Cross-sector collaboration is turning unbanked into banked and can unlock financial inclusion in South Africa

By Nomvula Nyandeni, Business Development Lead at Pay@

Financial inclusion is a key enabler in reducing extreme poverty in Africa. It provides a step forward for consumers in underserved and unbanked markets across the continent, who previously had little or no access to useful, relevant, and affordable financial products that adequately meet their needs – these include transactions, payment solutions, savings and credit facilities, and insurance.

This remains a priority in South Africa, where an estimated 23.5%1 of the population remains excluded from the banking system, with large groups of society unable to utilise financial services due to issues surrounding accessibility2. As such, South Africans are still choosing to make use of cash for the majority of purchases. This is despite there being a broader mix of payment options available, as low-income earners have lower access to digital channels and are in remote regions3.

Financial services are a significant enabler for a society’s social and economic development and therefore policymakers, development partners, governments and financial institutions alike need to work together to make strides in developing products and services so that all South Africans are able to make use of them4.

For sustained and inclusive development to thrive, a great deal of innovative thinking and cross-sector collaboration is needed to ensure that appropriate financial services and instruments are put in place for the benefit of lower living standards measure (LSM) groups.

We have seen in the past how innovative technologies have given rise to new solutions, from industries that are actively playing in and shaping the payments space, as well as those in complimentary sectors. New solutions have the ability to disrupt traditional business models and revolutionise previously disconnected sectors, such as banking, telecommunications, and retail. An example of this is the use of payment options like MTN MoMo, Masterpass, SnapScan and Zapper.

For the advancement and modernisation of the payments landscape, we must encourage stakeholders from both the public and private sectors to collaborate and create new partnerships with the potential to create meaningful opportunities not only for the industry, but for South Africans as a whole to bridge the gap of financial inclusion.

Retailers represent a prime example in this regard: Due to changes in regulations, technologies, and customer demands, these non-banks are offering or facilitating payment services. Retailers are becoming the face of banks by offering services like cashback at Point-of-Sales (POS), bill payments, bank account opening, and money remittances – showing an increasing number of retailer and bank partnerships arising. While South Africa is moving in the right direction, more can be done.

Leaders in the payment space have taken to the challenge of closing the gap for the unbanked. Examples include Pay@ and MTN Mobile Money – a safe, secure electronic payment service that enables wallet holders to store funds, send and receive money, make payments, and do a number of other transactions simply using their mobile phone. And another more recent partnership with Capitec, introducing the Capitec Pay solution offering consumers a convenient way for account holders to process payments online, whether using their mobile device or PC.

Partnerships like these mean that South African consumers now have access to useful, relevant, and affordable payment methods – ones that require as little as a cell phone number and do not even demand that users share their banking details with others.

These are just some of the examples of how cross-sector collaboration can help in reaching a greater footprint of the unbanked.

These solutions benefit both merchants, retailers, and governments in that lower income groups can make payments from anywhere and at any time in a convenient and affordable way and also enhance revenue collection for vendors – making it a win-win solution for all parties involved and providing inclusive financial services.