Lee Naik, CEO of TransUnion Africa.

Financial inclusion is about so much more than giving consumers a place to store their money – it’s about creating a pathway for them to transact, to engage with the financial system, and to leverage their money to grow personal wealth and improve their standard of living. The FinTech industry offers much potential in its myriad solutions that set out to extend financial inclusion – but now’s the time for us all to understand that building new ways for consumers to make payments is not the way to do it.

On this continent of nearly 1.5 billion people[1], at least 350 million[2] are financially excluded from its economies. In South Africa, our context is one of 32.1% unemployment, in a country where the government pays 26 million[3] social grants each month. While this safety net does help, it certainly doesn’t afford South Africans the dignity that they deserve, the dignity that they can realise when employed and able to engage fully with the financial ecosystem.

On the African continent, small and medium sized enterprises (SMMEs) represent around 90% of all businesses, each employing between one and five people and contributing up to a third (33%) of Africa’s GDP[4], so it’s not big companies that are going to solve for unemployment – it’s smaller businesses operating in an enabling environment with the technology and tools that they need to transact.

Between now and 2030, Africa will see the greatest growth in FinTechs, anticipated to grow to a $65 billion[5] industry, followed in size by the Latin America and Asia Pacific regions. The stars are aligning to create a platform for FinTechs to lead the way in financial inclusion – especially in Africa. Close to half the world’s mobile banking accounts are in Africa, with the continent already home to half the world’s mobile banking services, and around two-thirds of their global transaction volumes and value[6].

One of the most important ways to facilitate growth and reach our potential is to find ways to identify pathways for consumers to access the solutions that can change their financial futures. Until recently, the financial services sector used point-in-time decisioning to assess the risk presented by consumers applying for their products. It was all that was available, but it became a system of disenfranchisement, drawing on appearances and visible attributes to assess a consumer’s profile.

Technology has made it possible for that to change, with artificial intelligence and social data making it possible to really see more about the consumers we’re engaging with. Even though TransUnion has been operating since 1901, using information for good, it was only last year, for the first time, that we could ‘see’ 62,000 SMMEs that weren’t visible before, as we were able to include alternative data for the first time. That meant that, thanks to new techniques and data, we – and our customers – could see their dreams and hopes, and not just their history.

That’s the beauty of data modelling – it doesn’t just see prior bad behaviour; it can model more recent behaviour and trends to provision risk. Once consumers can see that the financial system sees their hope for the future, and that we have the tools we need to see the good in them, we can all work together to extend true financial inclusion.

In South Africa, 107,000 new to credit consumers are being added to our bureau each month, with their first credit accounts likely being clothing accounts, personal loans or credit cards. These are the least risky accounts, opened with small balances so that consumers can show that they are indeed worthy of that hope.

As we track cohorts of consumers as they move through their financial inclusion journey, we know that two thirds of borrowers are ‘good’, also aware that sometimes a consumer’s decision to default on a loan is made out of a choice between paying the loan or a meal. As an industry, we need to understand and identify these consumers more proactively, while we focus on the two thirds that are good customers. FinTechs can play an important role for both these cohorts, leading the way through education initiatives and ongoing communication with these new-to-credit consumers still learning how to borrow responsibly.

Our data shows that Gen Z7 consumers are the most positive about South Africa’s future, and that they’re the cohorts stimulating the growth of financial products. They’re the ones who have hope about South Africa, and they’re the ones who financial services providers – and FinTechs – need to see by drawing on data points to help them realise their dreams and aspirations.

Real financial inclusion now means acknowledging consumers and seeing them for who they are and helping them realise their hopes for the future. Among the 7,000 South African businesses we work with, the ones that are getting this right are those that are thinking differently. 

[1]Population of Africa (2024) - Worldometer (worldometers.info)

[2]Over 350 million Africans financially excluded - Report (premiumtimesng.com)

[3]Here’s how South Africa’s social grant system has changed since 1994 | GroundUp

[4](1) SMEs: A Workforce Surge in Africa | LinkedIn

[5]Africa’s fintech market expected to reach $65bn by 2030 | ITWeb

[6]Africa is the world leader in digital and mobile banking | World Economic Forum (weforum.org)