SA FinTech community can solve pensions challenge
THE SOUTH African social grant challenge is one crisis that should not be wasted. It is a perfect challenge for technologists to develop a solution that can become a financial backbone for the future.
Social Services Minister Bathabile Dlamini had indicated in Parliament that the department was working towards creating capacity within a government entity.
The SA Post Office (Sapo) is one of the institutions that has been considered as a solution provider.
The challenge, however, is that Sapo still has its own challenges. Currently, there is no government entity that can provide a seamless solution.
This leaves a hole that cannot be solved even by the private sector, as corruption led to this crisis in the first place.
Recall how the current provider used one of its companies to sell services to senior citizens, thereby creating a financial burden for them.
A hybrid solution (financial technology entrepreneurs, financial professionals and government officials and entities) in this regard is necessary to deliver a financial backbone for the future.
The solution can be driven by a social enterprise with one goal in mind: to serve the public through a technology system and professionals that care.
This challenge presents an opportunity to create capacity within the state while developing skills and, more importantly, enabling senior citizens to access financial resources without worry and concern.
One of the major challenges cited about the social grant issue is that there’s a need for recipients to have bank accounts.
While this is important for financial integrity, it is also important to note that technology has advanced to the point that this challenge can be solved without the need for a bank.
Across the world, there’s a trust deficit as people rely less and less on banks.
This is true especially in the African continent.
Think of M-Pesa, a cellphone-based money transfer, financing and microfinancing service, launched in 2007 by Vodafone for Safaricom.
The service allows users to deposit money into an account stored on their cellphones, to send balances using PIN-secured SMS text messages to other users, including sellers of goods and services, and to redeem deposits for regular money.
M-Pesa is a branchless banking service. Customers can deposit and withdraw money from a network of agents that include airtime resellers and retail outlets acting as banking agents for a small fee.
Although the conditions that gave rise to M-Pesa were the lack of advanced banking systems in Kenya, that reason alone should serve as an inspiration for a financial technology (FinTech) solution to be considered in the social grants fiasco.
Bankless
If Africans in Kenya could build M-Pesa to enable bankless people to access the financial system, what is stopping African tech thinkers and entrepreneurs in South Africa from coming up with a solution to this challenge?
Currently, South Africa boasts some of the finest FinTech leaders who are respected across the globe.
One such entrepreneur is Vinny Lingham, who, according to Wikipedia, founded Civic, a start-up that encrypts identity information on the blockchain in 2015.
Civic raised in excess of $33 million (R465.36m) in funding during its Initial Coin Offering in June of 2017.
Two months later it partnered with WikiHow, providing the how-to website with encrypted login functionality.
Lingham currently serves on the board of the Bitcoin Foundation, an authority in the crypto- currency space.
Another well-respected South African in the FinTech space is one Hannes van Rensburg, who is regarded as the godfather of financial technology in the African continent.
Van Rensburg founded Fundamo, a company that was recognised as one of the biggest mobile payment platforms in emerging markets. At least one in every three mobile payment transactions was running on the Fundamo platform at the time in those countries it was present in.
The company was subsequently acquired by Visa – the leading payment solutions corporation.
These two South Africans could lead a 60-Day FinTech Hackathon to develop world class FinTech solutions for the social grants challenge in collaboration with computer science graduates, financial gurus and government officials with keen interest in serving the people.
Headache
Thereafter, a social enterprise for this purpose can take over.
These efforts could bring an end to Dlamini’s current headache (assuming she’s really looking for a great solution).
A solution to this challenge would have to take into account the future.
Current solutions are focused on maintaining the status quo by sustaining current providers of financial services and current systems.
The social grants problem is an opportunity for South Africa to build a financial system for the future and to avoid previous mistakes of outsourcing key government services.
In the process of developing a solution, there’s a need to safeguard the key part of this process, that is, data of senior citizens.
Depending on the solution that will be considered, there’s a potential to either safeguard or lose out on the critical data of senior citizens.
The beauty of considering the hybrid solution is that the data of senior citizens will remain locally and safeguarded.
Such data will be useful in taking care of senior citizens for other needs that are non-financial in nature and avoiding exploitation, as it has been the case with the current service provider. Wesley Diphoko is the head of the Independent Media Lab and founder of Kaya Labs.