>> See the full case study
>> State of the Sector Case Study 2021: Mobile Financial services EN l FR
>> State of the Sector Case Study 2020: Covid-19
Impact EN | FR
Scale2Save webinar series
more about Scale2Save
May 2021 - ‘A
case study on innovative business models: partnerships as a key to unlocking
the mass market’, launched
today in partnership with FinMark Trust, is the third of the Scale2Save
series on the State of
Savings and Retail Banking in Africa.
This study contributes
to answering some of the Scale2Save learning programme
research questions. Particularly, it sheds light on what constitutes a viable
business model for small scale savings. The objective of this series is to inform retail banks and
other financial service providers (FSPs) about developments in the industry
affecting services to low-income customers.
Scale2Save is a partnership between the World Savings and Retail Banking
Institute and the Mastercard
Foundation. Its goal is to establish the viability of low-balance savings
accounts and to understand the extent to which savings allow vulnerable people
to boost their financial resilience and wellbeing.
Financial services in Africa still have great potential for
expansion, particularly in the
low-cost market, which remains under-served.
Financial service providers (FSPs) who serve low-income
customers face a threefold challenge. Digitization is becoming the norm, both
within the financial services industry and in the fast-emerging FinTech sector.
They wrestle with the effects of the COVID-19 pandemic and its impact on their
customers. And they must simultaneously adapt to changing and more demanding
customer expectations. These FSPs are under pressure. How they should adapt to
these new, unfolding realities?
New and varied business models are emerging from efforts to
address these issues. These models range from cooperation with other FSPs to
the use of digitization and FinTech, to tackling addressing infrastructure
shortcomings and addressing customer expectations.
This study describes six models, linking each to case studies:
•Cooperate with other FSPs - FSPs can compensate for
their lack of physical infrastructure by partnering with service providers who
have a more extensive network to offer their products. Similarly, FSPs with a
limited range of products – often prescribed by regulatory or legal
considerations – can enhance their value proposition to customers by
incorporating products from other FSPs. These models are beneficial to both
parties, because the overall business volume will exceed their individual
•Cooperate to build and extend financial infrastructure
- Despite progress in the past decade, the financial infrastructure in many
African countries is still inadequate for the needs of savings-led FSPs. FSPs
can work together to tackle these shortcomings, especially in retail payments
and credit information systems. Cooperation can be either directly with other
FSPs to improve infrastructure or through engagement with financial regulators
to establish what the FSPs need to serve customers better.
•Cooperate with mobile money operators - Mobile money
operators (MMOs) are the dominant retail financial service providers in some
African countries. This strong market position, combined with the reach of
mobile money agents, makes these FSPs attractive partners for banks, enabling
them to offer banking services to mobile phone customers. These partnerships
are also attractive to MMOs, enabling them to generate additional revenue and
enhance their appeal to customers by offering banking services without the
challenges of seeking a banking licence.
•Use FinTech - Innovation in retail financial
services is often achieved by independent technology-based companies or
FinTech. These companies develop ways of providing financial services
digitally, but typically lack direct access to customers. By working together,
savings-led FSPs can incorporate the services into their value proposition
without having to acquire or develop the internal capacity necessary. FinTech
services span a wide range of financial capabilities, from client-onboarding,
payments and savings and investments to credit and credit-assessment services.
•Establish a purely digital FSP - FSPs with strong
digital capabilities or commitment can establish a purely digital bank, with no
branch network and all client services and interactions done digitally. This
may be simpler than trying to digitize an existing operation but is
•Cooperate with non-financial service providers -
Increasingly, FSPs need to link directly into the economic ecosystem in which
they operate. They must enable customers to obtain goods and services where
required, and provide the financial service embedded in that interaction. This
can take various forms, from the digitization of value chains across all actors
(for example in agriculture), to incorporating the FSP’s products in the
services of a non-financial service provider (such as remittances sent or
received at grocery stores).
In each case we identify the key points that FSPs should
take into account when considering a particular model, and give an example of
the model, identifying the success factors and hurdles to be overcome.
The study concludes by summarising the strategic questions
that FSPs should answer when looking at alternative business models. We provide
a decision tree that FSPs can use to guide them in selecting an alternative
business model best suited to their situation and environment.
Other studies in this series will address specific
approaches to some of these models.