From start-up to SMEs’ must-have

A poor experience with a bank sparked the idea of iKhokha, the thriving payments platform that became a unicorn in August when Nedbank bought it for R1.6bn.

"I had quite a poor experience with one of the big four banks and realised that the big banks weren’t really set up to service and look after the smaller guys," CEO Matt Putman told Business Times.

He said the big banks "weren’t really doing a good job of serving SMEs in South Africa", because high banking costs limited access to the financial system.

So Putman, his father Clive, and close friend Ramsay Daly, co-founded the fintech in 2012, aiming to create a "bank-agnostic business that appealed to SMEs irrespective of whom they banked with".

Putman likened iKhokha’s beginnings to a classic Silicon Valley garage start-up: a small team worked in his father’s study with two engineers to build the first product — a card machine that transformed an iPhone 4 into a point-of-sale (POS) tool.

iKhokha’s card machine allows small business owners to accept card payments quickly and securely, receive same-day payouts and manage sales digitally without the need for long-term contracts or costly banking fees.

Putman said the idea came from business magazines in the US and Europe. He had an aha moment when reading about the financial services company Square, spearheaded by Twitter co-founder Jack Dorsey. In 2009, Square had launched an electronic POS system that enabled small businesses to accept card payments securely. The model has since become one of the largest POS systems in the US, generating $7.68bn (R132bn) in revenue in 2024.

Putman said he saw an opportunity to adapt it for South Africa’s emerging economy. The key to iKhokha’s business model was to make accepting card payments simple for SMEs and position its device as an e-commerce product.

"You’d buy a pair of shoes online; why couldn’t you buy a card machine online as a small business owner? We’re a business built by entrepreneurs for entrepreneurs. We really understood and empathised with what SMEs needed, what their pain points were, what was scary or exciting to them, and that came through in the way that we branded our products and how we went to market."

Nedbank, which took full control of iKhokha after the exit of three other investors, Apis Partners, Crossfin Holdings and the International Finance Corporation, said the fintech was a good fit for its model of empowering SMEs.

"By combining their innovative technology with our deep experience, we will provide small business clients with the best-in-class tools they need to thrive," said Ciko Thomas, group managing executive for personal and private banking.

Putman said his entrepreneurial spirit was shaped early. His father started multiple security tech ventures, while Daly’s father helped found a leading KwaZulu-Natal law firm. "We were both keen to find our own path and create our own businesses"

Despite their enthusiasm, Putman said iKhokha had "teething issues". While the business began during a period when mobile phones were becoming more widespread, "there was a lot more friction because South Africa was a less e-commerce-savvy market compared to the markets we were emulating".

To distribute its machines, iKhokha partnered with retail groups such as Massmart to stock the product. Putman said that allowed small business owners to physically get their machines, helping to build brand trust for a novel digital product.

He said the card machine was the first South African-developed device to be accredited internationally. Unlike the US, where swipe-and-sign was common, South Africa used chip-and-pin, which meant the device had to meet strict Fica, Rica and Know Your Customer regulations, and be highly secure to protect users’ PIN numbers.

Over time, iKhokha evolved into an extensive fintech service. Putman said that as the company developed, he and Daly realised the "very rich transactional data on [their clients’] businesses meant that we were quite well positioned as a brand to offer them ancillary products".

One major addition was access to working capital — 80% of the SMEs that iKhokha serviced "wouldn’t get a traditional loan through a bank because they don’t have traditional credit history", Putman said.

"We use that raw transactional data to provide a very simple, easy-to-understand working capital product that they could use to buy stock, renovate their businesses or hire additional people."

The company now offers an iKhokha card with same-day settlements, as well as business intelligence tools to help SMEs manage stock, inventory and daily operations.

The founders want iKhokha to become the main operating system for SMEs’ daily business operations, spanning payments, financial services and business management.

"Every business owner needs to be able to accept a payment from their customer ... You can be a sole proprietor who trades on the weekend that doesn’t have a formal education ... right up to being a more sophisticated business with multiple stores needing more detailed analytics and functionality."

The platform processes more than R20bn in payments annually, has distributed over R3bn in working capital to SMEs and counts more than 200,000 businesses as clients.

The next key ambition is to expand to other parts of Africa with Nedbank. .

"We thought it makes sense to have a partner who has a banking licence, who has a strong understanding of the banking world, the Treasury, account management, and the services that we haven’t got to yet," said Putman who will stay on as CEO and wants to see iKhokha reach 1-million SMEs across the continent.