Research suggests that financial products and services can play a critical role in enabling social mobility and wealth creation, and providing social protection for individuals and their families.1 If these products and services are developed responsibly and deployed broadly, they could be instrumental in meeting both policy objectives and customer needs.
Still, there is work to be done before this vision can be realised.
The National Income Dynamics Study (NIDS) was created to provide an analytical framework for theories on social mobility in South Africa. Action points
Much of the messaging on the role financial products and services play in social mobility, wealth creation and social protection appears to be have been lost. We need to get it back if we want to rebuild trust with consumers.
Insurance versus saving: the first mitigates the impact of risk, the second provides the means to mitigate it through self-funding. How well have we done as an industry to help people understand the trade-offs implied by those two dynamics?
Formal product providers need to better understand what drives their potential clients to informal markets. Lessons here frequently point to better transparency, simplicity, accessibility and trust. This all suggests creating better product information that closes the knowledge gap between product provider and consumer.
Employers can go so much further in enhancing their employees’ social mobility, financial wellbeing and social protection than their current offering of retirement savings, group risk and medical aid schemes allows.
The four best sources of value employers can add are:
To facilitate this, the action points for employers would be to:
Technology can become an important enabler for distribution, behavioural modification and cost reduction. The industry should do more to embrace these opportunities, through partnerships or innovation hubs, rather than simply find better ways to protect existing turf.
Technology and innovation can also go a long way to helping us:
1 Schotte, S, Zizzamia, R & Leibbrandt, M. 2017. Social stratification, life chances and vulnerability to poverty in South Africa, Working Paper No. 208, South African Labour and Development Research Unit, University of Cape Town (online).
2 Heltberg, R, Oviedo, AM & Talukdar, F. 2013. What are the Sources of Risk and How do People Cope? Insights from Household Surveys in 16 Countries (background paper to the World Development Report 2014) (online).