By Andy Jury, CEO, Mukuru
Formal financial and economic inclusion remain pivotal in addressing the rampant inequality in many African economies today. In 2022, as South Africa grappled with scheduled and unscheduled power outages, businesses were put under tremendous strain as revealed in the FinMark Trust 2022 report. With an estimated 50% of financial transactions in Africa occurring in an informal, over-the-counter, cash-to-cash, unregulated setting, there is significant potential to adopt digital solutions designed to bring about financial inclusion.
But more than the technology, driving financial inclusion comes down to using a customer-centric approach to financial services. For any business, this is a logical thing to do. For fintechs, it shows an understanding of the importance attached to promoting financial and economic inclusion in communities throughout the country. Such an approach is not just about the bottom line. It is about creating a discernible impact on people’s lives. Listening to and understanding the needs of the communities in which a fintech operates, to tailor solutions that focus on driving financial inclusion, has become a business imperative to stay relevant.
The adoption of the Mukuru Card / digital wallet reflects the current need in the market for all South Africans to access financial services. Its use and adoption has grown consistently since its launch over a decade ago and with nearly half of the active Mukuru customer base using digital wallets in some form, it is a clear sign that there are significant opportunities to unlock for service providers looking to access the underserved market.
Much of this comes down to designing solutions that reflect an understanding of the friction points when it comes to payments. It is about reducing the disruption people experience by creating something that reflects how a business can help overcome the challenges they face daily. In doing so, a service provider can unlock significant opportunities to bring in those people previously excluded from the traditional financial services ecosystem. Not only is it the right thing to do, but it enables fintechs to build a sustainable business by offering solutions that customers need and want.
Ecosystem of support
For instance, interventions to address financial inequality should be interconnected and tailored to solve the practical challenges many communities face. One example of this is how we at Mukuru are focused on reaching the unbanked and underbanked population by offering accessible, low-cost remittance services. Simultaneously, the organisation provides a digital store of value, allowing customers, for many of whom this is a first-time experience, to safely keep and manage their money. By facilitating easier sends with these digital stores of value, the opportunity cost for spending in other areas is lowered, thereby linking financial health to overall economic progress. These solutions are integrated to provide a degree of formalised financial services to those overlooked by the traditional banking system.
However, there are still significant barriers to banking which many face in South Africa, as outlined in the FinMark Trust report: the cost of acquiring POS devices, bank fees for digital transactions, and the challenge for informal businesses to get a bank account. Savvy fintechs address these barriers by providing services that require minimal initial outlay and offer affordability. This includes leveraging technology to allow for seamless transactions without the need for costly devices, as well as offering services that can be accessed without a traditional bank account.
People first
Moreover, Mukuru understands that embracing technology must not overshadow the human element. As such, the business has developed digital solutions like mobile apps and Web platforms, which offer convenience and ease of access. But crucially, we maintain a vast network of physical locations where customers can engage in person, receive support and
guidance – underlining the essential role of the human touch in driving financial inclusion. For instance, we have 1,500 field agents currently active across the country to provide in-person assistance to customers.
A significant aspect of this approach is recognising and addressing barriers to formalisation, as identified in the FinMark Trust report, such as the perceived administrative burdens and limitations on required documentation, particularly for immigrants. Mukuru strives to create an environment that encourages formalisation, with supportive guidance to help customers and informal businesses navigate these challenges.
This multi-faceted approach aims to address different aspects of inequality, from access to banking services, digital literacy, and limited internet connectivity. It is therefore not just about bringing banking to the unbanked, it is about ensuring these new users can comfortably navigate this new world.
To this end, there cannot be a single point of failure. This is why it is critical to invest in building the necessary redundancy when it comes to payment solutions. For instance, having a mobile app, USSD, WhatsApp, a contact centre, and physical booths all available to customers to transact more reliably.
By staying customer-centric and strategically deploying technology, Mukuru provides an inspiring model for financial service providers seeking to drive financial and economic inclusion. This human-focused approach may well be the key to harnessing the full potential of fintech in addressing inequality, and in paving the way for a more inclusive and equitable future for all.
In practice, every new customer that is added to this ecosystem not only increases the service’s value but also amplifies the impact on economic inclusion. Invariably, this creates a positive cycle where everyone benefits from a more connected network. At a fundamental level, Mukuru’s approach underscores the power of connectivity in reshaping the financial landscape towards greater inclusivity.