The launch of the Mzansi Money Transfer will go some way to meeting the banking needs of lower-income earners who, despite opening Mzansi accounts, are showing a relatively low usage of the product.
According to Colin Donian, head of Mzansi at the Banking Association, 1,6-million people have now signed up for the Mzansi bank account. Although it is impossible to know if these customers are all part of the targeted 13-million unbanked in South Africa, at least 90% of them are new clients to the specific bank and nearly 90% of the Mzansi account holders are black.
Despite the continued strong growth in new accounts the average bank balance has fallen from R350 to R275 and, over the past 30 days, only 33% of accounts received deposits while 40% saw withdrawal activity.
This would indicate that the accounts are not being used as actively as would be hoped and cash is not necessarily being reverted back into the banking system. Donian does point to the fact that debit-card transactions at point of sale have increased from less than 1% to more than 2%, which shows that customers are becoming more comfortable with electronic banking. However, Donian believes the low levels of transactions indicate that the poorer segments of society still prefer to work in a cash-based environment and it will take time to affect changes.
“It is not only a matter of habit and psychology but also a problem of infrastructure. In most rural areas cash is the only form of payment accepted by informal traders,” says Donian. Mzansi Money Transfer has been introduced to meet that need. Research by FinMark Trust shows that about R12-billion is transferred annually between six million people with the average transfer ranging between R350 and R500. Much of that is done informally at high costs in both time and money.
For example, Joseph Magagula, a self-employed painter who works in Johannesburg to support his family who live north-west of Pretoria, says it costs him R60 to take money to his family, and that during that time he could be working.
The Mzansi Money Transfer has been priced individually by the banks and the Post Office ranging from R15 to as high as R100, depending on the amount transferred. The Nedbank group, including Peoples Bank and Old Mutual Bank, is cheapest with a flat fee of R17,50 for cash-to-cash transfers and R15 for account-to-cash transfers.
The process is quick and relatively convenient. The fact that a copy of the person’s ID has to be made and kept on record on both sides of the transaction as part of the Financial Intelligence Centre Act is adding an unnecessary cost, estimated to be between R4 and R9.
Donian says the Banking Council is in discussions with the Treasury about an exemption.
Jeremy Leach of FinMark Trust says the Mzansi Money Transfer is a welcome step that will hopefully encourage people to open Mzansi accounts once they become comfortable with the process; however, he is concerned that the costs are still too high and may prove prohibitive for some people.
How to do an Mzansi Money Transfer
You can walk into any of the participating banks or Post Office with a bar-coded ID and hand over the cash you want to transfer. You pay the costs of the transfer so it does not impact on the amount you are sending. The bank will ask you to key in a secret PIN code of your choice and you will be provided with a reference number. You then call the person you are sending the money to and provide them with the PIN code and reference number. They in turn can go to any bank or Post Office with their ID book and collect the funds immediately.