South Africa: Looking for Mobile Money V2.0 - South African Start-Up Ukheshe Wants to Become the Universal Way of Doing Payments for the Informal Sector

London — Getting beyond basic mobile money services to mobile money V2.0 is difficult. Those that have the money have smartphones and those who don't have basic phones. The product needs plenty of functionality and the ability to straddle these two very different broad market segments. Russell Southwood spoke to Mike Smits, co-founder, uKheshe and Director, Jini Guru about how uKheshe is working out in the country that has largely rejected mobile money services.

The idea for uKheshe started with Mike Smits wanting to pay his gardener who didn't have a bank account on a Sunday afternoon. As he put it, in that situation he could run to his wife and say, do you have cash? Or go to an ATM to get some or pay him using his FNB (bank) wallet but the gardener didn't have a wallet like that.

"I wanted something that was a bank agnostic way to transfer money to someone who doesn't have a bank account." Out of this difficulty was born uKheshe, a micro transaction platform that allows you to pay and get paid.:"It's unlike any eWallet or QR payment service as it works with your lifestyle, not the other way around. uKheshe is now Masterpass certified which means it can accept payment from Zapper, Snapscan and most banking apps". The solution was built by his company Jini Guru, of which he is a director.

It's targeted at those who are at the bottom of the market and can be used on a featurephone or with USSD on a basic phone. There is an app but it's not essential to have it to make use of the service but is useful to those wanting to make payments to people in the informal sector.

"Once you have money in the wallet you can do P2P transfers to anyone with a cellphone number. That person can register digitally and get access. He or she can do it via a USSD code or they can get a card from PicknPay or use a digital card. You can buy, airtime, data or electricity."

Currently there are 300,000 registered users and 40,000 active users in South Africa. There are two separate categories of users: firstly, those who make micro transactions of between R5-20 (US14-36 cents) and secondly, those who are paying people like domestic workers and building contractors, who are mostly on weekly wages. Currently 80% of the active users make use of USSD and 10% are using smartphones:"It eliminates the need to carry cash"

"These are people who don't have a bank account or who are under-banked." He estimates that there are probably 6-7 million potential users - people who are unable to get a bank account - and an additional 3-4 million foreign nationals who work in South Africa.

At the beginning of July 2019, it launched the uKheshe Health Benefits card (based on QR codes), an innovative and affordable medical aid solution for as little as R99 per month. It offers a host of benefits to bring greater healthcare inclusion for individuals and families, including cover for private ground and air ambulance, private stabilisation and hospitalisation cover as a result of an accident or emergency. With two levels of card, individual cover and the family card (covers family of six), with benefits of R325,000, uKheshe Health caters to every need and income level.

The next wave of growth will be through extending the range of financial services available through the product:"We'll be launching a number of add-ons, including cross-border money transfers and switching on Stokvel (a local version of credit unions). The latter are a huge thing for the under-banked in South Africa. We're also looking at launching loans."

He doesn't see things like Zapper (100,000+ Android app downloads) and Snapscan (0.5 m+ Andriod app downloads) as competitors or even things like the widely used FNB eWallet:"We see ourselves as an entry level way of getting a bank. We're below the bank account level. Unlike the various mobile money services that have failed in South Africa, it's not a bank account replacement service. For cross-border transfers and insurance there are a number of other players in the market." It will also look at geographic expansion in Africa once it has found the right partners.

uKheshe is unusual in that its parent company Jini Guru has competences in tech, telecoms and fintech, but with "a main focus on finance." The start-up was internally financed but it is looking to do a series A funding round:"It's not urgent at the moment but we've got our feelers out. We're looking for the right partner. In 2-3 years time we'd like to become the universal way of doing payments and gratuities in the informal sector."

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