The range of services offered by banks on the Net has made this increasingly attractive to customers
David Shapshak
Internet banking is a hit in South Africa that much is clear from the strong support for virtual bank 20twenty and the massive subscription to Absa’s free Internet service and appears to be taking the lead in the utilisation of Web services.
The bulletin boards on the 20twenty site, which is mostly inactive while a resolution is found to the Saambou crisis, have flowed with positive sentiment that belies the fact that the online bank may ultimately be shut down.
“Many clients confirm that this is the best-organised bank they have ever experienced. There is a growing feeling that many clients would like to support the bank by buying shares and thereby supporting its continued existence,” 20twenty customer Lloyd Wingate wrote in an e-mail.
Absa’s foray into the Internet market, the bank said, was ostensibly to provide free Internet access to South Africans, but it managed to grow its online banking base by 67%. These users grew from 150 000 to 270 000, giving Absa 35% of the market.
Although Absa announced in November that it would phase out the free Internet service, it has extended this until June.
The Internet bubble may have burst, but the medium is growing as a means of providing everyday, useful services, such as banking.
“The trauma on the Web is not having a negative impact, our growth continues,” says Herman Singh, Standard Bank’s director: online business, referring to the past few years where the Internet was hyped up for investment purposes. “One third of calls to our call centre are compliments.”
The monthly estimates, he says, of money transacted online are around R10-billion for the local market. Of the 2,5-million South Africans on the Web, 700 000 bank online. The market, he adds, is growing at 3% a month, or around 30% a year.
“We are pleased with this good growth. Consumers are logging on to our system at a considerable rate. We recently migrated from a four-year-old platform running on a server to a really bullet-proof system running on a mainframe,” says Singh.
“Clearly Internet banking is part of our long-term strategy. We started doing it in 1997 and have learned lots of lessons about what works and doesn’t. One thing we’ve learned, is you have to keep it simple because that is what the customers want.”
Indeed simplicity is one of the longest-standing benefits of the Net, and most of the country’s banks offer Internet banking.
The advantages of Internet banking, says Dave Donkin, Absa’s group executive for e-business and information management, are “its convenience: being able to bank at home; bank and make decisions based on current information [such as your latest statement] and do things on a timely basis you can do a number of payments rather than write out cheques.”
Additionally, the settlement will be processed overnight, rather than the time it takes the cheque to be posted, then deposited. This is more automated for the bank and it is cheaper to process electronic payments compared with the handling costs incurred with cheques.
But while there has been a surge in recent years towards Internet banking, Donkin says this is plateauing out. “Yes, there definitely is [a surge]. There’s a kind of migration over time, and we might see that surge flatten out.”
Absa, he says, is “trying to cut down transactions in branches and grow them on the Internet, from a cost-control perspective. It is a channel that can add new services faster than any other channel.”
These can be provided in one place and are available everywhere, whereas at a branch staff have to be trained and then roll-out the services. “It is growth area in usage as well as our range of offerings.”
But, one warning analysts have made is that banks are in danger of cannibalising their own customers. “Yes,” says Donkin, “but it’s better to cannibalise your own customers rather than have other banks cannibalise your customers.”
Bank charges are typically more favourable to online customers than at a branch.
For the entirely online 20twenty, simplicity was a prime selling factor as was its easy-to-use transaction engine. When the site was effectively left in limbo two weeks ago when Saambou, which owns 65% of 20twenty, was put under curatorship, it had 40 000 seemingly happy users. The virtual bank offered an all-in-one savings, credit and current account, but no cheque books.
Online banks, however, have not had good press. Despite this they appear to remain popular. In the United Kingdom Egg has declared its first profit, while the other prominent online bank, Smile, has a huge following. The latter overcomes the bricks-and-mortar difficulty by using local post office branches.
However, says Singh, most banking customers prefer a multi-channel approach.
“Sometimes you may want to phone in, or send a fax, or do your banking on mobile if you’re at the airport and need to do so quickly,” he says, adding that clients also prefer to make investment decisions with people.
With Internet banking maturing somewhat, there are a range of additional services that both Singh and Donkin say they will roll out.
Standard Bank recently released a double password login procedure and it will be launching e-mail alerts when changes are made to a customer’s personal details on the system. It has also begun e-mailing statements in encrypted form.
“We have a whole lot of additional functionality, but obviously we don’t want to mention them yet. There are 20 to 30 different enhancements. All of those things will dramatically improve performance, stability and the popularity of the system.”
Absa is also asking itself what are the additional services that it can provide to a client.
One under-utilised banking service is telephone banking, says Donkin.
“There is a substantial amount of banking you can do through the telephone, to a phone call centre. That is a perhaps underused channel that has a lot of possibilities.”
Absa says it gave 56 000 new users first-time access to the Internet. Donkin argued this week that financial institutions had a “role to play in making Internet-based services more affordable and bridging the digital divide”.
Most users, however, only need e-mail, not the Internet. He suggests that the “next generation concept of Internet banking is that of bundled services” including Internet access, Internet banking, e-mail facilities and Web services.
The latter are the new rage in the computer industry, with software and hardware vendors positioning themselves as providers of Web-based services.
A new generation of Internet users is the target of a massive Gauteng provincial government drive to get the province’s schools online. Gauteng Online is an initiative to equip the province’s more than 2 500 schools with at least 25 computers each.
“It is directed at bridging the digital divide. The youth of today are not going to be able to do that if they don’t have access to technology during their schooling,” says the programme coordinator’s Dr Paddy Padayachee.
A pilot project has seen 25 schools equipped with 25 workstations each, and the project is aimed not only at the learners but at the teachers, the parents and the extended community.
Providing e-mail facilities for all 60 000 or so educators and the 1,5-million learners over the next few years would give the project more “subscribers” than the country’s largest Internet service provider, Padayachee says.
But he adds: “This is not simply about learning but improving the socio-economic standing of the whole province, which produces essentially 40% of the GDP.
“Just the infrastructure [for the 2 500 public schools] of 25 networked PCs, or 60 000 stations, creates an enormous thrust in the industry.”
In another significant move, President Thabo Mbeki announced in his state of the nation address this month that Microsoft will donate free software to all of the country’s 32 000 government schools. The software maker will also give “significant reductions on price” to private schools, universities and technikons.
Six consortia have been bidding for the Gauteng Online project, to which the provincial government has committed R500-million over three years.
Aletha Ling, executive director of MGX, which is part of a consortium, says: “Our digital world is not going to go away. It is part of our business future. Imagine a South African scenario where users did not know how to use it. That would be the ultimate example of haves and have nots.”
An announcement was expected sometime this month on the successful bidder.