While the local financial technology (fintech) industry is going through a consolidation phase, punctuated by multiple deals in the past two years, Altron aims to boost its capability rather than gaining scale from such activity. South Africa has seen a wave of merger and acquisition (M&A) action involving local banks and fintechs. Nedbank last year acquired iKhokha, one of Africa’s fastest-growing fintech companies, for R1.65bn in one of the biggest fintech deals of the year. Durban-based iKhokha was co-founded by Matt Putman, Ramsay Daly and Clive Putman, and since its establishment in 2016 has redefined the way small and medium-sized enterprises (SMEs) do business through mobile innovation.(Karen Moolman) In the same year, Capitec acquired fintech player Walletdoc as part of its strategy to offer leading secure payment acceptance to Capitec business clients and simpler, more affordable e-commerce solutions to Capitec personal banking clients.For Altron, its fintech unit has been a standout performer, the group priding itself on having developed its own platforms and intellectual property. Altron FinTech delivered operating profit of R561m in the year ended February, up 33% year on year, driven by the focus on higher margin products and services as well as the scaling effect in the business. The unit has more than doubled its operating profit over three years from R233m in the 2023 financial year. “We wouldn’t necessarily acquire for scale in a platform business,” said Altron group CEO Werner Kapp when asked about M&A prospects for the fintech unit. “Scale makes a lot of sense in IT services companies, though acquiring for scale in IT services is not an option for us, because of our alternative capital allocation.”In Kapp’s view, Altron FinTech is already at scale “and we continue to invest in that business. We would acquire for capability.”The unit specialises in providing payment processing, credit management software and transaction-switching infrastructure to the formal retail sector and the informal township economy. While considering prospective deals, the main question for Kapp is: “does this company have a capability that would take us longer to replicate and take to market organically, or maybe even a distribution system? Then we would acquire. But we wouldn’t acquire for consolidation or scale purposes.”There has also been consolidation among fintechs themselves. Lesaka Technologies bought Bank Zero for R1.1bn in a transaction that will see it launch a suite of foreign currency products that will allow it to play in the competitive cross-border remittances market. Lesaka also bought fintech operator Adumo for R1.6bn in 2024.It’s not only in South Africa that consolidation in the banking sector is under way, with Kenya and Nigeria also experiencing a wave of corporate activity.This comes as Altron reported a 20% increase in revenue for the fintech business to R1.5bn for the period, with earnings before interest, tax, depreciation and amortisation (ebitda) up 31% to R597m. The group said “ongoing success in the collection and payment platform continued to drive the strong performance, with healthy customer acquisition, particularly in the SME sector, and the number of debit orders and value thereof growing over 25%, leading to a significant increase in activity on the platform”.The unit’s integrated transaction solutions business saw strong growth in rentals of point-of-sale (POS) devices, which more than doubled during the period to more than 30,000. This is in line with the company’s strategy to grow annuity revenue.This recurring revenue now represents 88% of Altron FinTech’s total income.Capital expenditure for devices for the unit stood at R79m, up from R31m in the previous year.