By Jennigay Coetzer – Business Day, 30 July 2010

In South Africa the number of internet banking users users has doubled over the past five years to about 3.2-million to 3.5-million, across all the banks. Mobile phone banking is growing even quicker in the country, although off a lower base, with a total of about 5-million users across all the banks, says Christo Vrey, managing executive for digital channels at Absa.

“We have 1.1 million internet banking users, and 2-million cell phone banking users – including 50,000 businesses.” FNB has nearly 2 million active cell phone banking users out of a total customer base of 6.6 million.

“We are adding 40,000 to 50,000 users a month,” says Ravesh Ramlakan, CEO of FNB Cellphone Banking Solutions. He says mobile banking usage is more prevalent among lower and middle income groups.

“Two-thirds of our customers earn less than R100,000 a year.” A lot of these people use internet banking when they are at work and use mobile banking when they are not.

“Our mobile banking usage peaks between 19:00 and 23:00, while our other banking channels volumes peak during the day,” says Ramlakan. He says customers have a choice between traditional mobile banking, whereby they dial a number, are presented with a screen, enter a PIN, and select options from a menu by pressing numbers, or using browser based mobile internet banking.

Some people use dial-up mobile banking for quick functions like requesting a balance, which take a few seconds, and use mobile internet banking for more complex options, says Ramlakan. He says the browser based option will increase in popularity as more internet enabled mobile phones become available at affordable prices.

In addition, more of the phones that are passed down from higher to lower income people will be internet enabled, which will help to boost usage. Over the next three years, FNB will be putting significant effort into its mobile banking portal fnb.mobi because mobile internet banking is the future, says Ramlakan.

He says beyond the boarders of South Africa, the bank has been offering mobile banking in Namibia and Botswana since 2007, and in Zambia and Swaziland for six months, and is launching services in Lesotho and Tanzania over the next six months. Mobile phone banking is ideal for people living far from bank branches and ATMs, and is a good way for banks to broaden their reach across the continent without having branches and ATMs everywhere, says Ramlakan.

Brad Gillis, CEO for regulated cluster at BankservAfrica says although the adoption rate of internet banking has been steady over the past few years in South Africa, growth has been hampered by the fact that until recently it required a PC or laptop to use internet banking. “But with more mobile phones with internet capabilities becoming available, the take-up should be a lot higher.”

He says more than 90% of internet and mobile banking, ATM and retail point of payment transactions that involve settlement between two banks are handled by the company’s electronic funds transfer switch. Last year it switched 2.5 billion transactions with a total value of seven to R8-trillion.

“We switch the majority of the low value high volume payment transactions between the banks,” says Gillis. He says the ability to pay beneficiaries through real-time internet banking has been available for about three years and volumes are increasing by 74% a year.

In the past with batch systems, it could take a number of days for payments to be reflected in the recipient’s account, but the latest real-time technology allows this process to be completed in as little as one to two minutes. “Three of the large banks are already offering this and a fourth is currently implementing it,” says Gillis.

He says today, less than 3% of payments to beneficiaries are made by cheque and the balance are made electronically. The South African mobile banking market is different to the rest of Africa because a significant percentage of the population have a traditional bank account, and the growth potential is therefore likely to be in the unbanked sector.

“Many of those who are banked have access to a PC at the home or in the office and can use internet banking,” says Gillis. He says the success of mobile payments is dependent on getting enough retailers to accept this type of payment method.

Cell phone airtime is also being used as a currency, for example to download ringtones, make donations and pay to download software from online mobile application stores. “Anyone who is not banked can do this,” he says.

However, as the unbanked population adopts alternative methods of transacting payments, this could result in them working around the banking system, instead of migrating to it. A mechanism is needed to transition these people to formal banking services.

But to achieve this the technology between the banked and the unbanked world will need to be interoperable, says Gillis.

Jennigay Coetzer is a freelance business and technology journalist. She also does media spokesperson training and article writing skills training.

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