Cape Town - Digital technology across Africa is empowering more people financially, especially low-income earners, a joint report released by Deloitte and Mastercard on Thursday, coinciding with the World Economic Forum on Africa in Durban, said.
The report titled “Leveraging digital to unlock the base of the pyramid market in Africa”, with the focus on the waves of digital innovation in financial services, reinforces that digital technology is financially empowering more Africans.
With the focus on lower-income earners, referred to as the base of the pyramid (BoP) market, the report looks at how best to facilitate inclusion by providing financial solutions, products and services that focus on affordability, reach, access and trust.
Roger Verster, the financial services industry leader at Deloitte Africa, said half of South Africa’s workforce falls into the BoP income bracket, with this share likely to be much higher on the rest of the African continent.
“Although BoP consumers represent the majority of African consumers and spending power, their low income has been seen as a hindrance to gaining access to products and services through traditional distribution models.”
Verster added that the widespread reach of digital technology across sectors in Africa had spurred the introduction of new market entrants and solutions aiming to disrupt traditional models and accelerate financial inclusion.
He said a key enabler and catalyst for digital disruption in the financial services sector had been the rapid adoption of cellphones in delivering digital services to those still unbanked or underbanked, at affordable prices.
Raghu Malhotra, Mastercard president for the Middle East and Africa, said developing a more inclusive Africa would take a combination of strong partnerships, relevant financial solutions and a willingness for governments to move beyond cash.
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Malhotra identified several trends impacting financial inclusion, including mobile devices as a payments acceptance tool, the digitisation of key value chains, the growth in online cross-border money transfers and electronic identity solutions.
Partnerships with mobile network operators, in particular, enable these new entrants to tap into an existing customer base, giving them access to solutions such as mobile wallets that help to streamline credit extensions, the collection of premiums and the overall claim pay-out process, the report said.
It identified three waves of digital disruptions across Africa, as part of identifying innovative ways of unlocking new markets and providing more affordable and accessible solutions to the BoP.
The first wave involved fintech companies disrupting the banking sector by developing digital banking and payment solutions, started mainly in collaboration with telecommunication companies. The most well-known example is Safaricom’s mobile wallet, M-Pesa, which is now available in 10 countries, with 30 million users.
Successful companies leveraging mobile technology, often through partnerships, cloud computing and advanced data analytics, to bring down costs, achieve reach and increase trust.