South African banks go mobile

5 April 2012

South Africa already has one of the world’s highest mobile banking user rates, and this is set to accelerate, thanks to a 100% mobile phone penetration rate and an innovative banking sector that is pushing hard to reach a large, still unbanked segment of the country’s population.

In an interview with local paper Business Day this week, the CEO of First National Bank’s (FNB’s) Cellphone Banking Solutions, Ravesh Ramlakan, said the mobile phone was the future of retail banking in South Africa.

Ramlakan told Business Day that the increasing convergence between cellphone and banking technology for communication, shopping and banking meant the days of customers using their branch for their banking needs were numbered.

Rapid uptake by previously unbanked

Business Day quoted a recent survey by professional services company KPMG which found that consumers in countries with large unbanked populations were adopting mobile payments as a quick and reliable way to transfer money.

“The success story most commonly referred to was the M-Pesa money transfer service launched in Kenya by cellphone company Safaricom, which in South Africa has been copied by Nedbank in partnership with Vodacom,” Business Day reported.

Last month, in an interview with the same paper, Peter Schlebusch, personal and business banking CE for South Africa’s second-largest retail bank, Standard Bank, predicted that the country’s banking sector would gain an extra 8-million previously unbanked customers over the next five years.

The government has been pushing the banks to widen financial inclusion among poorer South Africans, and the banks have responded by developing various least-cost models to provide services to customers with low and irregular incomes.

But whatever the model, the mobile phone is increasingly the implementation tool of choice, especially when it comes to reaching people in remote areas where it is not viable to build a branch.

Nebank’s M-PESA solution

Early in 2010, Nedbank and mobile operator Vodacom teamed up to launch M-PESA, a solution that enables person-to-person money transfers via mobile phone – even between people without bank accounts.

This followed hot on the heels of the launch of a similar product, dubbed Instant Money, by Standard Bank and local retailer Spar.

Like Instant Money, M-PESA enables customers, regardless of whether they have bank accounts, to transfer money from person to person using their mobile phones.

FNB’s eWallet

First National Bank got in even earlier, launching its “eWallet” mobile money transfer solution in 2009. This week, FNB said that one-million eWallets had been created, and over R1.6-billion paid into them, since launch.

The eWallet allows FNB customers to send money to anyone in South Africa with a valid mobile phone number. Funds can be transferred instantly, and the recipient receives a text message indicating that funds have been sent to their cellphone.

eWallet allows payments to be made into accounts held at all major South African banks, and to nominated beneficiaries, including municipalities and major retail stores.

“eWallet is more than just a money transfer solution,” Yolande van Wyk, CEO of FNB eWallet Solutions, said in a statement on Monday. “The recipient is able to withdraw cash at FNB ATMs, buy pre-paid airtime or electricity, send money to another cellphone, purchase and/or get cash at selected retailers, as well as make once-off payments.

“We have seen year-on-year eWallet growth of 143% since January 2011,” Van Wyk said. “Average daily ‘send’ values are in excess of R3-million, double the figures we saw a year ago.”

The majority of the funds sent to eWallets originate from metropolitan hubs, and are then accessed across the country, often in small towns such as Giyani in Limpopo province and Ngcobo in Eastern Cape.

Mobile innovation award nomination

Meanwhile, earlier this year, local mobile services company Oltio was nominated in the “best mobile money innovation” category at the annual GSMA Global Mobile Awards for its payD platform, which turns a user’s mobile phone into a remote point-of-sale device.

Oltio is a joint venture company between pan-African mobile network operator MTN and Standard Bank. Through the payD platform, launched in August, consumers can purchase products and services online and use their debit cards to pay for the purchase while making use of their mobile phones to enter their PINs.

And in December, Absa Bank conducted South Africa’s first live user trial of Near Field Communication (NFC) technology on mobile phones, partnering with Mastercard to embed the Paypass Tap and Go payment chip on mobile handsets for the trial.

This enabled participants to load funds onto their phones through the Absa website or ATMs, and then to pay for goods or services by merely holding their phones in front of NFC-enabled pay points, with the value of their transactions being instantly debited from their stored value.

Southern African region

The above examples illustrate, but hardly exhaust, the mobile options currently being developed and expanded by South Africa’s banks – and applied not only locally.

First National Bank, for one, has seen a huge uptake in its mobile money solutions by customers of its African operations, with cellphone banking transactions growing 150% and eWallet transactions surging by 1 384% year-on-year in December 2011.

In February, the bank said that its customers in Botswana, Lesotho, Namibia, Swaziland and Zambia conducted 2.4-million cellphone banking transactions to the value of R214-million during December last year, up from R986 000 recorded in December 2010.

Botswana, which is FNB’s leading subsidiary outside South Africa in terms of cellphone banking activity, saw just over 1.3-million transactions and, in the same month, recorded a 126% increase year-on-year.

Namibia recorded year-on-year growth of 155%, Zambia 308% and Swaziland 227%.

“Innovation has played a key role in growing cellphone banking across Africa,” FNB’s Ravesh Ramlakan said, adding: “Our ability to adapt the service for use on any cellphone has been an important driver of this growth.”

SAinfo reporter