Global Courant 2023-05-11 15:33:01
Main image: Business Insider Africa
According to a study by McKinsey & Company, digital financial services have the potential to provide access to financial services for 1.6 billion people in emerging economies by 2025. The study also found that these developments are expected to boost the collective annual GDP (GDP) of emerging economies. by US$3.7 trillion, or 6%, by 2025, while creating up to 95 million jobs across all sectors. The government of South Africa challenged the financial sector to achieve 90% financial inclusion by 2030, and significant progress has been made since then. However, financial inclusion and the ability to drive growth in South Africa remains limited as many people in the informal sector continue to trade cash.
Accepting electronic payments is a challenge for casual merchants. According to a study by Mastercard titled “Insights into the Informal Economy Report”, more than 50% of informal businesses in South Africa have experienced strong customer interest in card payments, while about 90% of them are still cash-only businesses are. This reliance on cash is often caused by a lack of infrastructure in the informal sector. Traditional acceptance channels, such as physical points of sale (POS), are perceived as expensive, especially by micro-enterprises. While residents of rural and townships used cards for 60% of their transactions at formal retailers, only 4% of their transactions at informal retailers were card-based.
Fintech companies play an important role in providing financial services to the less fortunate. Fintechs have been able to offer some of the most innovative and customer-centric payment offerings thanks to their flexibility and responsiveness to market needs. Lessons from other markets show that solutions that prioritize the customer when designing products and services have been highly successful. Deposit @ Till, an innovation developed by AKELO’s subsidiary, Efficacy Payments, is a South African example of solving for the customer. Deposit@Till allows consumers to deposit cash directly into their card-linked bank accounts at select retailers, eliminating the need to visit a bank branch, which is especially useful for employees and casual merchants who work after hours secure cash deposits.
The relationship of trust between customer and service provider is also crucial to ensure customer acceptance. While fintechs offer a better customer experience, traditional banks continue to maintain trust. However, they do recognize that fintech can and should play a vital role in driving digital payment adoption and financial inclusion.
The shift to instant payments is an important area of innovation. Instant payment systems are being implemented in many regions as part of their payment modernization processes, replacing daily batch processing with real-time systems. Instant payments can make a significant contribution to financial inclusion as their implementation has been shown to coincide with a decline in cash in the economies where they have been implemented. For South African consumers, P2P and instant payout products enable one-to-one or one-to-many payouts to card-linked accounts in near real-time, providing a more streamlined and less expensive alternative to EFT and providing instant access to funds.
Financial institutions and fintech companies are increasingly collecting consumer data to gain insight into consumer behavior and to develop products and services that better meet the needs of their customers. More than ever, financial services companies have the potential to innovate and deliver customer-centric solutions by building profiles of previously excluded groups.
