M-Banking Finds Success in Africa
By Steve Wallage, Mon May 23 08:15:00 GMT 2005

In countries and communities where banks and credit card companies have far less sway than in the Western world, mobile banking suddenly seems much more attractive.

M-banking always seems like such an obvious evolution of the mobile phone. Talk of the electronic wallet and cashless society has been with us for years now, and what better tool to enable it than the ubiquitous mobile?

If only the reality was as easy. There are at least four major stakeholders in m-banking: the financials (banks and credit card companies), mobile operators, retailers and vendors (including SIM card manufacturers, payment system platform providers and handset vendors). A veteran of the European mobile market and senior exec at an operator told me recently that although many issues in the mobile world were filled with self-interest and conflicting agendas, the world of m-banking was in a "league of its own". He was very pessimistic on the ability of the European players to draw up common standards and push ahead with m-banking.

However, maybe a lot of us in the Western economies have been looking at m-banking opportunities in the wrong way. It's common to think of m-payments as another form of payment channel, for a user who has a wallet or purse stuffed with credit cards, debit cards and so on. But what about for a user who doesn't have a credit card or even a traditional bank account? And in a market where mobile penetration far exceeds Internet usage?

M-banking in Africa

Although many Western research companies still stick to the idea that mobile usage remains the preserve of the relatively well off, many countries in Africa are showing through prepaid, handset sharing and the sheer desire to own a mobile despite having very little income, that mobile service can reach all parts of the populace. The great advantage for m-banking in African countries is that the conflicts between the stakeholders simply don't exist in the same way as in Europe and the West. Most of those players have little or no current business in the area, and see m-banking as an opportunity, rather than a threat, to their business models.

Leading the charge to introduce m-banking in Africa has been South Africa-based startup Fundamo. It has three products: Fundamo Extender, Elevator and Enabler. Extender allows traditional banks to expand into m-banking, Elevator can be used for m-banking specialists and smaller banks and Enabler is for dedicated services such as prepaid top-up and virtual gaming.

The Celpay Example

A great example of the opportunities presented by the Fundamo Elevator product are the deployments made by a company called Celpay, a next-generation bank operating in Zambia and the Democratic Republic of the Congo (DRC). It offers mobile phone-based virtual bank accounts with advanced features comparable to many Western accounts. Account transfers, bill payments and cash deposits and withdrawals are all supported with real-time clearing.

For consumers, there is now a large retail base accepting retail payments including grocers, fuel stations and fast-food outlets. According to Fundamo CEO Hannes van Rensburg, one of the intriguing aspects has been how quickly users have grown to accept the service. Subscribers are regularly making payments of as little as one dollar to as much as thousands of dollars in transactions using their mobile phones.

Celpay has also developed successful m-banking business services. This includes mobile phone-based order entry with cash on delivery payment functionality. Current users include Coca-Cola, breweries and a cement manufacturer. In DRC alone, there were over 80,000 transactions per day on the Celpay system in November 2004.

Van Rensburg sees Fundamo's opportunity as far bigger than Africa, but as "emerging markets, whether in Eastern Europe, Asia or the Middle East."

Prepaid Top-Up

Another African Fundamo customer used its solution to roll out voucherless top-up services to 15,000 agents. No PINs are stored at the point of sale, but are delivered via encrypted SMS, using a standard handset as the POS terminal. Forecasters such as Telecom Trends have suggested that by 2007, some 40% of top-up transactions will be conducted in this manner.

Early adopters of this technology in Europe and Asia include Romanian operator Connex and Globe Telecom of the Philippines. Connex is using Macalla software to allow its more than 5,000 agents to use their mobile phones as a point of sale terminal, which cash-paying subscribers can use to link with the operator's prepaid billing system. The agent simply enters the subscriber's mobile number, the amount of credit required and the agent's PIN to top up an account.

In the Philippines, Globe sells airtime in bulk to distributors who in turn sell it to sub-distributors who target the end user on the street. selling top-ups for amounts as small as a euro, using cash. In this way, customers without bank accounts can be easily targeted. Globe Telecom is working with Valista, which also works with Airtel in India.

Going Forward

For Fundamo, two of the biggest issues have been ensuring it can overcome security concerns and having a multi-channel strategy. On security, critics have pointed to the challenges of Internet banking and suggested criminal gangs are well prepared to attack m-banking systems, but Fundamo is able to point to its own record and lack of fraudulent activity. On the multi-channel side, for a vendor such as Fundamo, it means IVR, Internet and other channels to support the mobile initiatives.

M-payments will evolve in many ways from DoCoMo's FeliCa-based wallet phone to the Upaid text check for paying utility bills. Yet, it seems that Africa and other emerging markets -- without the banking and credit card legacy -- that could lead the way into m-banking.