Modelling financial services adoption through an intermediary in South Africa : TAM and SEM approach

Abstract

One of the most pressing needs society has in 2012 is addressing the plight of the 4 billion people, globally, who live at the bottom of the economic pyramid. Unless initiatives are undertaken to alleviate poverty and hardship in this portion of society, human potential will be wasted and the economic burden on the rest of society to support them will remain significant. In South Africa a significant portion of the population live at the bottom of the pyramid. One initiative to alleviate poverty and hardship is to enable bottom of the pyramid people who are excluded from formal financial services to access to them. By accessing formal financial services they would be able to safely save and borrow money. They would also be able to escape exploitative informal financial practices. Technology has the potential to expand access to financial services and reduce the cost of service provision. To date, however, it has not delivered on its promise of expanding financial inclusion at the bottom of the pyramid. Intermediaries, too, have been used to increase access to financial services but have also not successfully expanded financial inclusion at the bottom of the pyramid. Understanding which factors would allow these approaches to realize their potential has the ability to meaningfully contribute to addressing the plight of people at the bottom of the pyramid. This study brings together the potential of technology and the role of intermediaries to model expanding financial inclusion at the bottom of the pyramid in South Africa. The Technology Acceptance Model is used as a basis to propose an extended TAM model that explains adoption of technology enabled financial services through an intermediary at the bottom of the pyramid in South Africa. The proposed model is validated using structural equation modelling with data collected in a national survey in South Africa. The extended TAM model successfully explains more than 90% of the behavioural intention of financially excluded people at the bottom of the pyramid to adopt financial services through an intermediary. Using the findings, a strategic approach to expanding financial inclusion at the bottom of the pyramid is proposed.