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By Jennigay Coetzer – Business Day, 30 July 2010

By the end of next year almost three times as many consumers globally will use their mobile phones to make person to person payments than those who will use them to conduct traditional banking functions, according to ABI Research. The developing world is embracing mobile payment services with enthusiasm wherever they are offered, says senior analyst Mark Beccue.

“It is becoming the first financial service for previously unbanked people, and may make a real contribution towards lifting them out of poverty.” The biggest mobile payment success story to date in Africa is mobile operator Safaricom, which has cornered 78% of this market in Kenya, with its M-PESA system, which enables money to be transferred between mobile phone users.

“Before the introduction of M-PESA, 15% of the adult population of Kenya was banked, and now 55% transact through mobile banking or bank in the traditional way,” says Simon Russell, managing executive for financial services at Accenture South Africa.

He says in South Africa the picture is a bit different because 56% of the adult population is banked and 60% of individuals over 16 have access to a mobile device, according to Accenture’s research. Nedbank recently entered into an agreement with Vodacom to bring M-PESA to South Africa, and intends to launch the service later this year.

Those signing up for the service, will be able to deposit money at authorised retail outlets and send it to mobile phone users anywhere in South Africa, much like Safaricom’s service in Kenya. Recipients will then be able to redeem the cash from authorised outlets or ATMs located near to them, says Ingrid Johnson, group managing executive for retail and business banking at Nedbank.

Those using M-PESA will also be able to use money stored in their electronic purses to purchase goods from conventional retailers and spazas that are using the service, by sending the value of the transaction to a designated cell phone number. The same thing could apply when paying for taxi fares.

Johnson says the electronic purse will be password protected, to stop any unauthorised person from accessing it. “M-PESA is the answer for the unbanked sector of the population.”

She says employers could also pay their casual workers by depositing money into their M-PESA electronic purses, which is much safer than them carrying cash around. However, the amount of money being transferred will be restricted to small amounts, in terms Fica regulations.

In the future, functionality could be extended to other services like enabling users to purchase funeral policies, as Safaricom has done in Kenya. When delivering services, the banks need to recognise the affordability levels of different consumer sectors and the devices they use, says Johnson.

For example, M-PESA can be accessed with basic phones, whereas mobile internet banking requires a more sophisticated phone, and full internet banking with richer functionality requires a laptop or PC. “We need to walk in the shoes of people with different needs.”

She says Nedbank also plans to launch a virtual credit card that is loaded on the customer’s phone and is activated and deactivated every time it is used. This is more secure than using a conventional credit card when making purchases online or at retail point of sale.

The bank is intending to provide increasingly rich functionality through electronic channels. “The objective is to provide a window through which customers can subscribe to different services,” says Johnson.

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

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