Collaboration between IT and banking companies would better enable banks to reach the significant number of unbanked South African adults, industry leaders have agreed.
Speaking at the BMI-TechKnowledge/International Data Corporation African banking forum in Midrand yesterday, Absa group SMS GM Theo de Lange highlighted the need for collaboration.
"We need to look at alliances between banks and technology companies. I don`t think the unbanked market can be reached using existing banking methods," he said.
Oracle solution architect Glen Lottering agreed, adding that both sectors had an important role to play. "If any technology vendor is telling a bank they have an entire solution, I think they are lying. There is a need for partnerships in order to achieve a total solution."
Hewlett-Packard financial services manager Carlos de Figueiredo said the solution lies in tackling the problem from a different angle. "Sometimes, the more sophisticated and up to date technology is, the more expensive it is. So we need to work out how to introduce sophisticated technology to unsophisticated people, while also making it affordable," he told delegates.
"For many years we`ve tried to reach the non-banking community but have not succeeded. The question is whether banks can shift their paradigm and see business from a different perspective. Because therein lie the opportunities."
The barriers to reaching the unbanked sector were also highlighted at last year`s forum, where Aplitec CEO Serge Belamant attributed the lack of penetration into the unbanked sector to high bank charges, lack of infrastructure and the lack of a value-added service.
Until recently, banks were seen as not giving enough focus to the lower income markets, said Finmark Trust independent consultant Darrell Beghin. "Banks are often slated for not focusing on those who earn under R3 000 a month, and these people make up more than three-quarters of South African adults."
In a 2003 study by Finscope, a programme launched by Finmark, a significant 35% of adults were still unbanked, said Beghin.
The business angle
From a banking perspective, there are a number of reasons for wanting to reach the unbanked sector, said De Lange. "Locally our banked market is fairly well covered. The big banks are basically pulling each other apart to take consumers from each other.
"Also, the unbanked market is very loyal, and they will tend to stick with whoever helps them first. So it is lucrative, and the growth of that market is important. But affordability is the key issue. If we reach them, they must be able to afford it."
De Lange added that there is a social responsibility aspect involved, stating that exploitation of consumers is fairly common in the unbanked sector." Repayment rates at loan sharks can be as high as 100% a week. The people who go to loan sharks are often the exact people who cannot afford to be exploited. The banking industry must replace this system."
While collaboration is seen as an ideal way into this market, De Figueiredo said there has not been sufficient progress made in this area. "I am not aware of any comprehensive forum for collaboration, but companies are working on it and getting together. We are working directly with a community in Limpopo, where we are adapting the technology to suit that community."
Beghin noted that while technology must play an important role, banks must not overlook the more pragmatic solutions. "The challenge to banks is to do things differently. Banking is a service, so they need to make a value proposition that will make a difference in the consumer`s life.
"One example is that we found many consumers in one rural area simply wanted ablution facilities at a bank. They travel far and want to use the loo and have a drink of water. The bank that offers this will attract more consumers than any other in the area."
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