Archive for: South Africa: Wizzit

Just over a year ago in Cairo, we convened the first Mobile Money Summit with our friends at the GSMA, DFID and IFC. The diversity of the crowd was fantastic – people from all over the world and all sorts of business – from mobile network operators to vendors to financial institutions. It might sound corny, but Hannes Van Rensburg captured the mood quite well: “A general spirit of: ‘Let’s build the industry’ rather than criticise each other prevailed.” (Mobile Payments have arrived)

Today’s the second and final day of this year’s Mobile Money Summit, and the key words here are data and partnerships:

Data - around the market opportunity for mobile money – by the year 2012 CGAP and GSMA estimate there will be 1.7 billion people with a mobile phone but not a bank account and as many as 364 million unbanked people could be reached by agent-networked banking through mobile phones;

Partnerships - a slew of deals announced yesterday illustrate the momentum around mobile banking services, notably: Visa Launches First Commercial Mobile Payment Service in Latin America. Read the rest of this page »

This is Nomakula Dyokomba. She’s the first person in her neighborhood to use her mobile phone to buy supplies for her spaza shop (corner store). The service is provided by WIZZIT Bank. Nomakula says it’s better than cash for two reasons. First, because she no longer carries lots of cash, she is less worried about getting robbed. Secondly, Nomakula can settle her accounts using her mobile banking service, instead of closing the store for several hours and taking a bus to the next town over.

For 20 years or so Nomakula has run her small shop and tavern out of the back of her home in the South African township of Motherwell. Spaza shops are ubiquitous in South Africa, and 80 percent of spaza shop owners are women. Think of it as a low-tech version of a 7-11. Situated near the tourism and manufacturing center of Port Elizabeth, Motherwell is home to 500,000 people, most of them using cash to pay for goods and services or receive payments.

WIZZIT, one of 12 partners working with CGAP’s Technology Program, this week has begun a pilot project here to see how Nomakula and others like her could send and receive money over mobile phones instead of using cash to buy food and drinks from wholesalers. As the press release tells us, the project’s three key components use point-of-sale devices in combination with WIZZIT’s mobile phone banking platform:

A mobile banking payment service for the major wholesalers serving more than 500 microentrepreneurs (spaza shops) in the township of Motherwell, where three in five people are unbanked.

A pilot program for easy account opening and preferred pricing at Dunns outlets—a leading South African clothing retailer. If successful, this pilot program will expand to 289 stores throughout the country. To encourage sign-ups and use, customers will be given incentives to make purchases with their Maestro debit card rather than cash.

Easy account opening using a direct sales model and the South African Post Office for distribution.

Globally, there are only a few examples of successful banking services that reach poor people in remote areas. With this project, CGAP is looking to WIZZIT to demonstrate how the reach of such services can be expanded with mobile technology and local agents who handle cash.

Mobile operators have notched some high profile successes in offering financial services to the poor. Think M-PESA in Kenya or GCash and Smart Money in the Philippines. They’ve have logged several million users for their mobile money transfer services which appear cheaper and more convenient than traditional banking products.

Will banks respond by emulating their new competitors from the mobile world? Banks have an appetite for offering multiple products to their clients, so it would be a boon to the poor if banks wanted to ramp up their offerings via new electronic channels. But the emerging picture is not always rosy.

Many banks see mobile as merely a threat, according to IFC’s Andi Dervishi, who leads investments in alternative-payments systems for the IFC. “Banks remain conservative. They don’t see this as a big opportunity. They are taking a more defensive position, rather than offensive, and not really going after the customer. Their business model needs to be changed.” Countries like India, China, Brazil and Russia now have more mobile phones than ATMs, giving rise to the notion that mobile will support the next wave of innovation in banking in emerging markets where low-revenue customers means banks need to find low-cost channels. But instead of jumping to explore, most banks are playing defense.

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There is burgeoning demand for mobile banking among users, though this is tempered by concerns about security and lack of awareness. This from industry analyst Sybase 365, who surveyed potential mobile banking customers in the Americas, Europe and Asia-Pacific regions.

Underlying the worldwide enthusiasm for mobile banking is a trend that has been coined by the survey as ‘nano-economics,’ or a near obsession by consumers with managing their finances to the cent and by the minute. 

But what about customers who are completely unbanked, who want first-time access to financial services? For many of the world’s 2 billion living on USD 2 or less, that means a secure way to save and affordable means to pay and make transfers. Those are typically services associated with transaction fees and unlike with credit, providers will need high volumes to make money off of low margin clients.

Interestingly, though, poor people have the same questions as the comparatively rich people Sybase surveyed: is it safe, and can I find out more? CGAP’s research with WIZZIT, which targets low-income South Africans with a mobile- and debit card-based service, found poor people had lots of questions about WIZZIT’s safety, convenience and affordability. Less than half were familiar with WIZZIT or mobile banking.

But it looks like the trick is getting people to try it. Low-income people who used WIZZIT were enthusiastic about the value. Three out of four said it was closer to their ideal way of doing banking than branches and ATMs, because of affordability, safety and ease of use.

Mobile banking is taking off. Or is it?  The buzz around mobile banking is matched by a recent flurry of product launches. In the US, nine banks rolled out a mobile banking platform to their customers this year. And they’re already late to the game. In Africa, Asia and elsewhere, banks and mobile phone companies have offered mobile payment and banking services for several years. Vodafone’s M-Pesa service has a half million users in just 6 months in Kenya, in a country with just over 3 million people with bank accounts.

Clients might sign up, but will they use mobile banking? Business projections, and a few careers, are likely to live and die on the answer. CGAP’s research in South Africa suggests low-income customers won’t understand the value until they use the service. Once they do, clients can become active users.

But a blizzard of studies in developed markets is clouding the picture with different answers, which has to be somewhat unsatisfying for senior bank and mobile manager deciding on whether to invest in mobile as a channel. Earlier this year, Celent argued 35 percent of online banking households will be using mobile banking by 2010, with new functionalities making mobile banking distinct from other channels.  Meanwhile, a more pessimistic Jupiter Research touts survey results showing only 8% of cell phone users who use online banking services are interested in mobile banking.  The debate in the US frames the same questions managers are asking in emerging markets. So which is it? Consumers will love it, or hate it?

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Banking agents, retail and postal outlets handling banking transactions for financial institutions and mobile operators, are mushrooming all over! It took less than four years to cover almost all of Brazil. Colombian banks established 3,548 service points in just one year. In Peru banks manage more than 2,500 agents. Equity Bank in Kenya is piloting agents in rural areas. Xac Bank in Mongolia is planning to develop an agent channel….

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Sci-fi seer William Gibson said “The future is already here: it’s just unevenly distributed.” If that’s true, then the future of mobile is already happening in places like Kenya, the Philippines and South Africa. And two numbers released this month by Wireless Intelligence tell us why mobile payments and banking is much more likely to happen in poor countries than rich ones.

August saw the world’s three billionth mobile phone connection made. The first billion mobile connections took a dozen years, and the second just two and a half years, with 82 percent of new subscribers coming from developing countries. The third billion: just under two years. The growth of mobile is centered squarely in places like Mumbai, not Munich, Lagos, not London.

Meanwhile, ARPU, or average revenue per user, continues its downward trend, sliding another 12 percent globally. This means mobile operators are earning less per customer. The trend is most pronounced in poorer countries. In Africa, blended ARPU has declined by a quarter from 2005, down to 13.9 Euros, compared to the world average of 22.6. ARPUs look even less enticing if you also factor in churn (percentage of customers lost), which increases customer acquisition costs.

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