South African Mobile Banking

A “land grab” is under way in South Africa's mobile phone and banking industries as big companies — retailers, banks and telecommunications operators — begin vying for a stake of the fast-emerging market for mobile payments. So writes Duncan McLeod in TechCentral (http://www.techcentral.co.za/inside-sas-mobile-payments-land-grab/13674/ )

Significant announcements are being made virtually every week, as SA’s big four banks and the country’s mobile operators make a play for what could become a lucrative new business — providing electronic financial services to the unbanked using mobile phone.

The past week saw two important developments. First, Vodacom confirmed market talk that it is partnering with Nedbank to introduce Vodafone’s M-Pesa in SA. M-Pesa, developed for Vodafone’s Kenyan subsidiary, Safaricom, has proved wildly successful as a person-to-person money transfer system in the East African nation.

The second big announcement came from Standard Bank subsidiary Beyond Payments, which is rolling a similar system in conjunction with retail chain Spar. Standard Bank’s offering, called Instant Money, is only available in the Eastern Cape — and soon northern KwaZulu-Natal — but will be expanded nationally this year.

Absa already has a solution, which allows consumers to use its ATMs to receive money sent to their mobile phone. It uses an electronic voucher mechanism. First National Bank, which was in the news last week for bringing US company PayPal’s full suite of online payment services to South Africans for the first time, offers something similar.

John Campbell, business development executive at Beyond Payments, describes what’s happening as a “land grab”. All the big banks and mobile operators are experimenting with different models, trying to find the one that will prove a massive success.
There’s no question of the banks backing away, either, as they view mobile payments and commerce as core to their future strategies, Campbell says. That means the fight could soon turn into a full-scale war.

“For Standard Bank, this is a must win,” Campbell says. “It’s our future.”
Beyond Payments was set up outside of the normal Standard Bank structures precisely so that operational issues in the rest of the bank would not distract it. It’s mandate is to come up with innovative new products, even if this means competing directly with long-established and core parts of the bank, Campbell says.

Instant Money isn’t Beyond Payments’ first product. Last year it introduced MiMoney, though it hasn’t taken off in quite the way that the company expected. The product, aimed initially at people without credit cards, especially youngsters who want to shop online, has developed a loyal following in specialist areas. For example, it’s become popular as a way of buying cellular airtime, and as a way of purchasing movie tickets.

People who do use it for online shopping do so not because they don’t own a credit card — they often do — but because it’s seen as a more secure payment mechanism, Campbell says.
Unlike MiMoney, Instant Money is targeted at people without any access to the formal banking system.

The idea behind Instant Money and rival services like M-Pesa is that because mobile phones are in the hands of virtually everyone, they’re an ideal platform on which to transact and move money around quickly. People working in cities, for example, can send money to unbanked family members in the rural areas, with neither party having to open a bank account.

“What we’ve launched with Spar is really backing another horse, as another feed into this whole [mobile payments] thing,” Campbell says.

Spar, which has 850 outlets, is an ideal partner, he says — it has stores catering to the more affluent parts of the population as well as stores targeting the poor, including those in outlying areas.

A flat R9,95 fee is levied on each transaction, with Spar collecting “the bulk” of that money.

Campbell says Beyond Payments will launch similar products with other retailers in time, though the Instant Money brand is exclusive to its deal with Spar.

“It’s flipping hard work to sign up retailers,” Campbell says. Beyond Payments has to train staff in each store so they know how to use the system and how to detect, for example, attempts at money laundering.

Consumers are already using the service to do interesting things, he says. For example, some people send transactions to themselves — handing in cash at the point of sale and converting it into electronic currency — so that it doesn’t get stolen, say, while they’re traveling on the taxi. They then draw the cash they’ve sent to themselves, when they need it. This obviates their need to open a bank account and makes their money less likely to be stolen.

Because these payment systems work over telecoms networks, some analysts have suggested that mobile operators could soon find themselves competing head-on with banks on their own turf. But Campbell thinks this is unlikely, especially in the SA context. He says operators more likely to partner with the banks — like Vodacom has with Nedbank for M-Pesa, or like MTN has with Standard Bank for MTN Money — than they are to go it alone.

“The [financial services] industry is still incredibly tightly regulated,” he says.
Even more regulation could be on the way. The SA Reserve Bank has said that eventually it would like mobile phone payment systems to interoperate, much like ATMs do via the Saswitch network. The central bank hasn’t set any deadline for this, though, as the market is still considered to be in its infancy.