In Africa, around 80-90% of all financial transactions still happen in the informal market, mainly in cash. This exclusion from the formal, increasingly digital financial ecosystem comes at an economic development and GDP cost as access to appropriate financial services facilitate investment in productive activities such as entrepreneurship.
According to Andy Jury, Group CEO of Africa-based fintech company Mukuru, this persistent gap between the informal and formal and the cash and digital financial worlds makes the financial services landscape on the continent incredibly fragmented but filled with immense opportunity.
How big is this opportunity? Studies have predicted that if unbanked citizens can funnel their private savings into the formal financial sector, another $157 billion could be produced in additional potential savings by the global economy.
Mukuru, founded in 2004, is a financial services platform that focuses on Africa’s emerging consumer and sits comfortably, says Jury, at the intersection of the informal and formal financial services market.
At its most basic, financial inclusion means that a person should have access to appropriate and relevant financial products.
Jury argues that the starting point should be access to a digital store of value, whether that is a lite banking account with a card or an e-wallet, and this is what lies central to what Mukuru offers.
“If you can have that, it provides a massive unlock for the previously excluded customer. Now they can save and get all the benefits of storing their money electronically as opposed to keeping it on their person,” he says.
Mukuru’s founders initially looked at solutions specifically for the hyperinflation environment that existed in Zimbabwe in the early 2000s. The business has since morphed from there with a focus, in the last decade especially, on enabling migrant diaspora in southern Africa to send money home through easy and accessible remittance channels.
“Many of our customers are coming to us when they take their first steps towards formal financial inclusion and digitalisation,” says Jury.
Hurdle of inertia
Providing access to digital financial products or services won’t necessarily mean immediate adoption, purely because these firsts are often filled with mistrust about a world that is foreign to the user.
“We try to address the pain points and value leakages in the informal system, through technology that leapfrogs those voids between the cash and digital worlds, but in a manner that our customers will still recognise for them to take that step,” says Jury.
The company does this by, usually, approaching first-use customers via its ambassadors or agents. These agents would either be roaming the community or stationed at kiosks and would engage in a non-confrontational manner around the solutions offered by Mukuru. The customer’s onboarding would then occur digitally, up-front, before any remittance or payment transaction occurs.
“This is one of the fundamental differentiators between us and the more traditional money transfer options out there. We treat every person as a client, not as a simple transaction. This way we build relationships with our customers over time, creating trust to address the hesitance of moving digital,” says Jury.
Peace of mind
Mukuru uses technology across various channels – USSD, WhatsApp chat channels and its own app, where customers can create transactions themselves – coupled with face-to-face trust-building access points such as agents, kiosks, and its contact centre.
It ensures that the customer receives multiple communications throughout the transaction to provide peace of mind of where their money is, instead of an example of the informal market where a money remittance via cross-border taxi could take two weeks, and no one would report the whereabouts of the funds during that period.
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Remittances remain the main entry point for customers into the Mukuru world, says Jury, but it is not the only one. Increasingly the first touchpoint is customers reaching out for a digital store of value, such as the Mukuru card.
Using the digital products frequently in their daily lives then eases the customer into the digital financial world.
“We create the relationship, then we show that we have a bouquet of products available and, through consistently high levels of customer service, we then prove to the customer that we are a brand name that they can entrust their hard-earned resources to,” says Jury.
Some of these additional products that the company is rolling out, or has plans to roll out, to the different jurisdictions in Africa where it operates, are the Mukuru card (currently available in South Africa), the e-wallet, a funeral service insurance product (only available, for now, in South Africa) and Mukuru Groceries (which can be received in Malawi and Zimbabwe from their loved ones in South Africa).
Building the framework for inclusion
As a player in the remittance world, Mukuru has grown its global footprint and network extensively to be present where its customers want to send their money. It currently has a network that touches 70 countries (including China). Global partners include Thunes, Worldremit and Mpesa. In addition, its call centre will be able to help customers in over 30 different languages.
Mukuru has 320 000 pay-in and pay-out locations across the continent and 60 global partnerships.
“Like any entrepreneurial business, we are trying to trade-off the size of opportunity against the speed to execute and the applicability of our capabilities to the opportunity set. Regulation certainly factors into this,” says Jury, adding that to move transactions online, the conversation has to be with both the end-customer and the source of income, the employer.
“We have teams who talk to employers where we believe that they are employing our target customer set and haven’t yet solved the pain point of paying their employees digitally,” he adds.
“It is a massive enabler for financial inclusion if you can find a primary funding use case that is digital, for example, receiving your wages or primary source of income digitally.”
Despite the work that needs to be done to set up the regulatory and technical structure to support financial inclusion, Mukuru sees immense opportunity to address the unreached market that remains on the continent.
“We want to build even richer relationships with our customers and provide further breadth of products to solve challenges for them,” he says.
The company was, for example, able to spin out a grocery product within 45 days when Covid-19 hit.
It believes it can do the same as and when other challenges or pain points appear within its customer base.
“We see this bridge between the informal cash-based world where people find themselves today and a more digitised environment as one that needs to be actively curated, which is why we are investing so much energy in our physical infrastructure,” says Jury.
“Every time we put a Mukuru Orange booth down, it acts as a manual ATM, a digital bank branch of the future and a beacon of trust for the community.”
Brought to you by Mukuru.
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