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Technology and Banking

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					                                                                                          Using technology
                                                                                           to bank Africa

                                                                                                             Lessons
                                                                                       Yolande van Wyk
                                                                                       Head: Strategic Projects
                                                                                       FNB Mobile and Transact Solutions




Page 1 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Topics
•     A look at GSM and why it‟s so successful in Africa


•     Technologies typically available for mobile banking


•     Typical business models for mobile banking


•     A quick look at banking in Africa


•     Mobile banking in Africa


•     Other barriers to rolling out a successful solution


•     Our lessons




Page 2 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Excuse me while I take my foot out of my mouth…

                     “Everything that can be invented has been invented.”
                   Charles H. Duell, Commissioner, U.S. Patent Office, 1899



   “The wireless music box has no imaginable commercial value. Who would
                 pay for a message sent to nobody in particular?”
   David Sarnoff’s associates in response to his urgings for investment in the
                                 radio in the 1920’s


 “This „telephone‟ has too many shortcomings to be seriously considered as a
       means of communication. The device is inherently of no value to us.”
                     Western Union, internal memo, 1876




Page 3 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
…and put the other one in

   Vodacom's initial growth projections catered for 250,000 subscribers within
                                      ten years.

       Vodacom‟s initial projections for the number of prepaid customers was
                                        50 000

     Coopers & Lybrand estimated 160,000 - 220,000 subscribers by the year
                                      2002

M-Net Communications Technologies CE Ian Wilkinson calculated a potential
             base of 300,000 - 500,000 subscribers by 2004




Page 4 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
 The ultimate disruption
 •    In 2004 Africa added almost 15 million new mobile cellular
      subscribers to its subscriber base;
         •     Equivalent to the total number of (fixed and mobile)
               telephone subscribers on the continent in 1996, just
               eight years earlier 1;


 •    Only 8% of people in Africa use a mobile phone but 52%
      of the population in low income countries as a whole live
      in areas with wireless reception 2;

 •    This difference fuels the expectation that growth will
      continue at rapid rates, with some analysts predicting that
      there will be close to 200 million mobile subscribers in
      Africa by 20103.

 •    Relative to mobile phones, internet usage is low: outside
      of South Africa, barely 1% of Africans access the internet.
1.       ITU data, Gray (2005:1)
2.       David Porteous - THE ENABLING ENVIRONMENT FOR MOBILE BANKING IN AFRICA
3.       IT Web Market Monitor 5 May 2006




Page 5 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
 Why is GSM so successful in Africa1?
 •    GSM technology vs Fixed line;
        • The shorter payback period on investment compared to fixed line;
        • Lower installation costs and faster build than fixed line;
        • Straightforward scalability of mobile compared to other infrastructure
            investments.
        • Greater ability to overcome geographic hurdles eg mountains,deserts.
 •    Complementary with lower levels of skills than needed for computers or the
      internet;
        • Illiteracy and minority languages;
 •    Lower social/income entry barriers than the internet;
        • Lower up-front expenditure - (Vodacom SIM Pack Sold for R49.99 (approx $7)with
               R55 airtime voucher included);
       • Greater ease of sharing mobile handsets than fixed line telephony.
 •    Business model innovations:
       • Pre-pay which helps overcome credit barriers;
       • Micro-entrepreneurship;
       • Mobiles as public telephones.
 •    Government and regulatory change:
       • Competition with fixed incumbent, stimulating the growth of the
           telecommunications market;
       • Liberalisation of the telecoms market;
       • Rollout requirements in licences such as rural coverage.

1.       Africa: The Impact of Mobile Phones, The Vodafone Policy Paper Series • Number 2 • March 2005




Page 6 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Technologies typically available for mobile banking
SMS                                                                             WIG/SIM Toolkit
         •     Good for notifications;                                               • Application has to be downloaded;
         •     Keyword based services;                                               • SMS based;
         •     Micro Payment services via premium                                    • Encrypted;
               rated services;                                                       • Usability an issue?
         •     Available on any handset.                                        Java
                                                                                     • Complicated to implement;
USSD                                                                                 • Application has to be downloaded;
    •          Menu based services;                                                  • J2ME compatibility not ubiquitous.
    •          More intuitive than SMS;
    •          Available on any handset.

WAP
         •     Handset limitations (growing
               penetration);
         •     Many networks in Africa not packet-
               data enabled yet (GPRS/3G/HSDPA);
         •     But will become the access medium of
               choice in the future.




Page 7 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Technologies deployed in South Africa
                                              SMS                          USSD                           WIG                    WAP

FNB
(division of FirstRand)                         √                             √                                                  √
ABSA                                                                                                        √                    √
Wizzit
(division of Bank of
Athens)
                                                                              √
Standard Bank                                                                                               √                    √
Nedbank                                                                                                                          √
MTN Banking
(division of Standard
Bank)
                                                                                                            √



Page 8 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Typical business models for mobile banking
•     Additive model
       • Primarily target existing banked customers;

         •     Offers the mobile channel as an additional channel;

         •     Alongside or as part of others (such as internet).

         •     FNB, ABSA, Standard Bank, Nedbank

•     Transformational model
       • Intentionally reaches out to markets beyond the
          existing banked groups;

         •     Product offering which meets the known needs of the
               unbanked groups.

         •     Wizzit, Celpay.




Page 9 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Business models deployed in South Africa
                                                                     Additive                                    Transformational

FNB
(division of FirstRand)                                                   √
ABSA
                                                                          √
Wizzit
(division of Bank of Athens)                                                                                                  √
Standard Bank
                                                                          √
Nedbank
                                                                          √
MTN Banking
(division of Standard Bank)                                                                                                   √




Page 10 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Banking in Africa? Depends where you are…

             Sophisticated markets                                                             Developing markets
               (e.g. South Africa)                                                                (e.g. Zambia):
           Well established and strong banking sector;                              Banking established for a significant period;
                        Good penetration;                                           Processes bureaucratic and old-fashioned;
                    Banking a trusted sector;                                          Technology limited and developing.
                    High level of technology
                         and innovation.

                                                          Conflict/post-war
                                                             (e.g. DRC):
                                                        Lack of trust in the banking sector;
                                                               Low level of savings;
                                                            Marred by inaccessibility;
                                                        Lack of services and infrastructure;
                                                             Corruption: environment
                                                                    of distrust.




Page 11 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
     What do the poor want from their bank1?
                                                                                                               Keep my money
                                                                                                                    safe




                                                                                                                   Take my cash,
                                                                                                                    give me cash



                                                                                                               I want to pay my
                                                                                                                 bills and send
                                                                                                                 money home
1.       David Porteous - THE ENABLING ENVIRONMENT FOR MOBILE BANKING IN AFRICA




     Page 12 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Good product mix for mobile banking in Africa
•Balance enquiry;
•Payments and peer-to-peer payments;
•Prepaid airtime.
•…and supported by adequate access to deposit and cash withdrawal facilities.


                 100%

                  90%

                  80%

                  70%

                  60%

                  50%

                  40%

                  30%

                  20%

                  10%

                   0%
                        Aug   Sep   Oct   Nov   Dec   Jan     Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec    Jan    Feb   Mar

                                     Payments               Transfers           Prepaid           Balance Enquiries             Other




NOTE: Transactional services such as Celpay Zambia & Celpay DRC can provide the retail
access point for banks that do not have a comprehensive retail network.




Page 13 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Other barriers to rolling out a successful solution
•Regulation as an inhibitor to the
development of a successful solution:
     • Technology is bypassing regulatory
        guidelines;
     • Current regulations do not cater for
        new technology;
     • "Realness" is lost;
     • Practicality of implementing
        regulation is difficult.

•Customer education:
                                                                                              Also keep in mind:
     • Usability;
                                                                                                   • Network coverage;
     • Difficult to "teach" customers due to
                                                                                                   • Balance the "High-tech" of
       remoteness.
                                                                                                      the solution with levels of
                                                                                                      education and literacy;
•Support and process:
    • The support of the solution is critical




Page 14 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
South Africa: 18 Months in review
•     All four major South African banks have launched or relaunched a cellphone banking
      offering

•     Cellphone Banking has moved from a “first to market” product to a significant
      transaction channel for banks, with millions of transactions worth hundred millions
      of rands per month reported

•     Major customer awareness and education campaigns have been undertaken by
      all banks, with collective marketing spend estimated at over R100 million for the past
      year

•     A proliferation of technology and business models has been adopted, with no clear
      winner in terms of technology or business models emerging

•     Adoption by all walks of life has been seen, with the collective registered base in
      South Africa estimated more than 500 000

•     Related services, like FNB‟s inContact service now have more than 3 million
      registered customers




Page 15 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
Our lessons
•Technology alone cannot guarantee                                              •Regulation should incubate, not
success;                                                                        inhibit;
•Technology is an enabler;                                                      How do we encourage access to banking, but
•It has to be supported by a solid product                                      limit:
offering;                                                                              • Risks related to money laundering?
•3 P’s – Product, people, process.                                                     • Credit exposure?
       • Registration                                                                  • We need to find the middle ground.
       • Education
                                                                                •Success through strong relationships:
•The needs of the market will dictate                                                    •    Financial institutions;
the choice of technology and the                                                         •    Regulatory bodies;
service/product offered to the market;                                                   •    Mobile network operators.
We need to understand the needs of our
customers;
                                                                                •Good product design is crucial:
     • Handset capabilities;
                                                                                         •    Keep it simple:
     • Market segments and their needs.
                                                                                         •    Easy to understand, easy to use;
     • Be Afro-centric, traditional European
                                                                                         •    If it breaks once, they will not try again;
         models can not be applied;




Page 16 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider
                                                     Thank you



               “We must be the change we wish to see.”
                        – Mahatma Ghandi




Page 17 | 16 August 2011 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider

				
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