Pay-day loans in South Africa will almost certainly benefit from the boom in mobile phone sales that is in progress, according to a report published earlier in the year on the fin24.com website. In an article published in February earlier this year (2015) the founder of Microsoft, Bill Gates, is reported as saying that digital banking via the mobile phone and the Smartphone in particular will allow South Africans more control over their money and will irrevocably change their lives by the year 2030. Approximately 2 billion people worldwide who don’t possess bank accounts right now will be borrowing, saving, and spending money via their mobiles.
A massive majority of South African do not have bank accounts
The updated pay-day loan product being offered by Wonga could be one of the financial services that are expected to gain from the momentum. The truth of the matter is that currently as many as 67% of the South African population do not have bank accounts. They are exasperated by a banking system which is based on charging exorbitant banking fees, and the FICA rules and regulations. The bottom line is that many do not trust the banking fraternity.
New mobile Fintech products set to take over
Amidst this malaise to get involved with the existing banking setup, South Africa already has one of the highest mobile populations in the world with over 87% owning a mobile, 36% of which are Smartphones. With the arrival of digital banking and new Fintech products including things like pay-day loans, it sets the scene for one of the biggest financial revolutions seen to date.
The switch from feature phones to Smartphones
According to an article published on the mg.co.za website last year, South Africa’s largest mobile phone retailer has recorded a huge shift in the positioning of the smartphone market. This shift is a change from feature phones to the new Smartphones, and it is happening faster here in South Africa than anywhere else.
Smartphones are absolutely ideal for surfing the net. The fact that the new pay-day loan products on offer can be applied for and granted almost instantaneously over the Internet will surely be of huge interest to the majority of the South African population; a population currently on the outside of the standard banking system.
A breath of fresh air
To a young South African population who feel ostracised from the standard banking facilities, the freedom and accessibility of digital banking using a mobile device is like a breath of fresh air, and it’s highly likely that people will be drinking in the new air supply in great big gulps.
Take-up of pay-day loans set to expand on a large scale
The biggest drawback to the growth of the digital money market in South Africa is the stranglehold that the top-5 banks enjoy over the payment sector. It makes it almost impossible for new start-ups to obtain a banking licence. But some innovative lenders, like Wonga South Africa, have got themselves established and are fully regulated by the National Credit Act.
Given the attraction of the new pay-day loan products and the explosion of mobile phone and Smartphone ownership in South Africa, the take-up of pay-day loan products is likely to expand on a large scale.
