New technologies available to telecommunications operators (telcos) and financial service providers (FinTechs) are combining to lead the charge in financial inclusion for large numbers of previously financially marginalised South Africans.
The synergies obtained by combining two separate market operators is now evident. Telcos have a strong, trusted brand presence, an established nationwide infrastructure and a large and secure customer base. Many of these customers are based in rural areas and have limited or no access to banks, ATMs or the internet.
Innovative technologies on the FinTech side enable the delivery of small micropayments and other services to individuals who can now benefit from credit access, payment portals and insurance.
However, this process needs to ensure that lending practices are responsible and do not leave consumers in a worse off financial position. Fortunately, the insights telcos bring into their customers’ payment track records ensure responsible lending. Experience shows that lower-income groups have a good track record of paying back loans if they are affordably priced.
Credit risk assessment
Invariably, customers in the mass market, lower-income segments struggle with access to ‘buy now pay later’ type products, especially because many are not documented anywhere in the formal financial services environment. This is particularly true when it comes to unsecured lending for very small amounts – generally between R5 to R200.
Telcos have recently introduced Artificial Intelligence (AI) tools that link telecommunications behaviour with consumers’ financial activity to assess their financial viability. These tools identify the creditworthiness of these consumers. Also read: Vodacom Is Using AI To Enhance The Customer Experience
This telco/FinTech convergence process is also relevant in the small business sector.
According to Statistics SA, SMMEs are playing an increasingly important role in the formal business sector and are an important driver of economic growth and employment. As a result, the National Small Enterprise Amendment Bill was recently gazetted to support small businesses in the country.
In an increasingly digital economy, for start-ups and SMMEs to access loan finance and access affordable business automation solutions, such as taking payments from customers, it is essential that they connect to the correct business tools.
When collecting payments from customers, FinTechs must offer a seamless and frictionless one-channel experience, ensuring consistent, efficient and personalised customer engagement across all touchpoints. Ultimately, the objective of telcos and FinTechs is to deliver great functionality and improved benefits that enable small businesses to grow.
The pandemic has thrust the fragility of peoples’ lives into the forefront. Many unbanked South Africans need access to an affordable funeral and device insurance cover to protect them from the harsh realities of our new environment.
Access to insurance
While most insurance sales are still done in a face-to-café environment, convergence of telcos and FinTechs will now introduce innovative new solutions that will allow lower-income earners to access these products on digital and mobile platforms that are best suited to their needs. Insurance providers must find the best channels to serve their customers and provide real value across all touchpoints.
In the same vein, innovative new technology in the insurance sector also increases efficiency by improving customer servicing and claims processes. The development of sophisticated data and claims management systems reduce turnaround times in claims pay-outs.
The above are only a few examples of this massive new trend in the financial services sector in South Africa. Encouraging financial inclusion, particularly during these unprecedented times, is more important now than ever.
Financial freedom for many South Africans may still be a long way off, but the disruptive processes and unique products offered to both consumers and small businesses by progressive telco and FinTech companies will steadily improve financial inclusion for all South Africans and underpin the growth of thousands of SMMEs.
- Mariam Cassim – Chief Officer of Vodacom Financial and Digital Services