One of the most significant potential benefits digital platforms offer for financial inclusion is in redefining what it means to be an informal merchant or worker. Most Africans participate in the informal economy, sometimes beyond the purview of the state and tax authorities and often without secure contracts, benefits, or social protections.
Faced with a customer base that lacks bank accounts or who do not trust online payments, many e-commerce platforms have developed tools and processes that allow customers to pay in cash for most transactions. In this note, I argue that while this strategy is fueling growth in transaction volumes and active customers, issues with fraud, failed deliveries and late/uncollected receivables stemming from the use of cash are opening platforms up to substantial losses. Additionally, e-commerce platforms have not been as proactive as they could be in launching strategies to onboard and pay financially excluded merchants and workers. This misstep is probably limiting the number of merchants that would be selling on e-commerce platforms if mobile money or easier conversions...
E-commerce and online labor platforms could be good business partners for African financial services providers. This is especially true for banks whose scale makes them prime partners for digital platforms. Similarly, banks and other financial institutions stand to benefit from the large numbers of consumers and producers on platforms’ growing networks.
There are several important challenges that digital platform businesses are facing when trying to integrate financial services into their business models, but we saw three themes emerge from our recent research highlighting areas where Africa platforms are struggling.
Platforms are increasingly offering financial services, with implications for platform business models and financial inclusion.
In 2018 FiDA Partnership conducted interviews with several key platforms in Africa looking at how platform business models are evolving in terms of financial services. This blog discusses three important ways that platforms are changing the landscape for financial inclusion
As we explored platform business models, we found examples of practices that we hypothesize could impede the participation of the financially excluded. We discuss considerations for improving several business practices that could be problematic for financial inclusion, and we highlight three problems and offer suggestions for organizations to consider or areas for researchers to explore more deeply
Why would a tractor company need to be in the insurance business? Why would a ride-hailing company start offering credit? It’s actually an old story. From store credit cards in the US and carnês de loja in Brazil, to Ally Financial—the bank started by General Motors—the line between financial services and consumer goods and services has always been blurry. We’re seeing this again: in the recent wave of platformization, platforms are getting into the finance game to support their core business.