Amid an often trying economy, Africa presents fertile soil for fintech growth. This potential is being unlocked because of an increase in mobile penetration and better internet infrastructure. The only missing piece of the puzzle is the need to close the financial inclusion gap.
Collaboration between large financial institutions and tech startups will play an integral role in improving financial access by leveraging technological advances.
According to the Oxford Business Group, 23.5 percent of South Africans are still out of the banking system even in 2023, with R12 billion in cash being held outside of banks. The aftermath of this is that these consumers often aren’t able to access formal financial products like credit cards and business loans. Financial inclusion is driven by the notion that everyone regardless of socioeconomic status or geographic location should have access to financial services.
Although this concept is nothing new, large enterprises and startups need to make it their core focus for the economy to thrive. Fintech startups have a unique opportunity of powering this movement by using their technologies to reach underserved populations, increase financial literacy, and provide innovative financial products and services. Taryn further states that extensive creative thinking and collaboration across sectors will be crucial in achieving sustained and inclusive progress.
According to Boston Consulting Group, for banks to stay competitive and meet their customers’ expectations in the future, they need to upgrade their customer service and use data to customise engagement and anticipate what both the banked and unbanked truly need. Banks and startups have long been preaching that collaboration will be the determining factor in truly achieving financial inclusion, but what’s the game plan?
Before that can happen, government and bank policymakers should facilitate the creation of economical, yet effective financial products to meet the needs of underserved, low-income customers. This could include establishing regulatory frameworks that accommodate customer-centric product design and encourage the development of basic bank accounts and microinsurance products. A customer-focused approach that dismisses behavioural barriers and increases serviceability should be at the heart of this process. This is where fintech startups step in, with their know-how and ready-made plug-ins that can help facilitate building these financial products.
Here are my five top tips on ways Fintech startups can accelerate financial inclusion in Africa:
- Technology aimed at streaming – the biggest reason consumers don’t apply or drop off during the application process is that the process is too complicated or manual. For financial products to be accessible it needs to be streamlined, so for financial institutions, this means drafting in the know-how from fintech startups. A full digital onboarding tool like Gathr, can easily assist with these drop-offs.
- Virtual banks – another factor contributing to financial exclusion is a disbursed geographic location, where consumers from rural areas can’t easily access bank branches. Banks like TymeBank and Discovery Bank allow for convenient document uploads and account approvals. These banks are constantly looking for new ways to meet the needs of their consumers.
- Superapps – one in three people globally are superapp users, with more than 90 percent of these consumers motivated by convenience. The rise of superapps in Africa will mean that consumers are able to easily access any financial product on the apps that they are already using e.g., Vodacom launched Vodalend compare, where users can compare personal loan offers within the app.
- Open Banking – The introduction of open banking in Africa could revolutionise the banking sector by addressing the issues associated with unbanked or underserved populations, as well as improving economic conditions. The potential benefits are far-reaching and could lead to substantial positive change.
- Fostering diversity and collaboration – there is a seat for everyone at the financial inclusion table. According to the World Bank, large corporates, financial institutions, government and fintech startups need to develop an inclusive legal and regulatory framework that facilitates the participation of diverse financial institutions. Additionally, Fintech startups that operate in similar realms need to facilitate and support each other by seeking out partnership opportunities. Looking for expertise or product gaps will allow even more advanced technology to be built that serves the end user.