South Africa can learn from the Indian government’s moves to bank its unbanked population by limiting the amount of cash that can be drawn at one time, identifying populations with high potential to ‘go cashless’, and by subsidising smart phones. Financial inclusion of the poor is key to poverty alleviation and critical to its success is financial literacy.
I recently returned from India, one of the world’s fastest growing emerging economies, nearly 2.7 times the area of South Africa but facing the same issue of vast gaps between rich and poor.
India identified where its immediate potential cashless market lies. The population of India is some 1.2 billion. Around 400 million people have a bank account and are either saving, investing or borrowing – they are included in the financial sector. However, 70% of the population remains unbanked. As the Indian government’s cashless drive gathers momentum these individuals will soon need bank accounts in order to send and receive money. With a smart phone and internet access or mobile phone signal, all they need to do is to choose a financial institution and the product and/or service they need. India’s maturity towards a cashless society is happening.
South Africa’s population sits at around 56-million. A trend in South Africa shows that people are moving straight to smartphones, skipping straight past laptops and PCs, because it’s easier and far more feasible for them. And, with going cashless comes bank-level security which has already proved a huge driver in the adoption of legitimate mobile money technologies by individuals and SMEs in South Africa. It would be worth pinpointing the under-tapped areas where a move to mobile has high potential.
The prospective volume of cashless transactions makes India extremely attractive to fintech companies, as the rapid explosion of fintech startups in India has shown.
The growth of fintech startups in South Africa that are offering alternative ways to accept payments is taking place. We see this by the number of service providers whose offerings to consumers and SMEs we compare on Fincheck such as Yoco, SnapScan and Ikhokha. Yet the scale and rate of successful startups has immense potential to grow here too.