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Digital banking future is here

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By Colin Timmis, General Country Manager, Xero SA

South Africa’s small businesses face a number of challenges: a declining economy, skills shortages and more. National statistics agency,  Statistics South Africa  recently revealed that the economy contracted by 3.2% in the first three months of 2019 – the largest quarterly drop in a decade, and an unfortunate turnaround from the 1.4% growth the country experienced in Q4 2018. But some of the more enduring problems they face have to do with banking.

One of the major issues that small businesses in South Africa face is lack of capital. Getting access to funding, tailored service, and ultimately, value for money can be a real struggle, especially for small business owners trying to get off the ground – or stay afloat. And yet, there’s cause for optimism.

Because even if some conventional banks resist it, disruption and innovation are right around the corner. And if you’re running a small business (or aspiring to do so) you can benefit from it sooner than you might think.

Securing funding

Here’s the thing about South Africa’s small businesses: they tend to have good, sensible business models. When they make requests for finance, they tend to be reasonable, and well within the scope of what the bank they’re applying to offers. Even so, they often find it hard to get finance anyway: the unmet lending need in South Africa is estimated at between R86 – R346 billion: a wide range, but one that’s still quite substantial at the lower end.

If you’re applying for funding, though, technology can make it easier to secure what you need. The problem usually isn’t the business model or the amount requested: it’s the documentation. Basically, banks need you to prove that you’re loan-worthy, and they can’t do that without the right financial data.

Using cloud accounting tools, you can make sure this data is kept scrupulously up to date – making it easier than ever to supply banks with the information they need. And when it comes to banks, don’t think you have to go down the conventional route: alternative lenders such as Lulalend, Retail Capital, and Bridgement can be accessed through an API. This means that they sync up directly to your cloud accounting software, so that quick, informed financial decisions can be made. In some cases, they can review applications in a matter of hours through these systems.

The disruptors

Some 80% of South Africans already have bank accounts, so it’s easy to see it as a settled issue. But the rise of digital banks and alternative lenders shows that preferences are changing and so are the conventional ways of banking. Their offerings are becoming less specific and their systems less arcane: technology is simplifying, strengthening, and ultimately reorienting finance around the customer – including the small business customer.

South African banks will inevitably learn from digital disrupters from overseas such as Monzo, Starling, and N26, which focus on user experience above all (in Monzo’s case, it didn’t even have a banking license for the first two years of operation). Three digital newcomers in South Africa – Tyme, Discovery Bank, and Bank Zero – have entered the market with low-cost operating models, competitive pricing, and sophisticated data systems. The aim is to attract a new generation of tech-savvy consumers, who have no problem banking through apps and devices rather than branches and ATMs.

Open banking, open banks

We can’t speak to the success of these banks just yet – but banking is ripe to be disrupted in South Africa.

The Second Payment Services Directive (PSD2) in the UK introduced the concept of ‘Open Banking’ into European legislation: basically, using open APIs to allow third-party developers to build applications and services around the bank. So if you’re a small business owner, you can more easily customise your banking service with apps and add-ons.

That’s not as easy a proposition in South Africa as it is in Europe, of course, because it’s hard to get hold of the relevant data. But tools such as Xero’s Bank Feeds API make it easier to get access to this information – Sasfin already has a direct feed with Xero, which will make it easier to integrate banks within the platform once Open Banking is adopted.

And it will be adopted here, sooner rather than later. Banking’s digital future isn’t on the horizon: it’s almost arrived at shore. Change is coming sooner rather than later, and if small business owners embrace it, they’ll surely benefit.

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Tech promotes connections across groups in emerging markets

Digital technology users say they more regularly interact with people from diverse backgrounds

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Smartphone users – especially those who use social media – say they are more regularly exposed to people who have different backgrounds. They are also more connected with friends they don’t see in person, a Pew Research Center survey of adults in 11 emerging economies finds.

South Africa, included in the study, has among the most consistent levels of connection across age groups and education levels and in terms of cross-cultural connections. This suggests both that smartphones have had a greater democratisation impact in South Africa, but also that the country is more geared to diversity than most others. Of 11 countries surveyed, it has the second-lowest spread between those using smartphones and those not using them in terms of exposure to other religious groups.

Across every country surveyed, those who use smartphones are more likely than those who use less sophisticated phones or no phones at all to regularly interact with people from different religious groups. In most countries, people with smartphones also tend to be more likely to interact regularly with people from different political parties, income levels and racial or ethnic backgrounds. 

The Center’s new report is the third in a series exploring digital connectivity among populations in emerging economies based on nationally representative surveys of adults in Colombia, India, Jordan, Kenya, Lebanon, Mexico, the Philippines, Tunisia, South Africa, Venezuela and Vietnam. Earlier reports examined attitudes toward misinformation and mobile technology’s social impact

The survey finds that smartphone and social media use are intertwined: A median of 91% of smartphone users in these countries also use social media or messaging apps, while a median of 81% of social media users say they own or share a smartphone. And, as with smartphone users, social media and messaging app users stand apart from non-users in how often they interact with people who are different from them. For example, 52% of Mexican social media users say they regularly interact with people of a different income level, compared with 28% of non-users. 

These results do not show with certainty that smartphones or social media are the cause of people feeling like they have more diverse networks. For example, those who have resources to buy and maintain a smartphone are likely to differ in many key ways from those who don’t, and it could be that some combination of those differences drives this phenomenon. Still, statistical modelling indicates that smartphone and social media use are independent predictors of greater social network diversity when other factors such as age, education and sex are held constant. 

Other key findings in the report include: 

  • Mobile phones and social media are broadening people’s social networks. More than half in most countries say they see in person only about half or fewer of the people they call or text. Mobile phones are also allowing many to stay in touch with people who live far away: A median of 93% of mobile phone users across the 11 countries surveyed say their phones have mostly helped them keep in touch with those who are far-flung. When it comes to social media, large shares report relationships with “friends” online who are distinct from those they see in person. A median of 46% of Facebook users across the 11 countries report seeing few or none of their Facebook friends in person regularly, compared with a median of 31% of Facebook users who often see most or all of their Facebook friends in person. 
  • Social activities and information seeking on subjects like health and education top the list of mobile activities. The survey asked mobile phone users about 10 different activities they might do on their mobile phones – activities that are social, information-seeking or commercial in nature. Among the most commonly reported activities are casual, social activities. For example, a median of 82% of mobile phone users in the 11 countries surveyed say they used their phone over the past year to send text messages and a median of 69% of users say they took pictures or videos. Many mobile phone users are also using their phones to find new information. For example, a median of 61% of mobile phone users say they used their phones over the past year to look up information about health and medicine for themselves or their families. This is more than the proportion that reports using their phones to get news and information about politics (median of 47%) or to look up information about government services (37%). Additionally, around half or more of mobile phone users in nearly all countries report having used their phones over the past 12 months to learn something important for work or school. 
  • Digital divides emerge in the new mobile-social environment. People with smartphones and social media – as well as younger people, those with higher levels of education, and men – are in some ways reaping more benefits than others, potentially contributing to digital divides. 
    • People with smartphones are much more likely to engage in activities on their phones than people with less sophisticated devices – even if the activity itself is quite simple. For example, people with smartphones are more likely than those with feature or basic phones to send text messages in each of the 11 countries surveyed, even though the activity is technically feasible from all mobile phones. Those who have smartphones are also much more likely to look up information for their households, including about health and government services. 
    •  There are also major differences in mobile usage by age and education level in how their devices are – or are not – broadening their horizons. Younger people are more likely to use their phones for nearly all activities asked about, whether those activities are social, information-seeking or commercial. Phone users with higher levels of education are also more likely to do most activities on their phones and to interact with those who are different from them regularly than those with lower levels of education. 
    •  Gender, too, plays a role in what people do with their devices and how they are exposed to different people and information. Men are more likely than women to say they encounter people who are different from them, whether in terms of race, politics, religion or income. And men tend to be more likely to look up information about government services and to obtain political news and information. 

These findings are drawn from a Pew Research Center survey conducted among 28,122 adults in 11 countries from Sept. 7 to Dec. 7, 2018. In addition to the survey, the Center conducted focus groups with participants in Kenya, Mexico, the Philippines and Tunisia in March 2018, and their comments are included throughout the report. 

Read the full report at https://www.pewinternet.org/2019/08/22/in-emerging-economies-smartphone-and-social-media-users-have-broader-social-networks.

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Nokia to be first with Android 10

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Nokia is likely to be the first smartphone brand to roll out Android 10, after its manufacturer, HMD Global, announced that the Android 10 software upgrade would start in the fourth quarter of 2019.

Previously named Android Q, it was given the number after Google announced it was ditching sweet and dessert names due to confusion in different languages. Android 10 is due for release at the end of the year.

Juho Sarvikas, chief product officer of HMD Global said: “With a proven track record in delivering software updates fast, Nokia smartphones were the first whole portfolio to benefit from a 2-letter upgrade from Android Nougat to Android Oreo and then Android Pie. We were the fastest manufacturer to upgrade from Android Oreo to Android Pie across the range. 

“With today’s roll out plan we look set to do it even faster for Android Pie to Android 10 upgrades. We are the only manufacturer 100% committed to having the latest Android across the entire portfolio.”

HMD Global has given a guarantee that Nokia smartphone owners benefit from two years of OS upgrades and 3 years of security updates.

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