Cellphone banking is the answer
Cellphone technology is the way of the future, was the overwhelming response from people who took part in a survey on mobile banking for low income customers. The survey is the first of its kind in the world on how low income people view mobile banking.
According to a report by CGAP (the consultative group to assist the poor), and the United Nations Foundation, South Africa was used in the study because it is the only country which a mobile banking service is targeted specifically at low income people with enough of a sample base, namely by Wizzit Bank.
Wizzit, the start-up mobile banking provider provided access to its database for the research conducted by FinScope, the research arm of FinMark Trust, on behalf of the international bodies.
In addition, 300 people who did not use cellphone banking were interviewed. All respondents fell into the poorer income segments of living standards measure (LSM) 1-5 with 43% of Wizzit customers falling below South Africa’s poverty line for households. This really was an acid test of the affordability of cellphone banking for the poor.
According to the report, there is a real opportunity for mobile banking to increase accessibility to millions of poor people across the world. Earlier this year, the cellphone became the first communications technology to have more users in developing countries than developed ones. In South Africa, 31% of unbanked people have a cellphone and a further 17% have access to a cellphone.
According to the report, cellphone banking appears to make it more comfortable and convenient for poor people to use financial services. It allows for easier access than travelling to banks or ATMs—and it is also cheaper. The survey showed that on a typical basket of transactions, Wizzit customers pay less in banking fees, compared to either Mzansi or traditional bank customers. The survey also showed that, on average, it took a low income customer 32 minutes to reach a bank branch at an average transport cost of R16.
According to Jeremy Leach of FinMark Trust, the most surprising finding was that most non-cellphone users perceived cellphone banking to be more expensive. For example, on average, they believed a cellphone transaction to be R12,91 compared to the R1,99 that Wizzit charges. Yet 70% of Wizzit customers cited it as the cheapest channel while 68% use it for convenience, 58% for easy access and 44% because it saves time.
Apart from cost perceptions, lack of knowledge is the main reason for not using cellphone banking. The survey found that the lack of take-up by non-users was ignorance, while 42% of the interviewees have never heard of cellphone banking and a further 28% do not know what it means. Leach says that due to lack of above-the-line advertising on cellphone banking is an issue and that Namibia, which ran above-the-line campaigns, was having a greater take-up of cellphone banking.
The survey showed that transactions are mostly used to buy airtime, make balance enquiries and money transfers. The extent to which cellphone bankers used their cellphones for transactions is surprising, with cellphone banking being the preferred method to pay store accounts as well as electricity accounts. They also transact more frequently than non-users. Considering that both users and non-users have similar incomes, the FinMark Trust concludes that Wizzit enables people to be more active in conducting the transaction.
The future of cellphone banking looks very positive as technological sophistication did not appear to be a differential between users and non-users. An important finding was that, despite low levels of income, over 90% of both users and non-users believed that technology was the way of the future and if they could, would make more use of technology as they found it exciting. Of the non-users, 60% were interested in cellphone banking of which 30% were unbanked.
Banks can capitalise on this willingness to take up cellphone banking, but they will have to make some changes. Firstly, FinMark Trust says there needs to be a better understanding of the technology and systems. Of those people interviewed who did not have a bank account, 84% said they were likely to open an account in the future, but right now, they did not have the money to put into an account to keep it open.
Banks could make it easier by not requiring so much documentation and to keep accounts open even if there is no minimum balance. This is a major issue with the Mzansi offering, which requires a minimum balance of up to R50 in some cases to keep the account open. For irregularly employed people, that is a lot of money.