FNB and Absa have launched products that use cellphone technology and ATM networks to transfer money to a recipient without the need for a bank account.
FNB’s Send Money product was launched earlier this month; Absa’s CashSend has been on the market for more than a year.
Absa’s product won it ‘The Most Innovative Use of IT” at the 2009 Banking Technology Awards.
Both products operate by providing the recipient with a PIN number he or she can enter at an ATM to draw money without an ATM card or bank account.
How it works
The account holder — either through cellphone or internet banking — requests to send money to a recipient.
With Absa, a 10-digit code is sent to the recipient by SMS, with a message telling him or her that money has been sent.
The sender then needs to call or SMS the recipient to inform him or her of the transfer amount and provide a six-digit code chosen by the sender.
At the ATM the recipient presses the key on the welcome screen that reads ‘CashSend withdrawal”. This deactivates the card reader and brings up a new screen.
The recipient is asked to enter the 10-digit code, the six-digit code and the amount. The cash is instantly distributed from the ATM, with a receipt.
The sender can track the transaction to see if and when the money is collected. Recipients have 30 days to collect the money.
FNB’s technology is a bit more advanced. The receiver gets a automated SMS telling him or her how much money has been sent. This includes an instruction on how to get the money.
The recipient can either buy airtime or withdraw the money from an ATM. If he or she selects to withdraw cash, a five-or six-digit PIN is SMSed to the recipient who has 30 minutes to enter it into an FNB ATM and select the amount he or she wants to draw.
Unlike Absa’s product, the recipient does not have to draw the full amount and can keep the money in a specified ‘wallet” that is PIN protected on his or her cellphone.
FNB Send Money also allows the recipient to send the money on to other people in the same way.
Who is the market?
Although Absa and FNB are trying to target the remittance industry (about 3.8-million people send money to family and friends living within South Africa), this product is ideal for parents who want to send pocket money to their children.
The fact that you can store the money on your phone and buy airtime gives FNB the edge in this market.
But having tested both products and having included my domestic worker in the experience, Absa’s product may be easier for the mass market to grasp.
It is quite difficult to explain to someone who is not financially literate that money is actually sitting in their cellphone.
With Absa the sender has to communicate with the recipient, offering an opportunity to explain what to expect and how to complete the transaction.
Costs
As part of its launch period FNB will not charge any fees for the product from November 22 2009 to May 15 2010.
The fees will be reviewed but at present an FNB bank account holder pays R6 for the first R100
transferred, R12 for a transfer up to R500 and then R18 for a maximum transfer of R1 000.
Absa charges R6.50 plus R1 for every R100. So it would cost R7.50 to transfer R100 and R11.50 to transfer R500. These costs are borne by the sender.
Withdrawal from the ATM is free so the recipient pays no fees. The fees charged are to cover the cost of the transfer and the ATM withdrawal. This applies even when the recipient makes several withdrawals from the same transfer.
FNB charges R1 for balance inquiries. Recipients can send the money to another cellphone for a flat fee of R6. But there are airtime costs to consider.
Receiving the funds, checking the balance and drawing the cash uses about R1.40 in airtime.
If the recipient doesn’t have airtime, FNB allows the recipient to buy airtime with the money received by using a free number that can be dialled from his or her cellphone.