Educating consumers around financial literacy, or providing them with the awareness, knowledge and skills to make sound financial decisions, was critical to financial inclusion, says a fintech startup that helps employees build financial wellness called Floatpays.
Simon Ward, founder and chief executive of Floatpays said that currently, the South African government had ratified several policies and procedures to this effect, but much more support is needed from the private sector and particularly, from employers. “Financial inclusion; or the universal accessibility and affordability of basic financial services, can be defended as a human right, due to its intersection with other liberties, including the right to equality, the right to housing and the right to freedom of trade, occupation and profession,” Ward said.
Floatpays provides employees with access to a free budgeting tool and free financial education on its app. Its focus was on providing financial education that was practical and relevant - educating people on the main areas of personal finance: income, spending, saving, investing, and protection.
He said that while the responsibility of ensuring South Africans exercised their right to financial inclusion may have previously sat with the public sector, the move towards a more inclusive society could be accelerated by private sector leaders and employers appreciating their role in making quality financial services accessible to workforces.
Ward said that as an emerging player in the Fintech space in South Africa, they were acutely aware of their role in building a more financially inclusive country. “Our vision is to partner with Africa’s employers to be the catalyst of financial inclusion and wellbeing amongst the continent’s people. Our belief in this basic need is rooted in our conviction that financial inclusion is a fundamental human right. Not only is it the key to socioeconomic development and equality, but it is a highly effective means by which to serve the underserved.”
Floatpays said that the path to financial inclusion differed for people but it usually began with getting a basic transactional bank account. Significant strides had been made to ‘bank the unbanked’ as data from the FinScope S.A Survey in 2016 showed that 77.13 percent of the South African population had access to basic transactional banking services. However, there was still a lot more to be done with regards to the accessibility of savings accounts and secured credit from formal financial institutions. The same survey indicates that only 28.76 percent of South Africans had a savings account with a formal financial service provider. With credit specifically, a big barrier to access was poor credit scores as the National Credit Regulator’s 3rd Quarter Credit Bureau Monitor reported that the number of consumers with impaired records increased by 98 892 to 10.17 million, an increase of 0.98 percent quarter-on-quarter.
Ward said that with fintech products that link to payroll systems- such as Floatpays, employers could become the enablers of access to savings products and provide solutions to help people improve their credit scores so that ‘good credit’ becomes within reach. He said Floatpays provideed employees with on-demand access to a portion of their earned wages, disrupting the notion of the 30-day payment cycle that often forced people to turn to ‘easy credit’ when mid-month cash flow was an issue. “Floatpays’ on-demand access to earned pay gives people an alternative to the type of credit that hurts people’s credit scores i.e. unsecured lending. Floatpays’ savings account is an interest bearing savings account that links directly to people’s paychecks, making saving highly accessible and easy to do.”
According to a proof of impact study at one of Floatpays’ clients, it was revealed that over 90 percent of employees have improved their money management since using Floatpays. Good personal financial management was critical to long term financial wellness and remaining financially included. As Ward concludes: “At Floatpays, we support employers who hold their leadership teams accountable for helping their employees build financial wellness. We have been encouraged by the results we are seeing in the companies who have been involved and we are confident that as more employers realise and act on their role in helping people become financially included, this fundamental human right becomes the norm and not the exception,” Ward said.