Banking tech hits mass market

The face of money changing is rapidly transforming, and South African banks need to be at the forefront of trends and technology in order to keep up with the global market.

However, while technology heralds the future of banking, its nature necessitates services that are affordable and accessible to the spectrum of income groups.

Herman Singh, Beyond Payments CEO, says money changing is not steeped in the world of mobile wallets, or in alluring apps. Rather, it is in vouchers, with random cryptographic codes.

“A quiet banking and retail revolution is taking place, from bank branches and ATMs to spaza shops and large retail chains in SA,” says Singh, adding that this revolution is essentially embodied in prepaid vouchers, which are issued by banks.

“The prepaid phenomenon has seen soaring uptake, particularly in countries where customers are credit-challenged rather than debit-challenged, as our lower income communities are.

“For example, over R100 billion is generated in sales of prepaid airtime and electricity annually, while over 2.5 million money vouchers, valued at over R450 each, are created and redeemed every month in SA. That is over R1 billion a month.

“What's more, over a billion rands' worth of e-currency is switched by Standard Bank's e-currency switches every month.”

According to Singh, the explosive growth in money vouchers, which make up about a sixth of the traditional prepaid voucher business, has killed the mobile wallet as a viable payment instrument.

“Lower income segments in this country are asking for less 'banking bling' and more utility and value-based offerings. These solutions must be extremely simple to use and available almost everywhere at extremely low costs. This explains the boom in prepaid money voucher sales.”

Singh cites that of the close to 20 wallets that were launched in the last four years in SA, only a handful remains. “These are struggling to survive within a niche market, or trapped in small closed-loop systems, which are usable only by a single bank's clients on their own ATMs. It is open systems that will win. Consumers want freedom of choice.

“The true innovation champions in Africa are those deploying fewer features and more value, less Western fad elegant obsolescence, and more basic down to earth home-grown ingenuity.”

Absa says it is adopting a far more optimistic view in the potential that virtual wallets offer both the customer and the bank.

It says: “As the concepts of virtual wallets and mobile payments become more clearly developed in the customers' minds, we believe that such offerings will make sense for customers at all ends of the spectrum.”

Electronic stores of value and prepaid instruments or vouchers, says Absa, will be key developments over the coming years, and will co-exist “extremely well”.

“We see the mobile applications environment developing across all customer segments, enabling customers with unique applications that have the capability to handle both core accounts (and virtual cards), between which money is moved, and the ability to hold and move vouchers from person to person.”

Absa says existing usage of money transfer services across all banks indicates that customers in the entry-level market segment have a requirement for a basic account in order to do transfers. “To suggest that mobile will not play a role in enabling banking offers in the unbanked and underbanked segments, in future, is short-sighted.”

Absa has in the region of seven million customers in the mass-market segment, which is more than 50% of its entire customer base.

“To serve this market we have enabled offerings like CashSend money transfer, which allows Absa customers to send money to anyone with a cellphone number, irrespective of whether they have a bank account, and Cellphone Banking Lite, which gives customers the ability to check balances and mini-statements, purchase airtime and electricity, and make CashSend payments.

“Although these offerings are focused on utility and simplicity, as the customer's needs grow in sophistication, we need to be able to cater for their requirements with virtual/mobile wallets that can receive deposits and have a greater ability to transact from a mobile device.”

In the market since late 2008, Absa's CashSend offering has seen over two million transactions and over R1 billion in transaction values being sent via this channel since its inception. The bank sees about 150 000 CashSend transactions each month.

“If one is to consider more broadly the definition of mobile wallets as 'a mobile interface from which one can access their stores of value', then we could include the three million customers that are processing over R12 billion in transaction values via this channel every year.

“Such statistics demonstrate the opportunity in the mobile environment.”

First National Bank (FNB) says the eWallet is leading the mobile money space in SA, with over R1 billion sent to recipients in two years.

CEO of eWallet Solutions at FNB Yolande van Wyk says: “We are averaging over R2 million per day on eWallet alone, excluding the massive amount of transactions we are doing on FNB cellphone banking and prepaid airtime and electricity.”

She says FNB is largely focused on bridging the gap to the unbanked. “The mainstream market is one of our largest customer segments, constituting over 50% of our total customer base. FNB offers products and services that are tailored to the needs of the specific market segment. When it comes to our product sets, we offer the FNB eWallet (bridging the gap to the unbanked), Easyplan branches and products as well as the Smart product set.”

FNB's eWallet has been launched in most of its African subsidiaries, including Botswana, Swaziland and Lesotho. “We hope to have most of the countries' eWallet enabled by early next year. Our focus for this product is not just a South African one, but a global one.

“FNB has realised that providing a product like the eWallet provides more options to the customers and it is applicable to the entire market, not just mainstream. Within the mainstream market, users may be using it primarily for money transfer services, but other consumers may use it for emergencies or to send money to children for pocket money. [For example] FNB CEO Michael Jordaan sent money to his wife, who was stuck at the airport without her purse.”

Van Wyk says that, with its mobile channels, FNB has ensured it can offer the ability for customers to access their bank accounts, regardless of the phone or network they use.

For mainstream users with basic functionality and no data, Van Wyk says FNB's menu-based cellphone banking has been successful, with over 14 million transactions processed every month. “For customers who have access to mobile Internet and data, [there is] fnb.mobi, which is online, full featured access to banking.

“Lastly, the smartphone app is a new addition to the family, but probably more applicable to the upper consumer market who have smartphones. [This is] currently a small yet fast growing segment of the overall mobile phone market in SA.”

Van Wyk concludes that 75% of its three million cellphone banking customers are mainstream customers, which means they have an income of under R100 000 per annum.

Nedbank says the addressing of diverse sets of client expectations is critical to the industry of banking.

Head of digital and mobile banking at Nedbank George Chirwa says meeting these needs means the bank “needs to provide both a comprehensive suite of banking services on cutting-edge devices, like tablets and smartphones, while also assisting clients with basic self-service solutions on easy-to-use cellphone services, at point of sale, ATMs, etc.”

Chirwa says, with approximately 35% year-on-year growth, prepaid airtime remains Nedbank's fastest growing digital service. “[This is evidence of] the appeal of basic transactional services to the mass market.”

He adds: “With Vodacom, m-Pesa customers are able to send money to friends and family anywhere in the country, 24 hours a day and 365 days a year, as well as a range of other services, including airtime transfer. This is a fast, safe, easy and very affordable service offering backed by the growing distribution network.

“We believe in providing a choice of convenient, secure client centric digital solutions to all our clients to meet their ever-evolving needs at every stage of life.”