Rising star

Like any technology, mobile banking has been a while in the making. For the past five years, iWeek has been quoting analysts as saying mobile banking has the potential to take full financial services to Africa`s unbanked millions.

Cellphone airtime has, in effect, been used as currency for some time. Premium-rate SMS subscription services already allow people to use their cellphones to buy products or services, and people in rural areas are reported to barter airtime for goods and services. Cellphones are also widely used for bank statement queries and transaction notifications.

While its potential may be immense, the adoption of mobile banking and mobile commerce was relatively underwhelming until recently. And the millions of South Africans who do use it aren`t making use of its full potential yet.

However, key players say the time for mobile banking has finally come. And this time, they mean it. Gartner predicts that the number of people using their cellphones to make payments will rise 70% over last year, topping 74.4 million this year. By 2012, this number should exceed a respectable 190 million. There are around four billion mobile phones in the world and only 1.6 billion bank accounts. In Africa, more people have cellphones than PC access. Africa also has an estimated 300 million reachable adults who have no access to formal financial services, according to the UN Department of Economic and Social Affairs. All of which adds up to a rosy future for banking via mobile phone.

TAKING OFF IN SA

As mobile banking takes off worldwide, companies across Africa are looking to make the most of the technology`s potential on the continent. And it`s not only the unbanked who stand to benefit. South African banks report that clients of all ages and income groups are now adopting mobile banking services.

In fact, recent findings from the Mobility 2009 report, researched by World Wide Worx and sponsored by RIM and FNB, show more South Africans now bank using their cellphones than on their PCs.

The study found that 16% of banking customers in South Africa use the Internet for banking, and 28% use their cellphones. A total of 34% of banking customers use one or both of these channels. The study also shows purchasing via the cellphone beginning to take off, with 24% of cellphone banking customers purchasing prepaid electricity, and 21% making general purchases like movie tickets and flowers. Purchase of airtime still leads the way, accounting for 61% of cellphone banking users.

"The fact that services like cellphone banking are taking off so strongly shows that consumers no longer see their cellphones only as voice and text messaging devices, but use them to stay in touch with everything that matters in their business and personal lives," said Deon Liebenberg, regional director for sub-Sahara Africa at RIM.

Liebenberg added that with mobile penetration at more than 114% in South Africa, adoption of mobile banking and other personal services and applications should ramp up quickly.

Arthur Goldstuck, MD of World Wide Worx, said: "South Africans are becoming comfortable with cellphone banking, but precisely half of general banking customers are still nervous of it, citing trust as their major concern. However, this concern must be seen in the light of 34% also saying the issue is not knowing how to use the service."

Paul Stemmet, GM of MXit, noted recently that the biggest barriers to rolling out mobile banking solutions were enabling trust and overcoming the cost of access onto the mobile network.

But banks and solution providers are fast coming up with simpler, more secure mobile banking solutions. Recently, FNB and Standard Bank launched new mobile banking services aimed at making mobile banking and cash transfer simpler and more convenient.

"With Send Money and other innovations, we are committing to bridging the gap between the banked and unbanked," said Len Pienaar, FNB mCommerce CEO. Pienaar has long been involved in FNB`s mobile banking services, and he foresees rapid uptake in the short term.

Well over 1.25 million FNB customers now use the concept of the "bank in your pocket". Many of the early adopters were young, black clients, FNB reported.

Figures released by FNB earlier this year showed that its cellphone bankers were: black (65%), white (22%), coloured (8%), and Asian (5%).

Absa, Standard Bank and Nedbank also have mobile banking services in place. Adrian Vermooten, head of Absa mobile banking, said at the recent ITWeb Mobile Payments Conference that Absa currently records around seven million mobile banking transactions a month, and 67% of its NotifyMe mobile service customers are mass-market customers.

"This space is growing rapidly," he said, and added that Absa is working on more innovations in the mobile payment space, and has also invested R12 million in a training initiative to drive awareness of mobile banking in rural areas.

SAFE PASSAGE

Mobile banking should prove very popular in developing areas - it allows financial transactions where there are no banks, it allows people to safely send money home to remote areas, plus it costs relatively little to transact.

While SA has been slower to adopt mobile money transfer services, the Mobile Payments Conference heard that Kenya`s popular M-Pesa mobile money transfer service is now used by one in three adults in that country. Other successful mobile payment systems have been implemented in Nigeria and Ghana.

FNB eMoney Product House CEO Yolande van Wyk said in launching FNB`s mobile Send Money service recently, that South Africans are often forced to take the risk of sending actual cash to their relatives back home.

"We conducted research on the challenges being faced by consumers when sending money. Some of the concerns were about whether the money would get to its destination, how long it would take to get there and the costs associated with sending money," she said. Often, this money is needed urgently, for basic needs such as groceries. The new service ensures the money reaches the recipient instantly and securely.

Parents could also use the service to send emergency cash to their kids, and those without credit cards can use the service to buy goods online.

John Campbell, business manager at Standard Bank`s MiMoney, said his bank noted the popularity of the airtime bartering model in rural African contexts, and developed the model into a more formalised, virtual cash mechanism. Instead of swapping airtime, users of MiMoney can swap vouchers that are loaded and sent in a similar way to airtime. "In South Africa, the credit for the development of the certain new services on the mobile platform goes to ordinary people in the lower income brackets, who have led the way by adopting, even instigating new ideas to turn the cellphone into a powerful transacting tool."

MiMoney also aims to launch the youth and credit-cardless South Africans into the online economy, with a simple way to convert hard cash into virtual cash to be stored on their cellphones. This can be used to make purchases online, over the phone or on the mobile Web.

"The youth market has the disposable income (estimated at R80 billion last year) to be influential online consumers, but they have been restricted by a lack of access to credit cards and other online payment mechanisms," Campbell said.

MiMoney also plans to equip micro-businesses and entrepreneurs with the ability to receive electronic payment from customers via MiMoney.

Herman Singh, CEO of Beyond Payments and the brains behind the new Mowaly virtual wallet, said SA has been lagging, but is now catching up in the m-commerce stakes. He expects Mowaly to capture a lot of the market as the mobile banking wave gains momentum in SA.

Another company aiming to change the face of local banking is mobile social network MXit. Already phenomenally successful as a networking medium, MXit entered the mobile commerce arena earlier this year. Its model, in partnership with Standard Bank`s MiMoney, allows users to load MXit Moola onto their cellphones for purchasing mobile services and content.

MXit CEO Herman Heunis said MXit already had a vast user base of over 11 million within SA and abroad, a large segment of whom are entry-level and unbanked. MXit Moola will allow them to purchase goods and services with their mobile phones without using hard cash. Heunis said MXit would start hosting various shop fronts on the MXit platform, to enable users to purchase items such as airtime, music, MXit Moola and more.

MUCH MORE THAN A PHONE

The cellphone, it seems, is becoming a multifaceted commerce device. People can buy prepaid services or pay bills, send money to recipients across the country and draw money at ATMs, using only their mobile device.

Shaun Campbell, Sybase 365 director of Business Development, agreed that mobile banking`s future looks promising. "In SA, most people don`t have access to banking or they are simply excluded by the banks. The cellphone is an enabler... The uptake of m-commerce will be high in the next couple of years."

He highlighted the difference between mobile banking and m-commerce: "Mobile banking is servicing your clients on their cellphones; mobile commerce is a wider financial environment that involves more stakeholders. It`s a financial portal."

Campbell said: "South Africa has the right set of ingredients for m-commerce to be a great success. It is well developed with infrastructure with things like transport services, merchants and day-to-day services like paying for electricity. This is cash-based and 50% of adults don`t have access to banking. What m-commerce does is bring all of those components together via a virtual wallet. It doesn`t matter which mobile operator you are with, and you don`t need a bank account to conduct financial transactions."

Vermooten added that there is a desire to find mechanisms that allow customers to interact in a more convenient way and at a lower cost than traditional channels. "Add to this the cost of handling cash, the development of our national public transport infrastructure, and the depth of penetration of mobile handsets, and you have a series of market dynamics that are supporting growth and development in the mobile banking space."

The most commonly used mobile financial services and transactions currently are airtime purchases, notifications and balance enquiries, with the ability to use a phone to buy goods in retail stores still limited. But, say players, watch this space. It won`t be long before South Africans are happily buying, selling and banking, without a real cent in their pockets.