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M-Banking in Africa – showing signs of growth
July 2005

There is a great divide in Africa that spans more than just the digital divide, and it is the world of the under banked or unbanked. Those people who find it hard to get to or use banking facilities but need to transact in some form or other.

It is against this backdrop that financial mobility (the ability to take your financial freedom with you and transact wherever you are) and associated technologies which enable the ‘mobile’ transfer of funds in a secure environment, are in great demand.

The mobile phone is the one pervasive device which has fewer barriers to entry than most technologies, and it has penetrated some of the poorest economies due to the overwhelming demand for any form of telecommunications. Mobile phones have presented a unique opportunity to individuals and even companies, not only in the communications and data transfer environments, but the banking environment as well.

“Africa and other developing nations are in the supposedly unenviable position of having a great number of people outside of the realm of traditional financial services. Although this is viewed by many as a challenge, from an African context this presents an opportunity for exploring new avenues of bringing these people into the financial transactional environment though the world of mobile banking or m-banking. Financial institutions on the African continent have acknowledged that in order to achieve greater penetration and ultimately share of wallet, they need to explore new methods of banking,” says Hannes van Rensburg, CEO at Fundamo.

The fuss
Fundamo has developed and deployed m-banking applications which enable secure financial transactions to take place through a mobile phone. The goal of which is to step the African continent, its businesses and its people into a world of real-time financial mobility.

An example of such a deployment is FNB-owned Celpay, a mobile payment facilitator operating in Zambia and the Democratic Republic of the Congo (DRC). It offers mobile phone-based virtual bank accounts with advanced features which compare to many normal bank accounts. Account transfers, bill payments, cash deposits and withdrawals and prepaid airtime vending are all supported with real-time clearing. Celpay has also developed m-banking business services like cash-on-delivery payment functionality and companies like BP, MultiChoice and various cafés, supermarkets, pharmacies, hair salons and even an O’Hagan’s in Zambia use the system.

“Africa is a cash-based society, and while the Western world views m-banking as almost exclusively about credit card transactions – African companies are proving that it can better be used as a tool to facilitate virtually any form of payment, directly from a mobile phone. To people unable to always make it to the nearest town or transaction point at the drop of a hat, m-banking offers banking to virtually all,” adds van Rensburg.

The benefits
Mobile transacting has a number of advantages over more traditional banking methods as it breaks down geographical constraints and offers other advantages such as immediacy, security and efficiency.

The knock-on benefits of this are seen by the users, mobile operators, banks and retailers. Operators see M-banking as increased traffic, customer retention and improved service offerings. Banks see it as allowing for immediate transactions (meaning the unbanked become banking customers), an alternative to carrying cash which in turn means better cash retention, increased security and payment efficiencies, reduced dependency on ATMs and branch infrastructures (meaning lowering of operating expenditure) etc. The greatest benefit is probably for the users who are able to affect a payment from anywhere to anyone creating a macroeconomic benefit that is as yet unmeasurable, but is most certainly significant.

Fundamo provides the software, applications and expertise to facilitate banking and payments via a mobile phone for any company wishing to transact in this way.

The reality
M-banking is gaining momentum throughout the continent and Fundamo has already provided solutions and supporting services to providers in South Africa, Kenya, Botswana, Zimbabwe, Zambia and the DRC.

The reality is that African businesses are willing to try new technologies which are safe, cost effective and allow them to break traditional barriers. There is a growing base of retailers accepting payments already and for consumers, buying airtime, paying bills and other payment types make this a worthwhile and convenient tool.

“The quick acceptance of the service has been the most surprising for us,“ says van Rensburg. “Subscribers are regularly making payments of as little as one US Dollar to as much as thousands of USDs in transactions using their mobile phones,” he says.

“M-banking has had its criticisms, one being security. The fact of the matter is that we are no longer playing with a fledgling technology. The platform has proven itself to be a secure form of transacting.” says van Rensburg.

“The use of the mobile phone is still growing rapidly in Africa. Mobile phones not only break communication barriers but can also be seen as a mini-computer – with a mobile phone people are always on, always reachable and have a secure computing device in the palm of their hands. M-banking certainly offers many application opportunities, especially to developing countries, on the back of a technology culture which is already accepted - meaning half the battle is already won,” concludes van Rensburg.

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