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Finding a winning fintech formula

Recognising that underserved communities don’t just jump from cash to digital is an important consideration for fintech firms.
Andy Jury
By Andy Jury, Group CEO, Mukuru.
Johannesburg, 28 Mar 2024
Andy Jury, CEO of Mukuru.
Andy Jury, CEO of Mukuru.

Fintech companies no longer need to convince anyone about the power of using technology to enable financial services and banking. Banks themselves are investing in various fintech solutions to better serve their customers.

However, some fintechs or fintech solutions take off, while others do not necessarily get the envisioned uptake. This is primarily down to how people, and even fintechs, view the bridge between cash and digital, because it’s a fundamental gateway to customer engagement in Africa.

People tend to visualise two worlds living side by side: a cash world and a digital world. It’s clear there is a massive cash economy in South Africa and other African countries, and that if this economic activity were brought into the formal economy, it would have a hugely positive impact on GDP and communities. But it is a mistake to view the two worlds as binary opposites.

We don't see a cash world and a digital world and a massive bifurcation between the two. We see customers who have needs. It just so happens that often they live in a cash-over-the counter world. However, the most important principle is: meet customers where they are, solve their needs and then walk with them along a journey.

The most important principle is: meet customers where they are, solve their needs and then walk with them along a journey.

By way of analogy, anyone can have a conversation with anyone else. Perhaps it is in person, or maybe on their phone, their laptop or tablet, with the various technology tools being interoperable. Essentially, we are doing the same thing as fintechs − we can chat to someone on WhatsApp on their phone, or via the website, or with an agent, and we then create a transaction.

The idea is that we are seamlessly evolving through an omnichannel world, and we are, as people, becoming far more accustomed to it. With this concept in mind, fintechs need to take a little step to the left along the continuum and apply the same principle to a non-digitised world.

This means the “why” of what we are doing is incredibly important. The “what” follows as a consequence of that “why”. Therefore, the best approach to digitising is to meet someone where they are in the cash-to-cash world, remove impediments and then enable the customer to learn and improve their lives in a manner that is a natural segue across a continuum, as opposed to a discrete binary jump.

To extrapolate the idea a little further, consider your own world. Not too long ago, you would have needed to visit your local bank branch and explain you wanted to pay R200 into your mother’s bank account. Perhaps it was more convenient for you to write a cheque. Now, you can’t write a cheque anymore and there are far fewer branches. However, we are all comfortable to quickly log into our banking apps and pay R200 across.

Our needs are still being met, but we are doing it differently. This concept is mirrored in the journey from cash to digital for underserved communities.

Saying: “Hey presto! Look at my digital solution and you have to be digitised to use it,” is not the best starting point but the end game. We’re all going to get there but it would take a brave pundit to bet on whether that will be in five, 10 or 50 years.

More importantly, is that we want to serve our customers right now and be relevant for them tomorrow, next week and further into the future?

A fintech should not panic if it creatively destructs some of its pathways or channels as long as they are being replaced by others. A fintech must innovate lest it becomes irrelevant and loses market share. If a business is resting on its laurels and the rug is swept out from underneath it because someone comes out with a far better and more relevant solution or product to engage with a customer, and it does not have an answer, it will lose that customer.

Turning the lens towards South Africa specifically, 2024 has been particularly interesting. Last year, activity mimicked the difficult economic conditions; however, this year is off to a strong start in the peri-urban, semi-formal and semi-digitised space. This talks to a resilience in the market.

Individual transaction sizes may be smaller, precisely because of the tough market conditions, but for customers it is a case of hunting for value, and in this hunt for value it doesn’t really matter to them whether the solution is hyper-digitised or not. The key for a fintech though, is this: Does it meet and satisfy the needs of the customer at this moment?

And then, every day, the journey must become a little more digital – as if measuring in grains of sand, but the needle must move in the right direction. A great deal of success in this approach comes down to confidence and trust, which I have written about extensively.

If you build something that someone recognises, with a brand name they can trust, and they are comfortable evolving – even if only a small amount – then you are onto a winning fintech formula. And that formula is financial inclusion by digitising underserved communities.