Retailers’ motivation for offering financial services

A number of financial products and services are offered by or through retailers in South Africa. These span the broad financial services spectrum including transactional, savings, insurance and credit products. This research aims to understand retailers’ motivation for providing these financial services more fully.

This study aims to build on several previous research projects. In 2009, the FinMark Trust commissioned a number of case studies on alternative microinsurance distribution in South Africa. These studies highlighted the role that retailers play in the roll-out and development of insurance products targeted at lower income clients. Research commissioned by the FinMark Trust in 2011 highlighted the role that South African retailers have played in the provision of retail payment services, notably bill payment services and cash to cash transfers. Outside of South Africa, research commissioned by the International Labour Organization’s Microinsurance Innovation Facility undertaken by the Centre for Financial Regulation and Inclusion (Cenfri) in Brazil and Colombia highlighted how differences across the retail environment shaped the specific nature of financial services offered. In addition, stakeholder engagement by Cenfri with multi-national retailers, such as Wal-Mart, Carrefour and Elektra (which acquired banking licenses in Mexico and Brazil), emphasised the role of global strategy in shaping the delivery of financial services at a country level.

The FinMark Trust commissioned this study to map the landscape of financial services and products offered by retailers in South Africa, build an understanding of the business case for retailers to provide financial services and unpack the evolution of the product offering and its relative position within the wider area of value added services provided by these retailers.

The project identified four retailer types; namely, Fast Moving Consumer Goods (FMCG) retailers, cash-based clothing retailers, credit-based clothing retailers, and furniture and appliance retailers. Two dimensions frame this categorisation: an industry dimension and a tender or payment type dimension (namely cash versus credit). For the purposes of this analysis credit retailers are those where credit sales account for 40% or more of total merchandise sales.