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By Jennigay Coetzer – Business Day, 30 July, 2010

The use of mobile phone banking is growing across Africa and will continue to do so because a large percentage of the population have cell phones and no formal bank account, and live far away from the nearest bank or ATM.

Mobile banking presents a great opportunity for operators on the continent to increase revenues and those that have done so have reported a 10% increase in average revenue per user, says Konstantinos Tzingakis, head of Innovations Centre and partner management at Ericsson South Africa.

In South Africa and other parts of Africa the operators are partnering with the banks to provide mobile banking services. “Operators are not allowed to provide mobile banking services themselves in most parts of Africa due to regulatory restrictions,” says Tzingakis.

However, in many African countries airtime is passed from one phone user to another and used as currency, bypassing the formal banking system. He says one of the operators providing this type of service is Kenyan operator Safricom, which has signed up two-thirds of its 13 million subscribers to use its mobile banking service M-PESA, and is signing up 11,000 users a day.

“Safricom processes $10 million worth of transactions a day, with an average value of $20,” says Tzingakis. Bharti (previously Zain) has introduced an equivalent service, Zap, which it is marketing across Africa.

“MTN is also taking its mobile banking solution into Africa in partnership with Standard Bank,” says Tzingakis. He says mobile banking is as secure as internet banking, bearing in mind that the banks send one- time passwords to customers’ cell phones before they transact online, as an additional level of security.

With traditional mobile banking some transactions are done directly between the user and the bank as opposed to over the public internet, while with others the transaction request goes to the mobile operator first before being passed to the bank. Most mobile banking in Africa is currently done in the traditional way, but there is great potential for browser-based mobile internet banking on the continent as more affordable phones with this capability become available, says Tzingakis.

He says the more people get used to interacting online, the more they are likely to use mobile internet banking, and this is already starting to happen. For example, social networking is becoming very popular across the continent, partly due to arrangements between Facebook and operators like MTN, Bharti, and Orange allowing free access for activities such as interacting with friends, and posting messages, in some countries.

“They then charge normal data rates for things like video downloads,” he says.
Farmers are also using mobile internet for checking the going price of commodities to know where they are most likely to get a good price for their produce before taking it there to sell it.

Online activities like these will be a catalyst for growth in the use of mobile internet banking, says Tzingakis. He says Ericsson is developing mobile banking-related applications at its innovation centre that are suitable to the African market.

This includes an application that allows people to trade goods and services on their cell phone, with the payment processed through mobile banking, which is ideal for farmers. The company is also looking at developing mobile micro financing solutions that are suitable for the African market.

For example a farmer might need the finance to buy a water pump, and someone wanting to set up a laundry service might need to finance the equipment to do so. These people could access a website on their mobile phone, fill out a form about who they are, their requirements and a brief business plan and invite responses from those interested in financing.

“We are developing applications like this with a view to offering them to the operators to take to market,” says Tzingakis.

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

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