Financial inclusion seems to be the latest buzzword when it comes to financial services and FinTech in Afrika. Just recently, the International Finacial Corporation (IFC), the United Nations and Ant Financial were in Ethiopia to discuss with the country's president the opportunities presented by digital financial inclusion.
However, when one scratches the surface, some digital financial inclusion services charge exorbitant fees which make you question who stands to benefit more from them, the previously unbanked or the financial institution. Also, different people have different definitions of financial inclusion.
To try and understand this better, I discussed this with Brian Richardson, CEO and founder of WIZZIT, a mobile banking solution provider that assists partner financial institutions and service providers in promoting financial inclusion.
Financial inclusion and mobile banking
iAfrikan: What does WIZZIT do for those not familiar with the company?
Brian Richardson: WIZZIT provides a model to Financial Service Providers (FSP’s) that enable them to attract and service the needs of the unbanked segment of the population – currently around 70% of the African population. The model includes state of the art innovative technology which works as well for the upper and middle segments of the market with their Smart phones using APPS as it does for the lower end of the market , the majority of whom have feature phones.
In addition to the platform, WIZZIT provides its customers with a model to effectively service the unbanked segment of the market.
We have been doing [this] since 2004 and it is interesting to see some press announcements proclaiming with great excitement that you can now send money to other people just using their cell phone number -something that we pioneered 15 years ago.
Mobile banking and mobile money are typically associated with financial inclusion, how would you define financial inclusion?
Financial inclusion means having access to a broad range of financial services and products – including savings, payments, credit, insurance. Some countries have specific targets around financial inclusion eg the Philippines have financial inclusion as part of their monetary policy with a target set at 20% of all transactions being electronic by 2020.
Financial inclusion means having a safe place to keep my money; being able to access my money when I need it; being able to make payments and send money; having access to credit should I need it. It clearly goes way beyond simply having a convenient way to buy airtime.
As a financial institution, you need to make a profit but also pursue "financial inclusion" of the unbanked, how do you balance these two goals?
This goes to the very heart of digitalisation and financial inclusion and empowerment. Banks for years have been claiming that there is no money to be made at the bottom of the pyramid. They are right when one looks at the traditional bank model which is Bricks and Mortar based. This is a very expensive model to run and files in the face of the critical elements of success required for financial inclusion that is embodied in what we have termed the “3 A’s” which we coined 15 years ago and today include another factor – R = Relevance of products.
The 3 A’s are:
Affordability – banks are perceived as expensive.
Accessibility – bank branches are typically located in urban centres whereas the bulk of the unbanked are rurally located. Branches are also seen as very intimidating to the lower end of the market.
Availability – bank operating hours are inconvenient for the mass market being the same as normal working hours. It begs the question as to when people are meant to get to the bank.
Technology solves all these issues and dramatically reduces the client acquisition cost, processing costs and ensures 24/7 availability for the customer. We had as our by-line – “your Bank in your pocket” for many years.
Banks should not assume that the needs of the unbanked segment of the market are the same as the banked customers and they have to ensure that they understand the needs of the market and satisfy these needs with appropriate and relevant products.
We have taken this model to 14 countries across 3 continents and have proven that you can be profitable in servicing the previously unbanked segment of the market and that the bank through a much lower client activation cost has the ability to cross sell other products and services.
In your view, what mobile banking trends in Afrika should we look out for during the rest of 2018?
I watch with interest the announcements and launches of “Digital Only Banks” - (WIZZIT was one of the first globally to launch with a branchless digital only model) – that are APP driven.
Clearly there is no intention for these new entrants to focus any attention on the un and underbanked segment of the market as they would be well aware that somewhere between 60% and 70% of the market have feature phones that cannot use APPS. There is an abundance of research showing the very high correlation between people with access to internet & smart phones and the banked population. In most parts of the world today, the banked segment of the market is multi banked and all their financial service and product needs are more than adequately provided for in perhaps an overtraded market. Ghana for example is busy consolidating its banking space and reducing the number of banks in operation.
I think that the big opportunity in Africa is around digitalization where the customer needs and requirements drives strategy rather than the traditional model where legacy systems dictate what a bank can and cannot do and what products and services they can offer.
We are going to see a big move in the use of mobile for retail transactions and a dramatic rise in e-commerce. It has been proven that cash on delivery and the e-commerce word does not really work and that only way that it can work is through a cost effective and efficient electronic payments system. Clearly the unbanked cannot access this and therein lies the opportunity for innovative banks.
Any closing remarks?
Although there are many “Challenger Banks” and lots of new and innovative startups, financial services is built on Trust – something that is earned and built up over time. So you have the dilemma or opportunity for the traditional banks to take digitalisation seriously and put some real effort into financial inclusion and not just pay lip service to it, or the new players potentially will “eat their lunch”.
WIZZIT gives the banks the tools to be agile and nimble and get to market in a fraction of the time that it would take for them to do it themselves. We have the opportunity to share with our partner banks practical lessons from around the world and ensure that they are at the forefront of developments.
We have some very exciting new products that are in the final certification phase that will be announced shortly. As mentioned earlier trust is critical and this is built through secure and certified platforms that at least meet, of not exceed banking and payment standards. A bank cannot from a reputational risk perspective, afford to work with suppliers and technology providers that do not meet basic security standards.
The rate of change in the industry, driven by digitalisation and technology is exponential and perhaps the biggest cost that a bank faces -is the cost of doing nothing and then trying to play catch up.
Cover image credit: Brian Richardson, CEO and Founder of WIZZIT.