Mobile technology is accelerating attempts by banks to broaden access to the formal economy for low-income earners, but more needs to be done.
Mobile money transfer is one area that appears to be outpacing others in this pursuit.
There are a number of mobile money transfer services in the country.
These include M-Pesa, e-wallet and the Shoprite Money Transfer. Various banks offer their own systems.
Absa added another system this week with the launch of a card payment system called PayPass, which allows users to pay for low-value purchases without using cash.
The users need only tap their cards onto the PayPass card readers at either retailers or transport operators to pay for their purchases.
These advances are universally welcomed but there are still challenges.
Lumkile Mondi, chief economist at the Industrial Development Corporation, said: “Access to credit, especially mortgage bonds, remains a huge barrier for low-income consumers.
“Banks still need to be flexible in their selection criteria so that consumers who would ordinarily be considered too risky because of their earnings could be able to buy property.”
Cas Coovadia, the managing director of the Banking Association of SA, said attempts by the banks to broaden access would be in vain if the regulatory environment was not responsive to the needs of the unbanked.
He said the association was concerned about parts of the regulatory burden which made it difficult for some consumers to access banking services.
“For example, people are required to produce proof of residence to open a savings account. Most consumers in informal settlements do not have such documents,” he said.
Coovadia said the industry had managed to get some of the services exempted from some of the Financial Intelligence Centre Act requirements.
Mandla Maleka, chief economist at Eskom, said active participation in the economy by low-income earners was key to unlocking benefits for the unbanked and to ensure the faultless transfer of funds.
Maleka said: “Tapping the unbanked market could open up other opportunities. Billions of rands are stashed under mattresses by people who are not part of the formal banking sector. Considering the country is an emerging market and has a low-savings ratio, there is space for such developmental opportunities.”
There are an estimated 13 million people in South Africa who are outside the mainstream banking system.
Coovadia said banks were looking at mobile technologies and forming partnerships with micro-financing institutions to broaden access.
He said the challenge for the local banks was to provide cutting-edge banking services that are globally competitive, but also accessible to the unbanked.
Maleka said transaction costs and illiteracy could slow the penetration of mobile money transfers.
Absa’s Simon Just said 85% of the 5.5 billion purchases recorded in the country a year are made in cash.
Consumers would be able to use a mobile money transfer card to pay for their taxi or bus fares and purchases of less than R1 500 by simply tapping the card on the card reader. They can load money into the card via a cellphone or the internet.
Absa said it was piloting this new system with public transport operators such as Gautrain and Rea Vaya.