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Africa's biggest lender by market capitalisation announced the
takeover of financial technology firm Selpal in March, with the
aim of capturing a greater slice of the township economy.
Millions of people live in townships, which were areas
designated for non-whites under apartheid and are often
satellites of South Africa's major cities.
Wealthy residents, golf courses and shopping malls are also now
a feature of the country's most populous township, Soweto, near
Johannesburg, as well as a large poorer population living
hand-to-mouth in often cramped conditions.
Townships are also home to millions of firms from tiny informal
shops to big wholesalers, historically ignored by major banks in
South Africa, which make up a sizeable untapped market.
After almost three years, FirstRand has found that the scale of
the unbanked businesses is much larger than it thought, Jesse
Weinberg, head of the small to medium-sized enterprise (SME)
customer segment at FirstRand's retail division FNB, said.
It has been giving firms Selpal devices and software, which
allow customers to pay via card and enable the firms to buy from
suppliers, with a view to using the data collected to later
offer them financial services such as loans for the first time.
Although it had not met its original goal of capturing 2,500
wholesalers by 2022, Weinberg said FirstRand had surpassed this
figure for the total of firms signed on. The bank has also
changed its definition of wholesaler and now estimates there are
only 20-30 of these in an average township.
It also found far bigger cash-only wholesalers than anticipated,
with some achieving turnover as high as 40 million rand ($2.84
million) a month, Weinberg said, a figure that firms at the
higher end of its SME category only do annually.
Even very small township shops typically turn over 2 million
rand a year, he said, although their margins are very thin.
"That would suddenly put that customer into quite a significant
bracket, it's a decent size of business," he said.
Early lending pilots had also entailed surprises.
One pilot testing a product that worked in a similar to way to
trade credit, which allows businesses to pay suppliers for stock
or services later, saw some business owners turn it down.
Those that did take part became so nervous about their negative
account balance that in some cases they began avoiding
interaction with Selpal agents altogether.
"It caused a bit of confusion," Weinberg said, adding the bank
would re-introduce credit pilots at a later stage.
($1 = 14.0631 rand)
(Reporting by Emma Rumney; Editing by Alexander Smith)
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