Fintech is poised to continue disrupting financial services and is uniquely capable of driving formal financial inclusion on a massive scale. However, there is a risk that in the pursuit of innovation, companies develop fintech solutions for technology’s sake, and not to address real needs, and that if real needs are not addressed, the solution(s) won’t gain traction.

All too often, companies or entrepreneurs in the fintech space find themselves in a mindset of “building something that shines” and then anticipating that associated demand, commercialisation and scale will automatically materialise. It doesn’t work that way in Africa for a variety of reasons, chief of which is that there isn’t a large, ready-made, fully digitised, homogenous demand pool that you might find in other parts of the world, and for the most part, “cash is still king”. The largest part of the addressable market is still in a cash-intensive, informal financial services ecosystem.

Banks in Southern Africa are looking at a services-based architecture that will support differentiated products for customers, particularly in the app space. In terms of banked customers within the South African market, apps are certainly becoming more the norm. Even if banked customers don’t have access to the Internet in other ways, they have access to their mobile phones and so there is growth in the app-based market.

This certainly is a positive development, but an app will only live up to its promise if a company has found an efficient way to bring its legacy systems to play. In other words, developing an app without a clear multichannel strategy will result in more challenges than successes. Working up from a multichannel environment puts a company in the driver’s seat because an app needs the good old legacy systems to work in sync – customer experience, service and retention depend on it.

We’ve all heard the saying, “There’s an app for that.” Sometimes there doesn’t have to be.

Why force them?

If we agree that any product, fintech or otherwise, should exist to address a real customer need, then we must accept that the channel chosen for a solution does not have to be the most sophisticated just because the store of value is digital. If someone uses USSD or WhatsApp daily, why would you want to force them to download your financial services app that requires e-mail login — and another level of digital sophistication — instead of allowing them to manage their finances on a channel they are already comfortable using?

Additionally understanding that, for the most part, “cash is still king” is an important consideration when developing solutions for African, emerging market conditions. Large sections of the economy in this country, and the rest of the continent, are cash based. This means a fintech solution that aims to drive financial inclusion among the least-served sections of the population must appreciate the proliferation of cash or it will miss the mark. The solution must integrate cash distribution networks and appreciate that the journey towards digitisation is a series of interconnected links in a value chain as a opposed to a single, binary “switch”.

At Mukuru, this understanding has been developed by rolling up our sleeves and developing solutions specifically for Africa, in Africa. This is why, in our efforts to deliver services to customers, we serve customers across a comprehensive, vertically integrated cash and digital network. Communication, delivery, engagement and distribution spans WhatsApp, USSD, contact centre, app, website, agents and over a thousand physical locations across Southern Africa and 60 partnerships worldwide to enable more than 320 000 pay-in/-out points. By developing this robust footprint of talking to people on the ground, we have seen first-hand the importance of the next key element in unleashing the power of fintech: education.

It is all good and well to integrate with cash distribution networks, but why would someone agree to move from cash to digital?

It is all good and well to integrate with cash distribution networks, but why would someone agree to move from cash to digital? Contextualise it in your own experiences: Reading this, you probably had a parent, and grandparent, who has had bank accounts. When you left school and entered the workplace, storing and managing your money digitally was natural; it’s the way it always was.

Now imagine someone who has had no one in their family and support network store their wealth digitally, never mind participate in elaborate financial management. How can we expect someone who has never encountered what you and I take for granted to have the same generational trust in a digital store of value and be able to make the transition in one leap?

Bridging the cash and digital divide and bridging the formal and informal sectors is a big strength of fintech, but financial education is paramount for this to occur.

Fintech companies will continue finding new and innovative ways to deliver services to customers where and when they need them

Although South Africa has a mature and well-established banking sector, it’s an error of judgment to assume that everyone, including migrant workers, will have a well-established and mature financial services mindset. Many don’t, and they need education, starting with basics such as the importance of keeping Pin codes safe, through to the value of treating digital solutions as more than conduits for cash.

Many of South Africa’s entry-level bank accounts are conduit mechanisms for cash to arrive (in the form of payments), and so the onus is on the financial sector to educate users that they need not withdraw all their funds at once and that it is safe to store their money digitally. Expect to see significant efforts across the sector to educate, influence and entice customers to make this shift in behaviour.

The future of fintech in South Africa

Fintech is pioneering by its very nature, and fintech companies will continue finding new and innovative ways to deliver services to customers where and when they need them.

Increasingly niche fintech players can provide a service in their areas of specialisation more dexterously and efficiently than a larger, legacy institution. This usually comes with better a customer experience, too, and almost certainly at a more attractive cost base than what they could achieve. The outcome is that we will likely see more and more banks decide that instead of competing with agile fintech players, they will be asking how they can leverage their expertise. Rather than reengineering solutions that already exist, the keyword will be partnerships.

Ultimately, the customer, the person on the street, will be the beneficiary as the entire financial industry will be in a better position to share experiences and learn from each other, not least in how fintechs are managing to serve the unbanked and underserved segments.

There’s no turning back the clock and both the regulators and industry players know this. It is important that the fintech industry sees the inherent value in engaging constructively with the regulators. Compliance is a business enabler, not a disabler. It’s by working together that we can unleash the true power of innovation and technology to solve important challenges and serve more people. And you don’t always need an app for that.

About Mukuru
Mukuru is a leading, next-gen financial services platform that offers affordable and reliable financial services to the emerging consumer in Africa. With over 50 million transactions to date, our core was built providing international money transfers. From this base, we’ve developed a set of services to address the broader financial needs of our customers.

We are a business that puts the customer at the centre of everything we do, and for that reason, we serve clients across physical and digital channels, by any means of payment (cash, card, wallet) as well as a range of engagement platforms including WhatsApp, USSD, contact centre, app, website, agents, and a branch and booth network.

Mukuru has been listed as one of the leading 150 cross-border companies globally in the 2020 FXC intelligence Incumbents vs Challengers in Cross-Border Payments.

Mukuru won three awards in 2021. In July, it also took the top honours for Most Innovative Financial Services Provider South Africa 2021 at the World Economic Magazine Award Winners 2021 as well as at the International Business Magazine Award 2021. In April, Mukuru took the top honours for Most Innovative Online Remittance App – South Africa, 2021 at the Global Brand Awards 2021.

Further information can be found at www.mukuru.com/the-mukuru-group.