According to the latest FinScope Survey, 63% of South Africans are now “banked”, up from 45% in 2004. For the LSM1-5 market, the figure has grown from 31% to 48%. This is no small feat and can to a large extent be ascribed to the rise of the Mzansi bank account. It has registered 3.5 m clients, most of them first-time bank account holders, since its launch1. The success of the Mzansi bank account, in turn, was facilitated by Exemption 17 to the Financial Intelligence Centre (FIC) Act, issued in recognition of the fact that KYC requirements may pose an access barrier for many in the low-income market.

The outlook for the formalisation of financial services in the remittances market is however less rosy. Though no hard data is available on the number of undocumented migrants in South Africa or the total volume of remittances, various sources estimate more than half the remittances flowing out of South Africa do so via informal channels. This is a significant “lost opportunity” for foreign exchange transactions through the formal sector. Informal channels cannot be monitored for suspicious transactions and undermine consumer protection, as users have no recourse and the services rendered are not subject to supervision, but rely entirely on trust. Such a large informal market is also not in line with South Africa’s commitment under the SADC Finance and Investment Protocol.