Both Africa and Middle East are currently the biggest underserved FinTech regions. And it’s not only about FinTech sector, it’s about the overall Banking in those regions.
Financial Times states:
The region’s need is great: the latest financial inclusion index from the World Bank showed that less than half of the population in sub-Saharan Africa has bank or mobile money accounts, while relatively high levels of financial inclusion reported in some areas of the Middle East mask the fact that many immigrant labourers do not have access to services.
Nat Cartwright, chief operating officer of Finn AI, which sells virtual assistants to banks, says technological advancements are lowering the costs for institutions to serve customers. “There’s a business case for them serving people who were formerly either unbanked or underbanked.” The term “underbanked” generally refers to people that rely on cash to manage their finances rather than bank accounts or credit cards.
TymeBank, one of Finn AI’s clients, describes itself as South Africa’s “first fully digital bank” and uses artificial intelligence to interact with its customers online and via kiosks rather than human beings at call centres or branches. The result is a low-cost account that Tyme hopes will appeal to the around 11m underbanked people in the country.
“Every South African has the right to accessible and affordable banking so that they can take part in, grow and benefit from the country’s economy,” its mission statement says.
Yet traditional South African institutions such as First National Bank are also removing barriers in an effort to lure previously overlooked customers. –
Bill & Melinda Gates Foundation joined with JPMorgan Chase and BFA (specialist inclusion consultancy) to establish the Catalyst Fund. It helps “impact-oriented fintechs get to scale”, says Colleen Briggs, JPMorgan’s head of community innovation and corporate responsibility.
Since 2015 the Catalyst Fund has worked with 20 start-ups, 12 of which are in Africa. JPMorgan focuses on companies that can make a meaningful impact on the financial health of their local populations. “What we find is that a bank account alone does not equate to financial health,” Ms Briggs says. She cites the example of India, where although bank accounts are now universal thanks to a government-led push, she says, “a lot of those bank accounts are dormant, nobody uses them”.
The fund also supports MobiLife, a South Africa-based life insurer, which provides cover for low-income families to help keep them afloat should they lose their main breadwinner. The insurer offers a product called FoodSurance, for example, which sends weekly grocery vouchers directly to beneficiaries’ mobile phones.
In east Africa, the Catalyst Fund has backed Sokowatch, a three-year-old Kenya-based fintech that enables small retailers to order goods from suppliers registered on the mobile-focused platform and receive same-day deliveries. It also offers access to credit. The platform has already expanded into Tanzania and Rwanda.
Here’s what FT states about UAE banking progress:
Elsewhere in the Middle East, Emirates NBD, the second-largest bank in the United Arab Emirates, offers customers a salary pre-paid card programme. Most banks in the region offer accounts only to those with a minimum monthly salary of around $1,350, says Suvo Sarkar, Emirates NBD’s senior executive vice-president and group head for retail banking and wealth management. That makes “access to banking services difficult for a large segment of the country’s blue-collar and semi-skilled workers”, he says.
Also, they are incorporating people with disabilities by increasing the level of accessibility to the bank branches for these people:
The bank has introduced hearing loops, automated real-time sign language translation software and, as of December, magnifiers for visually impaired customers that increase text size on documents by up to 30 times.
Raising accessibility reflects the customer-first approach to inclusion that is becoming core for many financial services providers in these regions. “They’re not just doing that because it is the right thing to do,” says Finn AI’s Ms Cartwright, “that is how you build a resilient financial institution. You build up the trust.”
But if this is enough only to raise the accessibility to banks? Is this the solution to the existing issues of “underserving” in the region?
Apparently, that’s a rhetoric question. There are a lot of steps to follow to solve this puzzle. And the first step is educating people more giving them at least basics of both financial and fintech literacy.