Towards the end of 2019, Nedbank embarked on a journey to unlock growth in underserved and unserved markets, including South Africa’s vitally important township economy. The bank recognised that an essential key to its success in delivering value to these markets is first ensuring that it has a deep understanding of how they operate, especially in terms of the ecosystems through which value is created and exchanged within this booming economy.
We recognised that, rather than trying to gain a ‘share of market’, we needed to focus on what we termed ‘share of life’, which meant that we think very differently about consumers and businesses in these markets and ensure that we deliver solutions that add tangible value to their lives, rather than merely presenting them with banking products and services.
One of the biggest challenges Nedbank identified within historically underserved markets and township economies is the lack of access to simple and affordable lending. It’s a widespread challenge that has given rise to a plethora of informal lending schemes that are often very expensive and make it nearly impossible for individuals and families to pay off the debt they incur.
To address this challenge, Nedbank has developed a unique short-term lending offering that provides clients with immediate access to small sums of money of between R250 and R6,000 for short time periods. By providing borrowers with easy access to the loans via all of Nedbank’s channels—such as ATMs (automated teller machines), self-service kiosks, Nedbank Money app, online banking and USSD (Unstructured Supplementary Service Data)—with low initiation and interest costs and flexible repayment terms that are easy to understand, the bank has made socially responsible lending a reality for thousands of South Africans who simply cannot afford to get caught up in expensive and financially debilitating debt cycles.
The bank also challenged itself to start looking at alternate data sources to assess client’s affordability, as most clients within the township economy do not have bank accounts, instead using cash for most transactions. Regulation requires that the bank confirms income sources as part of responsible lending, which has required it to explore alternate data sources that can be used as proxies. Two POCs (proofs of concept) in partnership with external parties are currently running to provide the bank with alternative ways to drive financial inclusion, especially for the unserved.
Another significant pain-point identified by the bank through its research was the need for contactless payment, accelerated by the impact of COVID-19. Chipo Mushwana, executive for emerging payments, noted that a largely cash-based economy has meant that consumers’ personal safety has often been compromised due to carrying large sums of money on their persons. Those vendors who try to offer alternative cashless payment methods are often faced with high equipment costs to install POS (point of sale) machines and infrastructure challenges such as network availability. Here, too, Nedbank developed two unique solutions geared mainly towards informal traders, namely Tap-on-Phone and Money Message. Tap-on-Phone is an award-winning capability that enables all merchants and business owners to convert their mobile phones into payment-acceptance devices without the need for additional hardware. Money Message is an in-chat payment offering that allows users to complete transactions with those on their contact lists via WhatsApp; this payment service equips businesses to send bills to customers using WhatsApp easily. “At Nedbank, we firmly believe enabling businesses to accept digital payments empowers them to achieve their goals and create great customer loyalty with little to no investment beyond the phone they already have. These solutions look to overcome a variety of cost, security and technical barriers by enabling micro, small and medium businesses and their customers to transact with each other easily,” Mushwana explained.
Nedbank also provides valuable savings solutions aimed at optimising the value that many derive from membership in savings clubs or stokvels. In South Africa alone, there are more than 11.5 million stokvel members, who are estimated to save a combined R50 billion per annum. Often, the savings vehicles used by these stokvels are expensive or don’t deliver the capital growth that they should, so Nedbank created a stokvel account that allows these savings clubs to open a group investment account via cell phone and then permits individual members to contribute. Interest rates on the Nedbank Stokvel Account are tiered and highly competitive, making it a compelling savings vehicle. Participating stokvel members also enjoy other value adds, such as funeral-expense coverage from just R25 and discounts through Nedbank’s retail partners.
According to Tina Pieterse, executive for Nedbank’s channel transformation, Nedbank has also looked very closely at the most viable banking-distribution options that would work best for the bank and its clients. “One of the major shifts we believe we have to make to successfully serve economies is to break the proverbial walls of our branches and trade within communities through a mobile workforce and value-adding propositions helping communities grow, build strong relationships across the township ecosystem and in so doing change the perception of Nedbank to one that is there for the communities we serve. For people living and working in remote areas and with limited access to transport, traditional brick-and-mortar bank branches are not the most sensible banking-services delivery mechanisms,” she explained, “which is why Nedbank completely reimagined and redesigned its distribution model to better serve previously underserved markets.” In response, the bank leveraged its extensive partnerships with retailers, devised a unique Nedbank store concept and deployed mobile bankers within communities to help people access the services they need.