FINCLUSION | How South Africa’s Oldest Fintech, Mukuru, Leverages Data to Drive Financial Inclusion

In a rapidly digitizing world, financial and economic inclusion remain significant challenges, especially in Africa. However, there’s immense potential to use data as a tool to close this gap and promote economic and financial inclusion.

Mukuru is one of the oldest fintech companies in South Africa, having been founded in 2004, by creating remittance services for African migrants in countries such as the United Kingdom. Since then, the company has grown and transformed to offer a range of human-centered services across Africa, though channels like WhatsApp, free USSD, the Mukuru App, and their website.

Main services offered by the Mukuru include:

• Cash Transfers
• Mukuru Funeral Cover
• The Mukuru Card
• The Mukuru Wallet
• Mukuru Groceries

Despite digital advancements, many African workers still receive their wages in cash, and community merchants often don’t accept digital payments, says Sandy Rheeder, CIO at Mukuru.

Access to formal banking and ATM facilities is also limited and costly, highlighting a disconnect between the formal economy and large segments of the population.

“This disconnect is amplified by several barriers to formalisation,” Rheeder said in a recent interview.

“For instance, merchants are often apprehensive about the administrative burden digital registration poses, the need to close their business temporarily to register, and the cash flow gap that digital settlement imposes on a business. Providing the correct documentation may also be a challenge, for example, many informal community merchants struggle to provide traditional proof of residence documents.”

Fintech’s Data Advantage

Fintech companies have a unique advantage in leveraging digital technology for data and analytics to address the challenges to financial inclusion, such as the one described above.

A key aspect of Mukuru’s data strategy is to create a digital financial profile for all customers, even those who operate with cash. The insights gained from this data can help anticipate customer needs and inform the development of new products like insurance.

For instance, Mukuru uses WhatsApp, a platform many of its customers are already using to communicate for engagement. The company uses its business intelligence and analytics departments to track product uptake and understand potential issues.

“This approach was used in Botswana when the company launched self-sign-ups on WhatsApp. Mukuru then analysed the number of people who signed up but didn’t transact to understand some of the reasons behind this,” said Rheeder.

“A dedicated customer journey department can work with the company’s contact centre to understand the impact of different campaigns and glean fresh insights from customers. Market surveys are also conducted to understand perceptions of the fintech brand in specific countries and see if these align with customer views.”

During the onset of the COVID-19 pandemic, Mukuru was able to pinpoint a segment of its remittance customer base that had ceased sending small amounts of money home as a result of unemployment. Many of these migrants are engaged in informal employment, and they were the first sector to experience job losses when the pandemic began.

Mukuru successfully disbursed funds directly to the identified migrants, thanks to the depth of information and data it had on its customers. This data allowed them to segregate customers into two categories:

• The most vulnerable, and
• Those who had stopped sending money to their families

Following the conclusion of the program, the data was used to facilitate a qualitative study with the grant recipients aimed at comprehending the types of expenses they covered using these funds.

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