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Reaching the Unbanked in South Africa

Standard Bank and technology partner SAP worked together to serve the country's rural and unbanked population.

Adding the ranks of the unbanked as customers can be a daunting task for any financial institution. For Standard Bank of South Africa, which serves a nation with a large unbanked population, the key to reaching this segment is treating them like any other banking customer, and realizing they cannot be served through traditional banking channels.

Willie Stegmann, an executive with Standard Bank, discussed how the bank partnered with SAP to make significant inroads with South Africa's unbanked population, during a presentation at the International SAP Conference for Financial Services in London.

According to Stegmann, 67& of the adult population in South Africa is unbanked, while 37% also live in rural areas. In many parts of the country, cash is still the preferred financial instrument. However, he added that despite those statistics the population is very tech savvy; most of the population has mobile devices and is "very comfortable with technology."

To better capture this market, Standard Bank created what it calls the AccessAccount -- an account designed to be simple, convenient and comprehensive, Stegmann said. These accounts are offered as a "pay as you bank" model with no monthly fees, as well as premium accounts with different degrees of monthly fees and added services.

To sign up new customers -- many of which live in rural areas -- Stegmann said "AccessAgents" are deployed in promotional tents or at local stores around the country, and can sign up new customers via a mobile device as long as they provide proof of residence and identification.

"This information gets processed and sent to our back end," he added. "Accounts can be opened up in eight to ten minutes."

Customers are then not only signed up for mobile banking, but also receive a debit card, which can be used at "AccessPoints," at around 5,000 locations throughout the country -- usually small retail shops, where customers can deposit or withdraw cash, make money transfers and even buy prepaid electricity or mobile telephone airtime.

"New branch construction is very expensive, so we looked at other means of low cost distribution," Stegmann explained.

According to Stegmann, 5,000 new customers per month have opened an AccessAccount since March 2012. Additionally, another 3.5 million legacy accounts were moved onto the Access system during a core transformation that took place over a weekend in April. The bank migrated on to a new SAP core platform, which Stegmann said will help Standard modernize and expand in certain areas, such as an improved CRM system.

Standard Bank also faces some challenges and areas it is looking to improve upon. Stegmann said about 50% of new Access accounts are activated; the bank is looking to get that number in excess of 80%. Standard Bank is also looking to drive transactions on these accounts to an average of more than five per month per customer.

Ultimately, what makes Standard's initiative to reach the unbanked successful is inclusion, Stegmann said.

"If you are an Access customer, your are formally in our banking systems," he added. "We are not treating this customer any different; they are a standard Bank customer with access to a range of services."

[See Also: Banking the Unbankable Requires a Targeted Effort]

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
7/11/2013 | 10:58:46 AM
re: Reaching the Unbanked in South Africa
It would be interesting to see if a US-based financial institution could be nimble enough to adopt these types of ideas to attract the underbanked population here. Also, I'm guessing there would be regulatory/security/risk management concerns with setting up mobile tents that might derail an effort like this even before it got off the ground.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
7/10/2013 | 8:40:29 PM
re: Reaching the Unbanked in South Africa
With the growing rate of underbanked consumers here in the U.S. financial institutions should be paying close attention to the efforts around underbanked populations in other parts of the world and seeing how they can apply those lessons here.
KBurger
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KBurger,
User Rank: Strategist
7/10/2013 | 8:18:28 PM
re: Reaching the Unbanked in South Africa
It seems a bit skewed to talk about the unbanked as the outliers in a market where 2/3 of the population is unbanked. I wonder if there have been some lessons learned that the bank is applying to the smaller "banked" segment -- for example, are there efficiencies or profits in the types of products they are marketing to the unbanked that could be extended to the banked? Another question -- from a tech standpoint, are there particular challenges in supporting products targeted to unbanked customers? More security risks? Less data-related opportunities?
Zarna Patel
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Zarna Patel,
User Rank: Apprentice
7/10/2013 | 1:43:47 PM
re: Reaching the Unbanked in South Africa
Untapped markets like South Africa, South East Asia, and parts of the Pacific might seem especially daunting with the differences in banking regulation in addition to the need for tailoring products to the community. There are a few reports on the number of companies trying to get a banking license in India. Even the number of available licenses are unknown.
Cara Latham
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Cara Latham,
User Rank: Apprentice
7/10/2013 | 1:19:32 PM
re: Reaching the Unbanked in South Africa
I think Standard has found a creative way to reach customers by going directly to them in areas where they would shop, etc., as opposed to trying to get new customers to come to them. Deploying tents at local retail stores not only creates visibility, but it also saves the bank money in constructions costs, as it does not have to build permanent structures.
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