South Africa on the go

In case you hadn’t noticed, banking in South Africa is on the move. If Visa’s $110 million acquisition of Cape Town-based mobile banking infrastructure provider, Fundamo, didn’t get your attention, then FNB’s July launch of a range of mobile banking applications should have, writes Arno du Toit.

South Africa, and Africa, is leading the field when it comes to mobile banking in all its guises, from SMS banking to e-wallets. A Time magazine article earlier this year quoted Carol Realini, the chairman of California-based global mobile payments company Obopay, as saying that Africa is the Silicon Valley of banking and that the future of banking is being defined here.

The numbers speak for themselves. A May 2011 comScore report said that mobile banking was used by 8.5% of cellphone users in the five leading markets in Europe (UK, France, Spain, Germany and Italy) with France the highest at 10.3%. Compare that to South Africa, where, according to World Wide Worx data from February 2011, 37% of South African cellphone users also use mobile banking services.

Mobile is a cheaper option than branches or call centres, reaches more customers than the internet alone, is a competitive value-add for high-end customers, and extends banking to traditionally unbanked markets. Analyst house, Berg Insight, predicts global mobile banking users will increase by 59% from 55 million users in 2009 to 894 million in 2015.

I’d argue though, that banks are still missing a trick when it comes to providing a relevant, secure mobile banking service to the bulk of their customers – the ones who already have a bank account, don’t necessarily have a high-end phone, but don’t have easy access to the internet – and that this is where the biggest returns from mobile banking might be found.

Undoubtedly the other major South African banks are working hard at launching their own mobile banking applications to rival FNB’s. Their best opportunity is to develop mobile applications that allow them to roll out services quickly and securely, across all devices, and scale effortlessly in this rapidly evolving market.

One size doesn’t fit all

Up until July, South African mobile bankers were given a one-size-fits-all  service based on USSD (unstructured supplementary service data) irrespective of the sophistication of their mobile device. Banking mobi sites were pretty much dressed up USSD services and didn’t add anything in terms of improved usability or features.

It makes sense at the lower end of the market to offer a service that works across all entry-level phones. This is vital to provide banking services to people who do not have access to the internet or who live some distance from a physical branch.

But choosing a lowest common denominator approach results in a sector of the market, without a choice about how they interact with their banks, having to deal with a less-than-optimum user experience and security levels.

Then FNB leapt in with a banking app for iPhones, Android smartphones and high-end BlackBerries and an improved user experience. New applications include a handy tool using the phone’s built-in GPS to find the user’s closest ATM or branch, and also offer free VoIP calls to any number of the bank’s call centres.

Could do better

As good a job as FNB has done, there are some things it might have done better, and some future issues it could have avoided.

Its first problem was trying to roll out a standardised service in terms of features and security across an incredibly fragmented handset market. It has launched, and will have to support, three disparate apps to cater for three operating systems, with a fourth “coming soon”.

Also, as new mobile operating systems reach critical mass ­– think Windows Mobile 7 on Nokia phones from next year – applications for these will have to be rapidly launched, with the same services and security being offered by the other applications.

Another challenge for application developers is to ensure the app works across all devices running a specific operating system. FNB’s BlackBerry application appears to only work on the five top BlackBerry devices, and BlackBerry 7, which has just been released, is not compatible with previous versions. This points to just how non-standardised the smartphone world is.

Then, one needs to consider the additional banking applications FNB could launch, such as internal applications for the broking and mortgage teams, business applications and enterprise resource planning (ERP) applications. Very quickly the bank could start looking more like a development house, as it builds teams to develop, support and standardise all these apps.

Following the money

Despite these challenges, FNB has made a great start at better serving the top end of the market. However, the large majority of a bank’s existing customers aren’t using smartphones, and aren’t likely to either, but neither are they using entry-level devices.

Most are using feature phones, which for many is their primary means of accessing the internet. According to a Gartner statement last year: “The dominant mobile device type shipped globally will be feature phones without an identifiable OS because emerging markets dominate handset demand. Organisations operating in emerging markets should assume smartphones will be a niche device beyond 2014.”

Unfortunately though, feature-phone mobile banking users are forced to use the same basic services as entry-level phone users, with the same lower security levels. As mobile banking volumes increase, it is likely that criminals will start targeting these less-secure channels.

Technically, there is no reason why featur- phone users need to settle for USSD service rather than run their own secure apps.

This sector is hugely neglected in the banking space. If I were a bank, I’d be targeting these customers that already have a bank account, aren’t online, but have a feature phone. This is where the biggest return on a mobile strategy will be found.

Mobile banking provides a win-win situation for both banks and customers. It ticks all the boxes in terms of business drivers for the banks when compared to traditional channels: a lower cost of service; improved competitiveness; improved customer acquisition and retention; and a launchpad for future products and services. For customers, it means they can closely track their finances and even transact on the go, whenever they like and for free, or at a lower cost than traditional banking channels.

At the end of the day, it’s not about choosing one technology over another on behalf of the customer and forcing them to engage with a company in a certain way.  In an ideal world, banks should allow their customers to interact with them safely and conveniently over whichever channels the customers choose, with the best user experience and functionality.

(Arno du Toit is chief commercialisation officer at Virtual Mobile Technologies)