Innovative banking, the unbanked and domestic savings in South Africa

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University of the Witwatersrand, Johannesburg
This study explores financial literacy and domestic savings and their impact on the economy, with reference to the unbanked low-income group in South Africa. Innovative and “smart” banking may be the ultimate tool that will serve the bottom of the pyramid and grant exposure to financial credit and means of saving. As almost two billion people in emerging markets are unbanked, the establishment of digital financial services is more about forming markets for future customers than about changing current bank–client relations. The greatest challenge affecting the poor around the world is their inability to adequately participate in the economy because of the challenge of being unbanked, which causes low-income groups to be excluded from mainstream financial activities. Poor communities encounter various obstacles when it comes to banking, including the distance to bank outlets, the prevailing risk of carrying cash, lack of trust, paperwork and identity and document requirements. Financial innovation is important in addressing the two key challenges that financial intermediation faces in Africa, namely high risk and high cost of financial services. The research underpinning the theoretical framework is drawn from the Base of the Pyramid market (BoP). The intention is to encourage an inclusive approach in the adoption of technology in the financial services sector, which is envisioned to create shared value socially, environmentally, and commercially. Studies have demonstrated that combating poverty and financial exclusion requires implementation of commercially viable technological innovations to address needs of the low-income market. Key related concepts are innovation in banking, the unbanked and domestic savings. The population under study is financial services professionals in the South African retail banking industry, mainly from Capitec Bank, as this study was inspired by Capitec Bank’s unique business model as one of the first banks in South Africa to focus on serving the bottom- of-the-pyramid client base. This research report adopts a qualitative research method. The research instrument includes key questions that were asked during semi-structured interviews. The findings of the study highlight the importance of constant enhancements of new technologies in the banking industry to address the matter of inclusion of lower-income groups in the economy by ensuring that banking is made accessible and convenient. The premise of innovation in banking is to benefit society and grow the economy in a manner that is useful for generations to come. Mobile banking has been identified as a key instrument in driving bankingto unserved areas in the most cost-effective way
A research report submitted in partial fulfillment of the requirements for the degree Master of Management in the field of Innovation Studies to the to the Faculty of Commerce, Law and Management, Wits Business School, University of the Witwatersrand, July 2022
Low income, Unbanked Market, Financial innovation, Financial technology (Fintech), Financial inclusion,, Financial literacy, Mobile banking, UCTD
Umar, Safiya. (2022). Innovative banking, the unbanked and domestic savings in South Africa [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace.