Financial wellness is a group effort

By Jikku Joseph

FINTECH startups around the world are developing incredible software that enables people to easily manage their money, but if no established institutions partner with these startups, financial wellbeing in South Africa will remain a pipe dream.

Where does the journey to financial health begin? Ask anyone who has come the way or a qualified counselor who can show you the way and they will tell you that it starts with understanding your expenses. You can only start saving if you have a clear picture of where your money is going each month.

It’s surprisingly difficult. In the old days the hardworking few kept spreadsheets or handwritten ledgers; They filed receipts for grocery stores and counted banknotes in envelopes.

It just got a little easier with online banking. Monthly bank statements are more easily accessible and searchable than their paper equivalents, but they’re still dense documents that require a healthy dose of patience and time to decipher.

Online banking quickly became ubiquitous, and other technologies emerged that further transformed the money landscape.

E-wallets and apps like Zapper, Ozow and Yoco give us so many ways to pay and get paid, and everything we need is right there on our phones. As long as you have mobile data, you are instantly connected to your finances.

Yet, despite all these amazing advances, money management tools remain stubbornly inaccessible. This is one of the reasons South Africans are so bad at saving – and why financial security remains a fiction for millions of people.

Adapt or lag behind

That’s not to say the technology doesn’t exist. It does. Startups around the world have created beautiful, intuitive products that help individuals track and manage their expenses so they can save.

The problem is that these startups are comparatively small compared to banks and other established financial institutions and it is up to the individual to research and register for a particular product.

However, imagine a world where this is upside down. Imagine if your bank offered you a very simple digital tool to manage your monthly expenses – a tool that categorizes your expenses and shows you exactly where your money is going at a glance. If everyone had easy access to this type of technology, just think how many people would turn their financial lives upside down.

There is a good business case for this. When a financial institution offers digital money management tools to its customers, it will quickly gain a much deeper understanding of how their customers interact with money, resulting in data that can be used for product development.

Better, more targeted products will have a higher chance of acceptance – twice as much thanks to financially secure customers who have more disposable income at the end of each month.

It is true that some banks and other institutions offer basic budgeting tools on their websites or through their apps, but these tools pale in comparison to what is independently available in the market.

Open finance is also growing in importance and data sharing with the consent of the customer is becoming more common. Financial institutions need to understand that the closed-loop model is no longer viable. People don’t like to feel trapped in a single ecosystem and will switch in droves once a more customer-centric competitor hits the market.

It all boils down to scale. Digital money management tools are available, but the only way to get into the mass market is for financial institutions to work with the developers of these tools and roll them out. The recent riots and looting have been symptomatic not only of a broken political system, but also of the desperation that comes out of poverty.

Covid has ruined the economy and it will take a very long time to stabilize and rebuild. Against this background, every financial institution has a social responsibility to strengthen South Africa. One way to get started is by offering customers the right tools to take control of their finances.

Joseph is the budgeting MD at 22seven.

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