South Africa is making significant headway in furthering financial inclusion, according to a new MasterCard report entitled A Progressive Approach to Financial Inclusion.

The report explores the progress that 30 developed and developing countries have made in enabling access to and driving usage of different financial products including payments, lending, long-term savings or investments, and insurance.

South Africa is in a “transitioning” stage in driving both payments adoption and usage through private and public partnerships, according to the report. A transitioning country displays a penetration of payments products at a rate of more than 50% but less than 75%, according to the researchers’ metrics.

The country is on the same progression towards financial inclusion as Russia, Italy, Poland, Brazil, China and Malaysia, displaying alignment with three of its four BRICS partners.

“Financial inclusion cannot be achieved by a single entity; it takes a broad coalition of key stakeholders. There is a need for greater innovation, public-private partnerships and consumer education to ensure South Africa becomes a truly financially included society,” says Mark Elliott, division president of MasterCard South Africa.

With 67% of South African adults owning a payment product, only 6% of consumer purchases are non-cash despite just over half (51%) of adults receiving money via non-cash means (that is, electronically). This means that while South Africans receive a large percentage of their income via electronic payment methods, they are not using their electronic payment products to transact – they are still depending on cash to do so.

“Adoption of products is an important first step for financial inclusion, but usage is equally important. The majority of South Africans may be financially included, however they are not making maximum use of the range of financial products at their disposal,” Elliott says.

In South Africa, lending adoption and insurance adoption were found to be at 42% and 43% respectively, exceeding long-term savings adoption, at 38%. However, according to the Barclays Africa’s Prosper Report, South Africans intend to grow their savings base. This is consistent with the report findings that South Africa is on a positive trajectory towards financial inclusion.

The report highlights that financial inclusion is a progressive measure, with payments as the optimal entry point. In almost all the African countries studied, payment product adoption exceeds the adoption of the other products studied, although local factors affect the different products in different ways.

“The public and private sector must identify current adoption and usage gaps, and actively pursue ways to close these gaps to boost the rate of financial inclusion,” Elliot says. “This encourages MasterCard to work even closer with our customer financial institutions and government to expand our acceptance footprint and electronic payment usage across South Africa.”

MasterCard has various payment innovations like prepaid and mobile commerce products and solutions to help fast track financial inclusion here, and elsewhere on the continent. The company has launched many initiatives with public and private sector entities that are bringing the benefits and security of electronic payments to the 560-million people in Africa who are currently financially excluded.

The “A Progressive Approach to Financial Inclusion” report measures adoption and degree of usage of financial products for 30 countries globally. The study covers the entire adult population in the countries, including salaried employees, self-employed, owners of businesses, welfare/benefits dependent, and farmers. The findings of the study apply not only to consumers, but also to businesses, especially small and medium-sized businesses. The study leverages current industry research and supplements it with additional secondary research and expert interviews.

The four stages of adoption of payments products are:
* Early Days: This stage represents the beginning of the progression. For all countries, adoption of payments product is less than 50%, and adoption of other products is typically very low (less than 25%). Countries include Pakistan, Egypt, Indonesia, Bangladesh, Philippines, Peru, Nigeria, Mexico, Columbia, Tanzania, Uganda, India and Saudi Arabia.

* Transitioning: In this stage, payments product adoption starts to break out with over 50% penetration. In several countries, adoption of one or more products also begins to gain traction and catch up with payments adoption (for example, long-term savings/investments in China, credit in Italy). Countries include Brazil, Russia, South Africa, Malaysia, Italy, China and Poland.

* Payments Ready: In this stage, payments product adoption reaches a critical threshold of mass adoption (greater than 75%). Countries are expected to be ready from a payments perspective (for example, infrastructure) to enable advanced levels of some other products. Here advanced levels vary by product and are based on current levels of adoption in the 30 countries, specified as over 60% for lending, over 70% for long-term savings/investments, and over 45% for insurance. Countries include US, UAE and Kenya.

* Most Advanced: In this stage, payments product adoption is ubiquitous, and adoption of all other products is expected to be at advanced levels. Countries include Spain, Belgium, UK, Japan, Germany, Sweden and Singapore.