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A mobile, risk-based approach is crucial to achieving financial inclusion in Africa (By Sandy Rheeder)

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  By Sandy Rheeder CIO of Mukuru www Mukuru com Fintechs that are innovating operating and growing across Africa have moved from the broad academic concept of financial inclusion to practical onboarding and walking hand in hand with underserved people across Africa of a financial environment trip The first port of call is understanding that serving the underserved is not just about technology It s about the human element of dealing with people who are not part of the main financial system it s about reaching them and engaging with them where they are and when they need you Repeat use of a product or service occurs when you create products that meet real customer needs The world of mobile access has unlocked an ecosystem where mobile channels can sit alongside a predominantly cash economy and this is vital for meaningful digital inclusion If a fintech wants to onboard people and build trust it must be able to do so without forcing customers to make a financial leap to mobile money or a digital store of value Often right off the bat it s a bridge too far Trust must be developed first At Mukuru we have used mobile digital channels to accompany a cash driven transaction This is important because between 60 and 90 depending on the region of payment transactions in sub Saharan Africa are still made in cash If you try to force the switch to a digital store of value it is often too much for an economically underserved person in the region particularly those who have left their home countries to find work Financial inclusion should be seen as a journey and it starts with putting someone in control of their financial destiny without asking them to invest their money in something they don t yet understand like the concept of the cloud Our market still predominantly operates on 2G mobile connections which means that USSD is a critical channel An effective fintech meets these customers at the touchpoints where they currently transact and then guides them down a path toward understanding mobile use cases Once the customer understands that they can control a digital transaction encouraging them to participate in the world of mobile wallets and digital payments becomes a logical progression This is a model for financial inclusion If we take the Mukuru experience and look at our 10 million customers and their journeys at the end of February 2021 up to 90 of our customers signed up through a field agent Despite this 80 of orders were generated through self service digital channels 43 in USSD and 32 in WhatsApp This is evidence that if you can create products that customers need and find them where they are you can grow them from a face to face field force model to a self service model where they start to take control of their own finances diary However there are still millions of people that field agents cannot reach It is not fair that they are excluded because they live in remote regions They too should have access to financial services A risk based mobile approach represents the solution to find them and help them throughout their financial journeys By the very nature of connectivity on this continent mobile subscription is a critical entry point for travel and basic mobile channels must be available Fintechs need to understand the market as well as regulations in various territories and then address the barriers to registration that perpetuate financial exclusion Mukuru has taken a two pronged approach we look at our core self service channels and then we look at the limitations of those channels Due diligence can and should be carried out using basic phones and this allows access to a basic product Then when customers upgrade which they do they can move to a place where they can buy data use WhatsApp and provide selfies for example which means they can upgrade to a higher tier product Once they can travel to a city where a field agent can find them they gain access to more product offerings because they can provide biometric and legal identification documents Then if they want to move up to take out even more products like a mobile wallet the documentation and due diligence requirements increase once again The next step would be feature rich self help services in the form of websites and apps A big mistake is that many believe that you can start your journey on this rung of the ladder According to Mukuru s experience in the SADC region the use of these channels represents around 5 to 8 of the total volume Fintechs must serve their customers what they need and they are voting with their toes and fingers they want to use simplified channels Collaboration between regulators is important for access to identification and fintechs greatly facilitate this process The point is that one doesn t have to throw the door wide open in the first place because of the same limitations that left people shut out in the first place Rather with a careful mobile led risk based approach the door can be opened bit by bit until they reach a point where they enter full financial inclusion Looking at a snapshot of Mukuru in February 2020 70 of our transactions were cash to cash In February 2022 we moved to only 49 of those transactions from cash to cash and a digital store of value which started as a remittance is becoming a real way of life for a significant portion of customers who were on board through access to a digital channel Financial inclusion and verified customer onboarding can and do work hand in hand If you start someone on their financial journey by giving them access to a digital channel instead of forcing them to immediately convert to a digital store of value you start moving people along a financial journey that they can control
A mobile, risk-based approach is crucial to achieving financial inclusion in Africa (By Sandy Rheeder)

1 By Sandy Rheeder, CIO of Mukuru (www.Mukuru.com) Fintechs that are innovating, operating and growing across Africa have moved from the broad academic concept of financial inclusion to practical onboarding and walking hand in hand with underserved people across Africa.

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2 of a financial environment.

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3 trip.

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4 The first port of call is understanding that serving the underserved is not just about technology.

5 It’s about the human element of dealing with people who are not part of the main financial system; it’s about reaching them and engaging with them where they are and when they need you.

6 Repeat use of a product or service occurs when you create products that meet real customer needs.

7 The world of mobile access has unlocked an ecosystem where mobile channels can sit alongside a predominantly cash economy, and this is vital for meaningful digital inclusion.

8 If a fintech wants to onboard people and build trust, it must be able to do so without forcing customers to make a financial leap to mobile money or a digital store of value.

9 Often, right off the bat, it’s a bridge too far.

10 Trust must be developed first.

11 At Mukuru, we have used mobile digital channels to accompany a cash-driven transaction.

12 This is important because between 60% and 90% (depending on the region) of payment transactions in sub-Saharan Africa are still made in cash.

13 If you try to force the switch to a digital store of value, it is often too much for an economically underserved person in the region, particularly those who have left their home countries to find work.

14 Financial inclusion should be seen as a journey, and it starts with putting someone in control of their financial destiny without asking them to invest their money in something they don’t yet understand, like the concept of the cloud.

15 Our market still predominantly operates on 2G mobile connections, which means that USSD is a critical channel.

16 An effective fintech meets these customers at the touchpoints where they currently transact and then guides them down a path toward understanding mobile use cases.

17 Once the customer understands that they can control a digital transaction, encouraging them to participate in the world of mobile wallets and digital payments becomes a logical progression.

18 This is a model for financial inclusion.

19 If we take the Mukuru experience and look at our 10 million customers and their journeys, at the end of February 2021, up to 90% of our customers signed up through a field agent.

20 Despite this, 80% of orders were generated through self-service digital channels: 43% in USSD and 32% in WhatsApp. This is evidence that if you can create products that customers need and find them where they are, you can grow them from a face-to-face field force model to a self-service model where they start to take control of their own finances.

21 diary.

22 However, there are still millions of people that field agents cannot reach.

23 It is not fair that they are excluded because they live in remote regions.

24 They too should have access to financial services.

25 A risk-based mobile approach represents the solution to find them and help them throughout their financial journeys.

26 By the very nature of connectivity on this continent, mobile subscription is a critical entry point for travel and basic mobile channels must be available.

27 Fintechs need to understand the market, as well as regulations in various territories, and then address the barriers to registration that perpetuate financial exclusion.

28 Mukuru has taken a two-pronged approach: we look at our core self-service channels, and then we look at the limitations of those channels.

29 Due diligence can and should be carried out using basic phones, and this allows access to a basic product.

30 Then when customers upgrade, which they do, they can move to a place where they can buy data, use WhatsApp and provide selfies, for example, which means they can upgrade to a higher-tier product.

31 Once they can travel to a city where a field agent can find them, they gain access to more product offerings because they can provide biometric and legal identification documents.

32 Then, if they want to move up to take out even more products, like a mobile wallet, the documentation and due diligence requirements increase once again.

33 The next step would be feature-rich self-help services in the form of websites and apps.

34 A big mistake is that many believe that you can start your journey on this rung of the ladder.

35 According to Mukuru’s experience, in the SADC region, the use of these channels represents around 5% to 8% of the total volume.

36 Fintechs must serve their customers what they need, and they are voting with their toes and fingers: they want to use simplified channels.

37 Collaboration between regulators is important, for access to identification, and fintechs greatly facilitate this process.

38 The point is that one doesn’t have to throw the door wide open in the first place because of the same limitations that left people shut out in the first place.

39 Rather, with a careful, mobile-led, risk-based approach, the door can be opened bit by bit until they reach a point where they enter full financial inclusion.

40 Looking at a snapshot of Mukuru in February 2020, 70% of our transactions were cash to cash.

41 In February 2022, we moved to only 49% of those transactions from cash to cash, and a digital store of value (which started as a remittance) is becoming a real way of life for a significant portion of customers who were on board.

42 through access to a digital channel.

43 Financial inclusion and verified customer onboarding can and do work hand in hand.

44 If you start someone on their financial journey by giving them access to a digital channel instead of forcing them to immediately convert to a digital store of value, you start moving people along a financial journey that they can control.

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