Vodacom is offering cash loans for the first time as the telecom giant deepens its presence in financial services, which has become an important contributor to group revenue.
SA’s largest mobile provider previously advanced only small amounts of airtime to customers with little to no credit balance, repayable when the customer recharged their account. Now it will advance cash values of as much as R500 for up to a month with its VodaLend Cash Advance product.
Airtime advance has become a big contributor to revenue from SA financial services for the Vodafone subsidiary. The company advanced R3.1bn in airtime in the past quarter, translating into 44.7% of total prepaid recharges.
VodaLend Cash Advance is available on the group’s VodaPay super app that was launched in late 2021. The platform has had more than 2.8-million downloads with 1.9-million of those by registered users.
“The new addition is geared towards underbanked consumers who need quick and barrier-free access to funds, whether it’s an emergency doctor’s visit or topping up prepaid electricity just before payday,” the company said on Tuesday.
The cash advances, which are available to Vodacom customers only, are the latest product on its lending services platform that includes airtime advances, a loan aggregation tool and advances for shopping vouchers.
The money can be paid directly into a customer’s VodaPay digital wallet or withdrawn as physical cash. Through the app, the money can be used to buy prepaid electricity and water, pay bills, scan-to-pay in shops, and can be sent.
Those looking to use the service must apply first to satisfy regulated requirements for affordability checks. Vodacom is including a customer’s recharge and payment behaviour as part of the credit-decision process. Such factors are being used as a tool to get more people approved for lending and into the credit system.
Once approved, customers can access cash advances between R50 and R500, with the option to settle or pay back over seven, 14, 21 or 28 days.
“With only 26-million SA consumers having a formal credit record, there is still a significant part of the population that doesn’t have access to formal financial services,” said Mariam Cassim, CEO of Vodacom Financial Services.
She said the cash advance product gives affordable access to lending for those who need these services most, “but who have historically been prevented from doing so due to high fees and difficult to navigate paperwork”.
Vodacom appears to be taking aim at traditional lenders, and informal loan providers who typically charge exorbitant fees.
“This innovative product is a potential game-changer, as its fees are less than traditional short-term cash advance providers. On average, it’s up to 400% cheaper than using a mashonisa [loan shark] — it moves us beyond financial inclusion to real financial impact,” Cassim said.
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