How long before everyone has access to financial services
We can expect to see queues for those wanting to receive their pensions and grants in the coming days. Despite the system being able to make the payments electronically to many, they are still either not able to or choose to queue and withdraw the physical cash.
Hopefully that will soon be a thing of the past.
In 2004, 54% of South Africans had no bank account, that thankfully changed significantly with the introduction of the national payment system which used a bank card which was loaded with the grant and could be used to make payments or used to withdraw cash when needed at pay points like supermarkets.
That saw the percentage unbanked fall to 33% in 2012 and could be used by 75% of the recipients. One of the highlights of a poor decade of state administration. It too became embroiled in controversy and is still working on becoming the service we need to look after the most vulnerable, but it does plot the correct path to address the issue of expanding financial services to everyone.
The National Development Plan set the target to extend financial services to 90% of South Africans by 2030. The most recent number I could find was from 2018 and put the number of people without access at 32%, only a 1% improvement in 5 years.
Efforts to increase payments for a set period and to introduce a new payment to respond to Covid-19 are ambitious even from a fully functional system. Offering additional methods to request access via WhatsApp and having simple options to determine the state of applications is also good. But with millions of applications and hundreds of thousands unsure if they need to simply wait or were disqualified has lots of messages on social media wondering what is happening as SASSA had processed a little over 100 000 by June with the undertaking to pay the rest in June.
Which services are needed
The genius of the invention of money was that rather than having to carry the actual goods, you used some representation of value that was trusted and accepted by anyone. It was both a store of value and could be used to pay for things.
Banking formalised that process and offered to store the excess funds, process payments on your behalf and then the new innovation to provide you with credit when you needed it if you qualified.
Banks built trust on having imposing buildings that looked safe and permanent and would have that trust eroded if the bank was robbed or employees were found to be crooked.
These days much has changed, we no longer consider the location of the bank but rather the fees, ease of using its products/apps and what is posted critically about it online as an indication of how well it is trusted.
Switching accounts remains difficult as does closing accounts but banks are being challenged by others looking to offer only some of the services of a bank with lower fees and less time to set up.
These are the new virtual banks that offer zero monthly fees by not having any physical branches.
Telecommunications companies too are looking to extend their ability to be more than just a means to connect to the network and the internet. I signed up for an MTN MoMo account which uses a check of Home Affairs and my voice for security, the setup took less than 10 mins from installing the app to being verified.
I also signed up for Thyme Bank at a Pick n Pay but that failed as the terminal appeared to not be able to connect with Home Affairs.
Then you get companies that are neither banks nor mobile companies but are looking to offer financial services either to make payments easier like the local Yoco which allows retailers to accept card payments. Then there are companies like 22 seven that offer to analyse and catalog your transactions in order to create a practical budget and let you know how you habits compare with others.
Discovery recently amended its banking offering to what it calls behavioural banking which may be a good option.
Once it is easier to store and move money and make payments electronically we can start connecting payment options to make getting around easier. Uber is built on you not needing to have cash for a ride (despite introducing the option to pay cash in SA) the company has a significant financial services division as many drivers were unbanked and so Uber created accounts in order to pay them electronically.
For other transport options when everyone can make electronic payments with a card or mobile phone would allow for public transport services to work with a tap and go system. Ideally it should work across all transport options including taxis to make journeys and payments easier.
Currently retailers and merchants that work with cash need to consider the security and banking costs for handling cash, if that was removed, it could be used instead for something to help the business grow. Remittances are another key area to be improved with projects by Shoprite between South Africa and Lesotho, allowing shoppers in South Africa to transfer money to someone to collect at a Shoprite branch in Lesotho at a minimum cost.
To get a sense of how significant this shift could be consider the growth of Ant Financial and Tencent’s WeChat in China. More transactions take place via their platforms than the banks and that shift happened in the last decade.
#BusinessUnusual - how long before everyone in SA has a bank account or financial services that work for them. Could it mean the end of cash, @brucebusiness and @colincullis after 7 pm this evening. How do you prefer to make payments?— 702 (@Radio702) June 3, 2020
The next opportunities
There is still a lot of work to be done to make this work for those that need it most but that requires the rest of us to push for more inclusion. Phone and data subsidies should be part of the grant system. An opportunity to employee young South Africans to assist with digital literacy will help those still hesitant about digital options.
This should allow users to feel more confident to leave their money in the electronic form and not stand in queues just to withdraw it in cash.
Those that prefer to keep their matters private should have protections from intrusive access but there is no excuse to try to protect fraudsters and scammers from relying on the anonymity of cash.
Then we should look to open banking, the principle that the data relating to your transactions belong to you and that you should be able to make that data available to those you believe will help you with access to it. It might be a service to look for suspicious payments, track spending or help clear your debt. One project will prevent transactions made by those with gambling problems.
It would also allow for more transparency with credit scores and your ability to get credit.
The final element is a bit more tricky to get your head around, digital cash. So far we have used digital methods to keep track of how much actual cash we have and what we spent. Digital cash does not need a bank to confirm you had the cash, the digital cash is available on your phone and can be transferred to anyone else with the same platform. China is testing the option to determine how well it might work. It is a version of the principles created with cryptocurrencies and would allow China to not only make moving money easier, it could begin to challenge the way the world uses money. Currently prices and actual transactions use dollars and transactions are routed through US institutions, this system could bypass that challenging the dollar dominance and circumvent US sanctions.
There will still be challenges as criminals look to exploit the system or us and try part us with our money but for all the challenges the improvements in just the last 10 years rival much of the progress made in the last 50 and so hopefully we not only reach the goal of having only 10% of the population still needing access by 2030 but that everyone will have access by then.
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