's almost more niche or very personalized. Maybe an example from the European market, there are a couple of neobanks in Europe, for example, that are very much focused on sustainability. So they're never going to capture the largest market share, but what they do capture is very, very dedicated customers that understand that the values align with their values, and therefore the willingness to pay is slightly higher, and therefore they can become profitable with fewer customers, compared to an N26 who needed millions of customers with that freemium model to actually start breaking even. That is similar to how we're looking at things where we don't believe in freemium. We don't believe in giving products for free, because then people would just use it for fun, but they don't look at it and truly adopt it by paying for it. That's a very different approach.
Samora Kariuki: You're absolutely right. I think the market exists for a specialized SME provider because there are so many of them currently. In South Africa, you have everything from spas, shops, boutiques, solopreneurs, and everything. It's very difficult to have a one-size-fits-all. You can potentially do well from a payments perspective, where I'm able to help all these people collect payments, like mobile money in Kenya, for instance. But for a comprehensive banking service, I think you're absolutely spot on. There's going to be different markets for different people, and the most important thing is to be the best in your specific area. Maybe one more point on this. Take lending, for example. We are ourselves not going to do lending, especially not in the first three years, because we simply don't know lending well enough or we don't know the customer well enough and the scoring models well enough.
Rinse Jacobs: With the data that we have, we can tell the customer, "Look, we have five or six different lenders that we have connected. Let us push your profile to those different lenders so that we know that the best one is coming back that fits your purpose." Then you don't need to apply five or six, seven different times. You just do it once, or allow us to do a pre-scoring for you. So it is through that marketplace and through those specialized players that we're connecting that we can tap into these niches more easily, because they understand that we're actually solving those particular problems. 95% of the products in the marketplace are not going to be used by a single entity. They are using three or four or five of these marketplace users, but every customer uses a different combination because they have a different set of problems they're solving for. That's what makes us more unique in how we can stack modularly all these different tools together.
Samora Kariuki: Just to speak to that, do you know there's no open banking mandate in South Africa, is there? Does that have an impact? Because your product would work way better if open banking was as advanced as it was in, let's say, Brazil or a market like that.
Rinse Jacobs: No. What you had in South Africa is more screen scraping, of course, so that is kind of working, but it's not ideal. We would rather see, of course, that you can plug in other existing bank accounts that you may have. Because you might be very loyal to your brand, or you might get a slightly better interest rate from that bank compared to the other bank, and for us, it's important to get those data streams in there so that you can still see that in your financial cockpit at the end of the day. So that's what's happening. We know that the SAR, the South African regulator, is looking at this. We know they're looking at various licenses to make this also easier for fintechs to participate more deeply into the payment world. So that is all very interesting, and that's how you can see how much a regulator plays a big role in the actual innovation and enabling of SMEs. It's much needed.
Samora Kariuki: Speaking of something else, from what I understand, the marketplace model makes a lot of sense, and I think one major accelerator for this might be AI. I think AI, of course everyone thinks it's a buzzword. I don't think it's a buzzword. I think it's the most powerful technology we've seen in a long time. At least I haven't seen anything like this in my lifetime. I was here with a gentleman called Kamal, and we were saying that there's a role for a financial AI. So if you could think about opening your Zazu app and saying, "I'm running short of cash, and I need to pay my workers in two weeks time," and it takes in that intent and says, "Okay, given your past cash flows, given what we know about the lenders in the marketplace, given what we know about your monthly payroll, then I think we should now get this specific working capital loan from this specific lender to make sure you make payroll at the end of the month." I think that speaks to a marketplace model as opposed to a full-stack bank because if you're a bank, you want to keep all your options in-house, and that will limit the quality of the service you're providing. Is that a future you foresee at least for Zazu, or how do you think Zazu is going to leverage AI?
Rinse Jacobs: We are actively talking about this. We actually acquired an AI company from Cape Town a couple months ago to really make sure that fundamentally or foundationally we are having AI at the core. But we also understand that a lot of AI things are hyped, so we don't want to just wave the AI flag like the hundreds of other companies out there are waving the AI flag. We are seeing AI more as how 30 years ago people looked at digital, like, "Digital is so cool, it's so amazing." Big companies set up their digital innovation hubs and build out all kinds of cool solutions that never made it back to the mothership. That's the same, I think. It is a better way of how you can interact and have customers interact with data. It is helping you unlock previously not easily recognizable patterns or solutions, as you said in your example, "I have this problem, how can I solve that?" And the more options we have available, the more likely we find a suiting solution for you. So AI, especially agents, not so much customer support agents, I think that's still a bit of a way to go. But when it comes to helping you understand what should the next step be, maybe it is paying that invoice now because you get a discount or maybe paying it later. All of these small steps in terms of cash flow management and explaining that to a customer in natural language instead of in CFO language, I think will go a very long way, tapping back into a lot of people not having a PhD in finance. So how do you help them understand how to grow the business?
Samora Kariuki: I think you're right, a lot of these technologies, the whole underlying thing is to reduce frictions. For instance, if 10 years ago, WhatsApp and Instagram enabled way more people to now open up a business, sell, and create some kind of storefront, then AI should reduce further frictions and some of these further frictions in terms of knowledge, context, insights. If you can give me some kind of CFO support, if you can give me some customer support, at least some commercial analytical support, that may be valuable. Going forward, what does growth look like? What does the next one year, two years look like for you guys? I know there's still some kind of waitlist. Just walk us through that. When are you fully live? When are you just hitting the markets? What are your short-term priorities?
Rinse Jacobs: The expectation for us is to go live after the European summer, so let's call it end of August, with the first set of customers in the beta go live. They are able to transact funds. That's the current timeline. We very much believe in staying in one market at least for one fiscal year just to make sure we have ironed out all the different wrinkles and found out all the outliers that exist with tax reportings and everything else. We use that blueprint to then go into the next market, and that next market will be very much dictated by our existing customers. Who are they remitting to within Africa? The much larger vision for us is once you are live in five or six different African countries, how do you connect these countries together so that you have a much larger network to work with? That is a missed opportunity from some of these Pan-African banks who have 14 or 15 different countries that they operate in. But these systems don't talk with each other by any means; they are very isolated systems. That is where I think you can really build a very big and really cool system to make those local SMEs continental SMEs and really give them that ability to grow through your banking or through your finance hub system that is Zazu.
Samora Kariuki: You're absolutely right. What tends to happen is that Bank A wants to get into this specific market, they acquire a license mostly through an acquisition of a smaller bank, and they continue running on the core banking system of that license because it's not a priority. So you have this kind of situation where these systems are not speaking. Speaking of going Pan-African, this is down the line, where do you see the roles of things like at least crypto or stablecoins in enabling that kind of Pan-African money movement? Or do you just see it as that we can, maybe you haven't even thought that far, and that's perfectly normal because it's good to prioritize. But do you see a situation in which stablecoins can now support this, or do you think you can, with existing rails, make a good job of it? The reason I asked that is because I think if there's a bit of clarity, as you mentioned even earlier for some of this larger banks, even within subsidiary, treasury movements are difficult, and sometimes maybe that's where crypto stablecoins come in.
Rinse Jacobs: I can give you all kinds of buzzwords on stablecoin, but the truth is, I honestly don't know enough about it to give your listeners any meaningful insight on this. The only thing I do know is that in many African jurisdictions, you have monetary exchange policies that at the end of the day make this still quite difficult to realize. It helps to circumvent some of that exchange policy probably, but whether that's the right way to go, I'm not sure. For now, we are very heavily focused on getting the MVP out, which doesn't involve stablecoins. I am on the side advising and supporting a couple of companies on different stablecoin solutions, but I couldn't yet say anything meaningful about that, unfortunately.
Samora Kariuki: It makes sense. I think those are some of the buzzwords right now in the market. I think it's good to focus on what your core priorities are, and for you, for sure, it's the MVP. Winding up right now, you have a business account, you support digital incorporation, you're enabling invoice management, expense management, and I think you're building bookkeeping and cash flow right now. That's something that you're building, and I think as your first crop of customers go live, that might as well be live. How are you looking at sequencing the next set of products, or are you just looking at it in terms of, let's see how this works, let's see what's adopted, and then we build from there, or do you have a specific view in terms of what comes next?
Rinse Jacobs: There are indeed those main modules that we are looking to bring live first. There will be, of course, feedback on that, and there will be adjustments that need to be made on that, so that's going to take probably some time as well. One thing that we are then looking heavily at is from that marketplace, which are these tools that are most popular, and to what extent would we either have a deeper integration with those companies to make it a bit more of a native experience, or to what extent do we leave them more on the edge of Zazu, if you want, just data sharing. Also, I think especially for us being so young, it is important not to have a fixed roadmap six to 12 months in advance, because you need to stay agile enough to pivot and to listen to your customers. That's one of the reasons why the first year we're not going to push hard for tens of thousands of customers but try to keep it to around a thousand customers, just to give us enough ability to actually speak with these customers and understand who we are building for and what problems we are solving for them. So that is more what we're doing and what we're looking at and keeping that a bit more open. It will be for the foreseeable future definitely more around optimizing finance streams, as you said, bookkeeping, expense management and similar products. And then in the future, we would look more at, let's say one or two years from now, adding productivity tools as well, which very closely can then be aligned with finance products.
Samora Kariuki: It makes a lot of sense, financial tooling, because that's your promise, unifying SME finance. In the life of an entrepreneur, a lot of things happen. Sometimes you have to be bold, sometimes you have to be slightly delusional to actually build some of this stuff out. But you must derive your conviction from somewhere, and in your last couple of years building out Zazu, has there been one specific anecdotal thing, a story that has kind of enforced your conviction, where you saw this, you saw how this customer did this, and you knew we were on to something?
Rinse Jacobs: The first thing that comes to mind actually is in the earlier days when we just had mockups, being able to understand or have a customer grasp what we're trying to do. That customer, and that was mostly neobanking to be fair, post account cards and payments, but we had some digital incorporation flows in there as well. That customer then said, "But actually guys, are you saying that I can build out my whole business on top of Zazu and manage it from there?" We were like, "Well, actually, why not?" Then we started to think about this a bit more and said, "Why don't we build this out a bit more broadly and really make sure that all of these streams are captured instead of just the neobank side of things?" So that was very inspiring. That definitely something that sticks out quite a bit.
Rinse Jacobs: Separately, more looking at an existing tech company in South Africa where we were talking with, they said, "Finally somebody that can do card issuing without me having to go to the branch or without me having to sign and stand in line and waste two or three hours. It's nice that they offer me coffee, but I don't care for coffee. I care for doing this as efficiently as I can behind my computer or in the evening when I'm fixing some last things before going to bed." These are the things that keep you driving, and the feedback we're getting from these customers is so amazing that keeps us at it.
Samora Kariuki: Great, man. Thank you so much for sharing that. It was good speaking to you guys a few years back. Good to see the progress you guys have made. Keen to see how this journey maps out going forward. We'll stay in touch and see how this thing goes. Wishing you guys the best. When you're in Kenya, let me know. When I'm in Cape Town, I'll definitely reach out.
Rinse Jacobs: Perfect. Terry, thanks a lot for allowing us to do our story here and to express how we have come through Zazu and all the ups and downs that we're facing. Once we're live or once we're live a bit later, we definitely should do this again and see if the promise has come to life or if there are other pivots that we made.
Samora Kariuki: For sure, man. Take care.