Kathy Gibson reports – The South African financial market is a paradox in that a majority of people have bank accounts, but 80% of them don’t have access to financial services.

Khulekani Mathe, head of financial inclusion at the Banking Association South Africa, points out that South Africa’s financial sector is world-class but most of the population is still excluded from financial services.

Speaking at a virtual Huawei event on the financial services market in sub-Saharan Africa, Mathe says financial inclusion means providing high-quality and affordable financial services that meet the needs of a wide range of society sectors and that is appropriate to people needs regardless of what life stage they are in.

In the South African context, history has dictated a system that is not inclusive, he adds.

“Compared to many countries on the continent, South Africa is ahead in terms of transactional accounts. But many of these accounts use used to receive a social or student grant which is immediately withdrawn as cash.

“So these accounts are used to deliver funds, but are not used to access other financial services.

“And this is why South Africa is a county of paradox.”

There are a couple of reasons that cash is still preferred, but mostly it’s because small town shops accept only cash and an ATM is not always available.

The key will be to getting inexpensive payment infrastructure into as many retailers as possible, particularly in small towns and rural areas, Mathe says.

Banks and  fintechs are starting to move into this market, and a number of solutions are coming to market that could solve the problem.

“When we can do that, the payment instruments that people have in their hands will have more meaning, and they won’t have to go to an ATM to get cash.”

Mathe stresses that the situation needs to be resolved, so save millions of people from being left outside of the economy.

Individuals will also have to become more technology and financial literate. “Educating consumers is very important,” says Mathe. “They are often more comfortably dealing face to face with people they know and trust.

“We also have to address the myths that make people less trusting of formal institutions, and build trust in the systems.”

Data access is a big part of the problem of using technology to improve financial inclusion. “Data access in less developed areas needs to be improved. Not everyone lives in a big town and services don’t always work in small towns or rural areas. In fact, things don’t seem to work when you are further away from the cities.

“So we need to solve the data issue, and make sure there is access to broadband.”