Cash to the peo­ple

Cel­lu­lar Tech­nol­ogy of­fer­ing so­lu­tions to Africa’s un­banked

Finweek English Edition - - Companies & Markets -

EN­ABLING FI­NAN­CIAL SER­VICES for peo­ple liv­ing in out­ly­ing and ru­ral re­gions of South Africa is chal­leng­ing due to the lack of in­fra­struc­ture and tech­nol­ogy on the ground. It’s es­ti­mated 11m South Africans are ex­cluded from the bank­ing sec­tor given their ge­o­graphic or so­cio-eco­nomic po­si­tion­ing. How­ever, so­lu­tions have emerged that lever­age the high pen­e­tra­tion rate of cel­lu­lar tele­phones in SA to pro­vide ser­vices to even the most re­mote of ar­eas and fa­cil­i­tate bank­ing and in­di­vid­ual pay­ment sys­tems.

Last week MTN an­nounced it’s pi­lot­ing its Money Trans­fer mi­cro-pay­ment ser­vice through its MTN Bank­ing divi­sion. The sys­tem will al­low users to buy coupon codes from par­tic­i­pat­ing MTN out­lets and then SMS those to pay­ees who ex­change them for cash. The sys­tem com­petes with the likes of Shoprite Con­sumer Ser­vices’ money trans­fers of­fer­ing and the Mzansi Money Trans­fer.

“The de­vel­op­ment of this ser­vice is a joint ven­ture be­tween Stan­dard Bank and MTN Bank­ing, of­fer­ing a safe and se­cure way for cus­tomers to send money. The ser­vice will al­low money to be sent di­rectly to the re­cip­i­ent, re­mov­ing the has­sle and cost of lo­cat­ing a tra­di­tional ‘cash-out’ lo­ca­tion such as a bank’s branch,” says Tim Lowry, MD of MTN SA.

Codes for MTN Money Trans­fer can be sent us­ing any method, but MTN is hop­ing to dif­fer­en­ti­ate its of­fer­ing by util­is­ing cell­phones for ser­vices.

Dave Par­ratt, busi­ness de­vel­op­ment ex­ec­u­tive at MTN SA, says: “We want to start work­ing with banks and other play­ers in the space to ex­pand the ser­vice. Money Trans­fer is dif­fer­ent be­cause it uses phones to go the last kilo­me­tre. The pi­lot pro­gramme will al­low us to ex­per­i­ment with pric­ing and iden­tify where value lies. Part of the aim of the pi­lot is to un­der­stand the South African en­vi­ron­ment in which cus­tomers de­mand a pa­per re­ceipt. For ex­am­ple, in Kenya Sa­fari­com runs a money trans­fer ser­vice called M-Pesa that doesn’t pro­vide pa­per re­ceipts. We want to gauge whether or not South Africans would be happy with cell­phone-based trans­ac­tions that don’t pro­vide a re­ceipt,” says Par­ratt.

“A point-of-sales en­vi­ron­ment has also been de­vel­oped for Money Trans­fer, with two tools: a de­vice that runs our point of sale ap­pli­ca­tion and an­other ap­pli­ca­tion that runs on a cell­phone.” The lat­ter would en­able in­di­vid­u­als to them­selves be­come agents of the ser­vice, so long as they have a cell­phone to run the ap­pli­ca­tion on. MTN’s Com­mu­nity Pay­phone net­work could also pro­vide a base from which to fur­ther en­hance the reach to Money Trans­fer cus­tomers. Ini­tially, there will be 14 out­lets par­tic­i­pat­ing in the pi­lot.

“MTN is con­sid­er­ing charg­ing a flat rate of R10 for trans­fers. That will be split three-ways: be­tween MTN Bank­ing and the send­ing and re­ceiv­ing agents. There will also be a cap on the amount of money that can be sent. The pi­lot will al­low us to gauge ex­actly what those amounts should be,” says Par­ratt.

Other com­pa­nies are ex­plor­ing bank­ing ser­vices in a broader sense and us­ing cel­lu­lar tech­nolo­gies for ser­vices, such as ac­count sign-ups, that aren’t cur­rently cov­ered by ma­jor banks’ cel­lu­lar bank­ing so­lu­tions. One such com­pany – WIZZIT Bank – was recog­nised in a book called 101 In­no­va­tion Break­throughs, the only South African busi­ness in the pub­li­ca­tion.

A divi­sion of the South African Bank of Athens, WIZZIT of­fers cell­phone func­tion­al­ity for money trans­fers, air­time top ups, elec­tric­ity vouch­ers and other ser­vices as a com­po­nent of its sav­ings ac­count that aims to pro­vide full trans­ac­tional ca­pa­bil­i­ties to hold­ers. The ser­vice at­tracted more than 50 000 clients within its first two years of op­er­a­tion and eight out of 10 WIZZIT cus­tomers had no bank ac­count and had never used an ATM be­fore.

“There are 36m cell­phones in SA and it’s es­ti­mated 40% of the 11m un­banked peo­ple in the coun­try have cell­phones – ow­ing to a chronic lack of land­line in­fra­struc­ture in ru­ral and other out­ly­ing ar­eas,” says WIZZIT co-founder and di­rec­tor Brian Richardson. WIZZIT al­lows ac­count sign ups 24/7 from any­where that there’s cel­lu­lar re­cep­tion through a net­work of field agents re­cruited from un­em­ployed peo­ple in lo­cal com­mu­ni­ties.

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