SA can learn from the Indian government’s moves to bank its unbanked population by limiting how much cash that can be drawn at one time, identifying populations with high potential to go cashless, and by subsidising smart phones.
Financial inclusion of the poor is key to poverty alleviation, and critical to its success is financial literacy.
I recently returned from India, one of the fastest-growing emerging economies, nearly 2.7 times the area of SA but also with vast gaps between rich and poor.
India identified where its immediate potential cashless market lies. The population of India is 1.2-billion, of whom about 400-million people are included in the financial sector as they have bank accounts and are saving, investing or borrowing.
However, 70% of the population remain unbanked. As the Indian government’s cashless drive gathers momentum these individuals will soon need bank accounts to send and receive money. With a smart phone and internet access or mobile phone signal, all they need do is choose a financial institution and the product and/or service they need. India’s maturity towards a cashless society is happening.
SA’s population is about 56-million. A trend in SA shows that people are moving straight to smartphones, skipping straight past laptops and PCs, because it’s easier and far more feasible for them. And, with going cashless comes bank-level security which has already proved a huge driver in the adoption of legitimate mobile money technologies by individuals and SMEs in SA. It would be worth pinpointing the undertapped areas where a move to mobile has high potential.
The prospective volume of cashless transactions makes India extremely attractive to fintech companies, as the rapid explosion of fintech startups in India has shown.
The growth of fintech startups in SA offering alternative ways to accept payments is taking place. We see this by the number of service providers whose offerings to consumers and SMEs we compare on Fincheck such as Yoco, SnapScan and Ikhokha. Yet the scale and rate of successful startups has immense potential to grow here too.
India is embracing young companies that will develop the relevant technology. Banks are leveraging off accelerators to get in touch with young fintech companies. Thankfully, we are seeing more innovation units being established in SA’s mainstream financial institutions with Rand Merchant Bank’s AlphaCode initiative being one of these.
I was attending the Fintech Startupbootcamp in Mumbai in January this year.
Ten startups in areas such as digital identities, blockchain, personal finance management, compliance and alternative data-based credit scoring, among others were identified and are now receiving support, mentoring and access to leading Indian financial corporates who will provide pilot customers, industry data, application programme interfaces and integration support. The goal is for these startups to be market-ready within the next three months.
We also learned that it is the on the ground sales teams in India that are bringing about conversions to financial products and services. Even though this is slowly changing, critical to India’s financial inclusion drive right now are face-to-face relationships.
Together with my co-founder Chris Ball we attended discussion groups about the role of fintech startups in lessening inequality gaps. One of these groups was with the former chairman of the Indian Stock Exchange, and others involved top directors of banks and insurance houses.
Startupbootcamp MD Adrian Johnson said: "We decided to venture into India with our fintech accelerator because we were seeing a significant growth in innovations that address the financial need-gap of the Indian economy coupled with significant participation from Indian companies."
• Bowren is CEO and co-founder of online financial product-comparison portal www.fincheck.co.za
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