See More

Banks pin hopes on cellphones

Sep 19 2010 11:23 Dinkie Dube

Related Articles

Call on this mobile

Multichoice and e.tv to go mobile

Mobile is where it's at

Foreigners discuss mobile money in SA

Vodacom launches mobile TV

Lower cell fees sting Vodacom

Johannesburg - Mobile technology is accelerating attempts by banks to broaden access to the formal economy for low-income earners, but more needs to be done.

Mobile money transfer is one area that appears to be outpacing others in this pursuit.

There are a number of mobile money transfer services in the country.

These include M-Pesa, e-wallet and the Shoprite Money Transfer. Various banks offer their own systems.

Absa Group [JSE:ASA] added another system this week with the launch of a card payment system called PayPass, which allows users to pay for low-value purchases without using cash.

The users need only tap their cards onto the PayPass card readers at either retailers or transport operators to pay for their purchases.
These advances are universally welcomed but there are still challenges.
Lumkile Mondi, chief economist at the Industrial Development Corporation, said: “Access to credit, especially mortgage bonds, remains a huge barrier for low-income consumers.

“Banks still need to be flexible in their selection criteria so that consumers who would ordinarily be considered too risky because of their earnings could be able to buy property.”

Cas Coovadia, the managing director of the Banking Association of SA, said attempts by the banks to broaden access would be in vain if the regulatory environment was not responsive to the needs of the unbanked.

He said the association was concerned about parts of the regulatory burden which made it difficult for some consumers to access banking services.

“For example, people are required to produce proof of residence to open a savings account. Most consumers in informal settlements do not have such documents,” he said.

Coovadia said the industry had managed to get some of the services exempted from some of the Financial Intelligence Centre Act requirements.

Mandla Maleka, chief economist at Eskom, said active participation in the economy by low-income earners was key to unlocking benefits for the unbanked and to ensure the faultless transfer of funds.

Maleka said: “Tapping the unbanked market could open up other opportunities.
Billions of rands are stashed under mattresses by people who are not part of the formal banking sector. Considering the country is an emerging market and has a low-savings ratio, there is space for such developmental opportunities.”

There are an estimated 13 million people in South Africa who are outside the mainstream banking system.

Coovadia said banks were looking at mobile technologies and forming partnerships with micro-financing institutions to broaden access.

He said the challenge for the local banks was to provide cutting-edge banking services that are globally competitive, but also accessible to the unbanked.

Maleka said transaction costs and illiteracy could slow the penetration of mobile money transfers.

Absa’s Simon Just said 85% of the 5.5 billion purchases recorded in the country a year are made in cash.

Consumers would be able to use a mobile money transfer card to pay for their taxi or bus fares and purchases of less than R1?500 by simply tapping the card on the card reader. They can load money into the card via a cellphone or the internet.

Absa said it was piloting this new system with public transport operators such as Gautrain and Rea Vaya.

- City Press

For more business news, go to www.citypress.co.za.



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

People who fall victim to Ponzi scams are:

Previous results · Suggest a vote