A Legal Analysis of the Use of Innovative Technology in the Promotion of Financial Inclusion for Low-Income Earners in South Africa

The promotion of financial inclusion is important for the combating of financial exclusion in many countries, including South Africa. Nonetheless, most low-income earners living in rural areas and informal settlements are still struggling to gain access to basic financial products and financial services in South Africa. This status quo has been caused by a number of factors such as the absence of an adequate financial inclusion policy, the geographical remoteness of financial institutions to most low-income earners, rigid identity documentary requirements, a lack of access to reliable and affordable Internet connection by low-income earners living in informal settlements and rural areas, a lack of financial illiteracy, the high costs of financial services, unemployment and poverty, over-indebtedness, and cultural and psychological hindrances to low-income earners in South Africa. Consequently, these factors have somewhat limited the access to financial services offered by financial institutions to low-income earners living in rural areas and informal settlements. In many countries, including South Africa, the financial sector is relying on innovative technology, especially in banking institutions, to aid in the offering of financial services to their customers. It is against this background that this article discusses selected legal and related challenges affecting the regulation and use of innovative technology to promote financial inclusion for low-income earners in South Africa. The article further discusses possible measures that could be adopted by the government, financial institutions and other relevant regulatory bodies to promote the use of innovative technology to combat the financial exclusion of low-income earners in South Africa.

H CHITIMIRA & PT MAGAU PER / PELJ 2021 (24) 3 earners in South Africa. Financial exclusion refers to the failure or inability of low-income earners to access and utilise reasonably cheap and suitable financial services in the formal financial system in a particular country. 11 In this regard, the promotion of financial inclusion is vital for the combating of financial exclusion in South Africa. This is owing to the fact that financial inclusion is also key to the development of a viable economy and stable financial markets in South Africa. Most low-income earners, especially those living in rural areas and informal settlements, are still struggling to access basic financial products and financial services in South Africa. This has been caused by several factors such as the absence of a financial inclusion policy, the geographical remoteness of financial institutions to most lowincome earners, 12 rigid identity documentary requirements, a lack of access to reliable and affordable internet connection by low-income earners living in informal settlements and rural areas, financial illiteracy, 13 the high costs of financial services, 14 unemployment and poverty 15 and overindebtedness, 16 as well as cultural and psychological hindrances to lowincome earners in South Africa. 17 Moreover, most financial institutions are now constantly using innovative technology to offer financial services and financial products to financial consumers in South Africa. Accordingly, the South African government and other relevant stakeholders should adopt more sustainable measures that will advance and expedite the financial inclusion of low-income earners with the use of innovative technology.
It is against this background that this article focusses on the use and regulation of innovative technology to adequately promote financial inclusion for low-income earners in South Africa. In this regard, legal and other related challenges that may arise from the use of innovative 11 Mohammed, Mensah and Gyeke-Dako 2017 AFJ 2; Louis  technology to promote financial inclusion for low-income earners in South Africa are discussed.

The lack of a specific and comprehensive legal framework for financial inclusion
Currently there is no specific legislation that deals with the regulation and use of innovative technology to promote financial inclusion for low-income earners in South Africa. For instance, financial inclusion is poorly regulated in statutes such as the National Credit Act (the NCA), 18 the Financial Sector Regulation Act (the FSR Act) 19 and the Consumer Protection Act (the CPA). 20 These statutes are often confusing and not comprehensive enough regarding the promotion of financial inclusion for low-income earners in South Africa. This lack of a specific and detailed legal framework for the promotion of financial inclusion has contributed to the low levels of financial inclusion for low-income earners in South Africa. Furthermore, the lack of a comprehensive legal framework regulating the use of innovative technology to promote financial inclusion has led most low-income earners to rely on informal financial services in South Africa. 21 This is owing to the fact that the informal financial sector provides easy access to cash which often comes at a higher interest rate than in the formal financial sector. Thus, the high interest rates that are associated with the informal financial sector threatens financial inclusion in South Africa. 22 Nevertheless, it is encouraging to note that the NCA 23 provides for financial inclusion through the extension of credit to the poor and low-income earners who could not access credit in the past. In an effort to achieve the extension of credit to the poor and low-income earners and protect such financial Section 3(a) of the NCA provides that one of of its purposes is to promote and advance the social and economic welfare of South Africans, to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers by promoting the development of a credit market that is accessible to all persons, and in particular, those who have historically been unable to access credit under sustainable market conditions. consumers inter alia from over-indebtedness and reckless credit, the NCA has established the National Credit Regulator (NCR). 24 The NCR promotes financial inclusion for all consumers inter alia by making the credit market and credit industry accessible to all financial consumers, especially historically disadvantaged persons, the poor and low-income earners, 25 but the NCR is not expressly and solely empowered as a regulatory body that deals with the promotion of financial inclusion under the NCA. 26 Similarly, the CPA 27 establishes a legal framework for the achievement and maintenance of a consumer market that is fair, accessible and responsible for the benefit of all consumers including financial consumers. The FSR Act has also introduced the Prudential Authority (the PA) 28 and the Financial Sector Conduct Authority (the FSCA) 29 inter alia to have a regulatory and supervisory oversight role over financial services and financial products offered by the financial institutions with the aim of protecting the financial consumers. In this regard, the FSR Act obliges the PA 30 and the FSCA 31 to adopt measures that promote financial inclusion in South Africa. Such measures include promoting fair treatment and the financial education of financial consumers to enhance their financial literacy and financial inclusion. 32 However, such measures have not been adopted, and it remains to be seen whether they will be successfully adopted in order to enhance the promotion of both financial inclusion and financial education, especially for low-income earners in South Africa.
Notwithstanding these commendable legislative efforts, there are no provisions in the NCA, the CPA and the FSR Act that specifically regulate and promote the use of innovative technology to curb the financial exclusion of low-income earners in South Africa. 33  with the use and regulation of innovative technology to promote financial inclusion in South Africa. For oversight purposes, the authors also submit that such a statute should be effectively enforced to promote financial inclusion in South Africa. Most importantly, it is submitted that such legislation should be clear on how innovative technology will be used and regulated to promote the financial inclusion of low-income earners. The issue of financial inclusion is broad, which may make it difficult for the legislature to provide single legislation on the issue. Nonetheless, the advantage of having a single piece of legislation regulating the promotion of financial inclusion through the use of innovative technology would be that it would eliminate the confusion which might result where there are different statutes dealing with the same issue. Thus, there is a need to adopt new legislation that would include provisions on the use of innovative technology to promote the financial inclusion of low-income earners in South Africa. This could increase financial inclusion through the use of innovative technology to curb the financial exclusion of low-income earners in South Africa. 34

The poor access to financial institutions by low-income earners living in informal settlements and rural areas
The South African banking sector has undergone drastic changes and developments in recent years. 35 Most changes were related to the regulatory aspects, the offering of new financial products and financial services as well as engaging low-income earners and the previously unbanked market. 36 There has been a notable growth in the banking sector since 1994, which has led to the introduction of a number of banks and financial products to date. 37 For instance, the distribution of ATMs has increased to a network of more than 5000 branches and approximately 30 000 ATMs have been made available in most urban areas in South Africa. 38 Notwithstanding the discussion above, most persons who reside in informal settlements and rural areas are still struggling to access bank branches and ATMs due to the uneven concentration of such financial institutions in South African urban areas. 39  areas. 40 As a result, financial consumers who reside in rural areas and other informal sectors struggle to access such financial services providers and banks in their communities. Thus, despite the advent of mobile money, instant cash, the use of innovative technology and other measures that have been adopted to enhance financial inclusion, most low-income earners in rural areas and informal settlements are still largely excluded from accessing basic financial services and financial products. It is submitted that there is an uneven balance and concentration of banks and other financial institutions in urban areas rather than in rural areas and informal settlements of South Africa. 41 The aforesaid imbalance has indirectly increased the financial exclusion of low-income earners in South Africa. 42 The authors submit that more measures on the use of innovative technology that are relevant to the particular circumstances of people living in rural areas and informal settlements should be adopted to promote their financial inclusion.
For instance, more ATMs should be installed in rural areas and informal settlements to ensure that financial consumers residing in such areas are not financially excluded and that they no longer have to travel a long distance to access financial services and products.

Poor access to reliable and affordable Internet facilities for lowincome earners living in informal settlements and rural areas
Notably, there have been some commendable technology-related developments and changes in the manner of how banking services are offered to financial consumers in South Africa over the years. 43 Such developments include the use of websites and mobile banking apps which make banking easier, especially for the poor and low-income earners living in informal settlements and rural areas, who cannot always afford to travel to access the banking services offered by physical bank branches. 44 All these commendable developments and measures may be undertaken, but if they do not reach the intended target audience, financial inclusion will not be fully achieved, thus missing out on the golden opportunity to increase financial inclusion through the use of innovative technology to curb the financial exclusion of low-income earners in South Africa. 45 Most financial institutions provide useful information on their websites and banking apps, which are beyond the reach of those in informal settlements and rural areas 40 Chitimira and Ncube 2020 J Afr L 337-355. 41 Louis with poor Internet connectivity. In this regard, the promotion of financial inclusion may not necessarily be an issue for financial institutions alone, but the government and other relevant stakeholders must also help to bring the financial services and products that are offered by financial institutions closer to those in informal settlements and rural areas via Internet access to avoid forcing such people to travel to urban areas to access the relevant financial services and financial products.
In South Africa, the reality is that most low-income earners living in informal settlements and rural areas have smartphones that can access the Internet and can transact or access various financial services and financial products. However, poor Internet connectivity in their areas makes it difficult for such financial consumers to access various financial services and financial products without travelling to the physical branches of the financial service providers. Accordingly, poor Internet connectivity negatively affects the promotion of financial inclusion for low-income earners in South Africa. In this regard, the Independent Communications Authority of South Africa (ICASA) 46 must address the issues of high data costs to allow people in informal settlements and rural areas to easily access financial services and financial products. Financial institutions, government and other relevant stakeholders must ensure that financial services and financial products are easily accessible to the poor and low-income earners in informal settlements and rural areas in South Africa inter alia through the provision of stable Internet access and cheap data costs to the low-income earners in informal settlements and rural areas.

Financial illiteracy and the lack of appropriate financial education
Financial literacy is defined as the knowledge, ability and opportunity to make sound money management choices by financial consumers to improve their finances. 47 Put differently, financial literacy refers to the ability to make well-informed judgements and decisions about the management of one's finances, taking into account any change that could occur in economic events and/or related aspects. 48  financial needs. 49 Although financial consumers may take high-risk financial decisions with the relevant information, the consistent and robust promotion of financial education is needed to help low-income earners with the management of their finances. On the other hand, the term financial education is not adequately defined in any piece of legislation that relates to financial inclusion and the protection of financial consumers in South Africa. 50 Nonetheless, financial education could entail the process by which financial consumers or investors improve their understanding of financial products, concepts and risks, through information, instruction and/or objective advice from financial service providers. 51 Financial education is given to financial consumers to develop their skills and confidence to become more aware of financial risks and opportunities, to make informed financial decisions, to know where to go for help and to take other effective actions to improve their financial well-being. 52 The financial sector is becoming more innovative and at the same time more complicated for financial consumers. 53 This places a substantial burden on them regarding their financial decision making and management. The poor promotion of financial education by financial institutions, the government and/or other relevant stakeholders remains a huge challenge for the majority of financial consumers, especially low-income earners in South Africa. 54 In South Africa, financial illiteracy problems stem from poor planning, lack of financial planning, and a lack of relevant knowledge and understanding of the various financial products at the disposal of financial consumers. 55 Such problems are caused by a lack of financial education initiatives and programmes for financial consumers. 56 Most low-income earners do not have the appropriate financial education to understand basic financial services and financial products in South Africa. 57 They are susceptible to taking up financial services they do not understand and end up being overindebted due to a lack of appropriate financial education to equip them financially. 58 Financial education must be promoted through the use of innovative technology by the government, regulatory bodies and other relevant stakeholders to enable financial consumers to understand the array of financial services and financial products available in South Africa. 59 In addition to this, financial education should be promoted through non technology-orientated methods of providing information such as regular site visits to rural areas, and the use of community newspapers and community radio to provide rural communities with financial education. Moreover, the government, regulatory bodies and other relevant stakeholders should find other innovative means to make information about financial products and services easy to understand to all financial consumers. This would ensure that financial consumers were better positioned to make sound financial choices and decisions. There is a strong possibility that the majority of consumers who are financially illiterate and end up taking high-cost loans owing to their limited financial education, which would result in overindebtedness. 60 It is important that the government, regulatory bodies and other stakeholders equip low-income earners with knowledge on saving and money management. This would help not only to avoid the overindebtedness of such consumers but also to ensure that they are not financially excluded from accessing the basic financial services and financial products available in South Africa. 61  One of the objectives of the enactment of the NCA was to balance the negotiating power between consumers and creditors through consumer education. 63 The aim was to help consumers to make better financial decisions regarding how they manage their finances and make use of credit. 64 In addition, the NCA also established the NCR to implement financial literacy programmes to enlighten consumers so that they could make informed financial decisions. 65 Notwithstanding this, only about 50% of the adult population in South Africa is financially literate. 66 Low-income earners form a small fraction of this percentage. The offering of financial education as provided under the NCA 67 is vague in that the standard of training to be provided to financial consumers is not outlined in the Act. 68 Moreover, the infrastructure to carry out this obligation by the NCR is also currently not in place. 69 The omission of the standard of training required in terms of the NCA might cause confusion to financial consumers, who have different backgrounds and varying levels of education. 70 Moreover, the NCA is silent on how financial education is to be promoted and enforced. This lack of clarity of the policy provided under the NCA negatively affects the promotion of financial education for low-income earners in South Africa.  73 Currently, most lowincome earners are yet to receive appropriate financial education on how to access basic financial services and productsin South Africa. 74 In this regard, it is submitted that the FSCA should adopt a robust approach to enhancing the promotion of financial education and enable all financial customers to make informed financial decisions in order to avoid over-indebtedness and other related challenges in South Africa. 75 For instance, the FSCA could roll out financial education programmes through innovative technology, the Internet and media platforms such as television, radio and the print media. Over-indebtedness 76 could also be curbed by financial education to discourage reckless borrowing and lending amongst low-income earners and other financial consumers in South Africa. 77 The CPA 78 was promulgated inter alia to curb the challenges of financial literacy that discourage low-income earners from accessing financial services and financial products in South Africa. 79 The CPA has established Provincial Consumer Affairs Offices (PCAOs) across South Africa to provide financial consumers with financial education, advice and information to enhance their financial literacy. 80 However, the levels of over-indebtedness among low-income earners remains high in South Africa. 81 This indicates that most low-income earners still need proper financial education. The CPA has not been robustly and consistently applied to address the problem of financial illiteracy among financial consumers, including low-income earners in South Africa. Consequently, there is a need for law reform to ensure that financial education is consistently and robustly promoted, especially among low-income earners in South Africa.
Despite some commendable efforts to promote financial education to curb financial illiteracy and financial exclusion, most South African low-income earners remain financially illiterate and financially excluded. In this regard, it is submitted that the use of innovative technology and media platforms such as radio and television interviews could enhance financial consumer 73 Nanziri literacy and increase financial inclusion in South Africa. 82 Neither the NCR nor the FSCA has adopted any robust innovative technology measures to promote financial education. For instance, since its inception in 2017 the FSCA has not yet achieved any desirable success in providing adequate financial education and financial literacy to increase financial inclusion. 83 Likewise, the NCR has been struggling to adopt innovative ways to promote financial education through sustainable programmes, workshops, conference presentations, brochures, radio and television interviews to enhance financial consumer literacy and increase financial inclusion in South Africa. 84 Innovative technology could be adopted and optimised to bridge the gaps which exist in the role played by the regulatory bodies to promote financial education to the low-income earners and curb financial exclusion in South Africa. For instance, online campaigns and programmes on television and radio on how to spend money wisely, invest appropriately and save smartly should be implemented by the NCR, the FSCA and other regulatory bodies in South Africa. This could also benefit the financial sector and be seen as an online marketing strategy that benefits both financial services providers and financial consumers. Thus, financial education and inclusion could be promoted through online marketing campaigns.

Mistrust of formal financial institutions and the fear of fraud by low-income earners
According Chitimira and Ncube 2020 J Afr L 337-355. 84 Chitimira and Ncube 2020 J Afr L 337-355; see Sibanda and Sibanda Financial Education 1, where it is submitted that the NCR made great efforts to reach financial consumers through various financial education initiatives between 2013 and 2014 in South Africa. Notwithstanding this, the NCR has managed to reach only approximately half of the total population of South Africa with its financial education programmes to date. This is not entirely commendable, considering that low-income earners form only a fraction of the people who have sufficient financial education in South Africa. inclusion for low-income earners, who have limited disposable income. 87 If financial institutions have financial integrity financial customers will have trust and confidence in the formal financial sector and this could increase financial inclusion.
The most recent incident which contributed to the mistrust of the financial institutions in South Africa was the Experian data breach. 88 Experian is a consumer credit reporting company that experienced a breach of data that exposed some of the personal information of about 24 million people and about 793 749 business entities in South Africa to a suspected fraudster. 89 Another incident was the recent mismanagement and embezzlement of funds at the Venda Building Society (VBS) Mutual Bank. 90 Incidents of this nature contribute to the mistrust of the banking sector by financial consumers, especially low-income earners. Consequently, most financial consumers end up resorting to using cash to transact as a way of avoiding dealing with banks and other financial institutions. 91 A reliance on cash to transact increases the possibility of reckless spending by low-income earners. The use of cash does not inculcate a culture of saving money among financial consumers and it discourages financial inclusion in South Africa. 92 Although most low-income earners do not prefer using online banking and mobile money due to fears of being exposed to fraudulent activities, 93 the use of innovative technology could go a long way towards the promotion of financial inclusion for low-income earners in South Africa. It is submitted that the use of innovative technology, such as artificial intelligence (AI) could enhance financial transactions and increase the financial inclusion of the poor and low-income earners. AI measures could also be utilised to curb financial crimes such as corporate fraud, market abuse and money laundering. AI could include computer systems which could acquire knowledge from the input of experiences and provide solutions to complicated problems in different situations. 94 AI computer systems can perform tasks that were previously thought to be capable of being performed only by humans. 95 Notable advancements made by AI applications include innovative ways and means of crime detection, for instance, by the use of automated facial recognition (AFR) technology. AI can be used to promote financial education and financial inclusion for low-income earners in South Africa. 96 Currently, AI is not specifically regulated in any legislation in South Africa. In this regard, it is submitted that the legislature should consider enacting a robust statute to regulate the use of AI to promote financial inclusion in South Africa. In addition, financial institutions should consider investing in innovative technology that is fast, robust, efficient, affordable and more secure to financial consumers to promote financial inclusion in South Africa.

Challenges in complying with identity document requirements
Most low-income earners are financially excluded from opening bank accounts and accessing other financial products owing to the strict and often cumbersome requirements relating to the possession of identity documents. 97 Banks are further required to know and establish the identity of their customers and satisfy the customer due diligence requirements through keeping and documenting the information of their customers under the Financial Intelligence Centre Act. 98 This process often discourages lowincome earners from opening bank accounts owing to the fact that they usually do not have the required documents to open and access bank accounts. 99 Banks usually require certain documents including inter alia valid identity documents, bank statements, proof of income, proof of residence and a minimal balance prior to the opening of an account, and most of the poor and low-income earners do not have such documents. 100 Moreover, the process of approval for new bank accounts often takes too long. This discourages most low-income earners from having bank accounts and accessing other financial services and financial products. Banks also have strict identity document requirements for the granting of loans, which further discourages low-income earners from accessing such loans. 101 As a result, most low-income earners end up resorting to informal credit providers which offer instant cash with no lengthy procedural requirements. 102 Although the financial assistance from informal sources is offered without daunting documentary requirements for the low-income earners, it often comes at high interest rates. 103 In this regard, the authors submit that the adoption of innovative technology that can streamline the process of gathering financial consumer information could help to promote financial inclusion for the low-income earners in South Africa. For instance, banks could also adopt online marketing strategies that require fewer documentary requirements for bank accounts. This could promote financial inclusion for low-income earners, who are often excluded owing to the fact that they do not possess the relevant documents required to open bank accounts.

Over-indebtedness as a threat to financial inclusion for lowincome earners
Most low-income earners in South Africa are over-indebted and struggle to extract themselves from their debts. 104 Over-indebtedness occurs when a financial consumer is unable to timeously satisfy all the accrued debt obligations under any credit agreement and/or facility to which he or she is a party. 105 Many South African households rely too much on credit for their day-to-day needs. 106 Most of this credit emanates from informal sources such as stokvels, loan sharks (who charge high interest rates) and borrowing from family and friends. 107 These informal credit sources remain unregulated and detrimental to the promotion of financial inclusion for low- income earners in South Africa. 108 Moreover, most of them struggle to extract themselves from their over-indebtedness due to several factors such as inaccessible debt relief measures, unemployment, poverty, limited disposable income and high bank fees. 109 Consequently, low-income earners end up seeking credit loans from informal sources that often charge high interest rates. 110 In this regard, it is submitted that the use of innovative technology that could detect the reckless granting of credit could militate against the financial exclusion of low-income earners in South Africa. At the end of December 2019, the credit bureaus had records of more than 55.07 million individuals on their databases in South Africa. 111 From these records, there were 25.20 million (45.76%) credit-active financial consumers. 112 Credit-active consumers are consumers who are obliged by authorities such as the NCR to pay their creditors. 113 Despite these catastrophic statistics of over-indebtedness in South Africa, the NCR has to date failed to adopt robust and consistent measures to curb over-indebtedness and prohibit the reckless granting of credit to low-income earners. 114 In this regard, it is submitted that the NCR must carefully monitor the consumer credit market and credit industry 115 through adopting and using innovative technology measures that can detect any reckless credit granting to low-income earners in South Africa.

Concluding remarks
More still needs to be done to promote financial inclusion for low-income earners in South Africa. Accordingly, the South African government, the regulatory bodies and other relevant stakeholders must address all the challenges and flaws affecting the regulation and promotion of financial inclusion for low-income earners, as indicated above. In this regard, policy makers should consider introducing adequate measures to encourage the use of innovative technology to promote financial inclusion for low-income earners in South Africa. Policy makers should further consider enacting specific legislation that deals with the regulation of financial inclusion in South Africa to curb the financial exclusion of low-income earners. Such legislation should clearly outline how innovative technology could be used  to promote financial education and financial inclusion in South Africa. Innovative technology could also be used to enhance the accessibility of financial services and financial products in rural areas and informal settlements in South Africa. Moreover, more banks, financial institutions and ATMs should be introduced in rural areas and informal settlements to increase the access to financial services and financial products for the poor and low-income earners.
The government, financial institutions and other relevant stakeholders must take adopt appropriate measures to improve Internet access and connectivity in the rural areas and informal settlements to effectively promote financial inclusion for low-income earners in South Africa. In this regard, the government and the ICASA 116 must incentivise and reduce data costs for people in rural areas and informal settlement so as to promote financial inclusion.
Regulatory bodies such as the NCR and the FSCA should adopt innovative ways of promoting financial education through sustainable programmes, workshops, conference presentations, brochures, radio and television interviews to enhance and increase financial inclusion in South Africa. 117 Online campaigns and programmes on television and radio media platforms on how to spend money wisely, invest appropriately and save smartly should be implemented by the NCR, the FSCA and other financial institutions. It is further submitted that financial institutions should invest more in AI and other innovative technology that protects the confidential information of their consumers, to encourage all people to trust in the banks and the formal financial sector.
It is submitted that innovative technology should be used to streamline the process of gathering financial information by banks so as to promote financial inclusion of low-income earners in South Africa. This would promote financial inclusion for low-income earners, who are often excluded due to their lack of the required documentation for the opening of bank accounts. Moreover, this would discourage low-income earners from relying on the informal financial sector, which charges high interest rates for most 116 See ss 3 and 4 of the ICASA Act; Oke and Fernandes 2020 Journal of Open Innovation 1-22. 117 Chitimira and Ncube 2020 J Afr L 337-355; see Sibanda and Sibanda Financial Education 1, where it is submitted that the NCR made great efforts to reach financial consumers through various financial education initiatives between 2013 and 2014. Nevertheless, the NCR has to date managed to reach only approximately half of the total population of South Africa with its financial education programmes. This is not entirely commendable, considering that the low-income earners only form a fraction of the people who have sufficient financial education in South Africa.