Telco mobile money apps drove financial inclusion in parts of Africa a decade ago, and a startup is trying to kick off another wave by giving the technology away.
MyBucks, a company headquartered in Luxembourg that publicly trades in Frankfurt, was founded in 2011 to make microloans to small businesses. It has since added machine learning, bots and alternative data sources to drive credit decisions for more than a year.
Starting in about three to four months, the company plans to give away entry-level smartphones, loaded with MyBucks financial technology, to encourage mobile payments, mobile banking and mobile access to financial services in South Africa.
It's different than in developed markets, where financial institutions often add or upgrade mobile features when the technology becomes popular for nonfinancial use cases. Retailers have spent the past couple of years looking to streamline payment execution to respond to Uber's user experience, for example.
In Sub-Saharan Africa, it's the opposite — financial inclusion is a catalyst for technology adoption that was once seen as too expensive for the mainstream.
In Africa, there are introductory-level smartphones, or a phone that's more than a feature phone but less than a smartphone, that sell for as little as $30. MyBucks contends it can get the price as low as $22, so the fintech isn't giving away an exorbitantly expensive device.
"The cost of data and phones has been onerous, but that cost is coming down dramatically, and that opens the opportunity for mobile phone usage and mobile payments," said Dave Van Niekerk, founder and executive chairman of MyBucks. "These phones don't have all of the bells and whistles that you think of smartphones, but they do have internet access and can download apps."
MyBucks hopes that more mobile app use will in turn create more opportunity for payments — which creates an added opportunity for loans and other financial products that can use the payments data for credit decisions.
Plastic ATM and debit cards will still be an option, but MyBucks hopes to increase the use of apps and mobile payments. That drives fee revenue for MyBucks and also feeds the AI engine for its lending service, called Haraka, which provides loans to mostly unbanked or underbanked micro businesses in Africa.
Like many fintechs that serve markets without a traditional credit structure, MyBucks relies on an increased use and distribution of mobile devices to reach rural areas that don't have banks. In these areas, mobile phone penetration is growing fast, allowing the technology to "skip steps," according to Van Niekerk. MyBucks' preloaded "free" smartphones will integrate with the three major "pays" and can connect to most other mobile money services and mobile payment apps, he said.
MPesa is an option, as well as a catalyst for digital payment and mobile financial services in Africa. "[Nearly half] of Kenya's GDP goes through MPesa and every person wants to interact with all of the OEM wallets," Van Niekerk said.
Backed by Safaricom, MPesa dates back more than a decade, and is credited with jump-starting a financial services market in Kenya and other emerging economies in Africa and elsewhere, now covering more than a dozen countries. It recently branched out by adding IoT payments.
In the years since MPesa's launch, more traditional bank and card models have launched in Africa to push the mobile payments market deeper. Cryptocurrency providers such as BitPesa also promote financial inclusion in Africa.
"In emerging markets, where internet access and the supporting infrastructure is becoming available to a growing percentage of consumers, the payments infrastructure is moving from barter and cash directly to mobile very rapidly," said Sarah Grotta, director of the debit and alternative products advisory service at Mercator. There's evidence of this in the payments evolution in China and India where payments jumped from cash to mobile in a matter of only a decade, she said. "It's no wonder that Alipay and WeChat Pay's parent companies are investing heavily in Africa."