South Africa is the leader in mobile banking solutions

In case you had not noticed, banking in South Africa is on the move. If Visa’s $110-million acquisition of Cape Town-based mobile banking infrastructure provider, Fundamo, did not get your attention, then First National Bank’s July launch of a range of mobile banking applications should have.

South Africa, and Africa, is leading the field when it comes to mobile banking in all its guises, from SMS banking to e-wallets.

A TIME magazine article earlier this year quoted Carol Realini, the chairperson of California-based global mobile payments company, Obopay, as saying that Africa is the Silicon Valley of banking, and that the future of banking is being defined here.

The numbers speak for themselves: A May 2011 comScore report stated that mobile banking was used by 8.5% of cellphone users in the five leading markets in Europe (United Kingdom, France, Spain, Germany and Italy), with France the highest at 10.3%. Compare that to South Africa where, according to World Wide Worx data from February 2011, 37% of South African cellphone users use mobile banking services.

Banking no-brainer

It is a no-brainer for banks to embrace mobile. Mobile is a cheaper channel than branches or call centres; reaches more customers than the Internet alone; is a competitive value-add for high-end customers; and allows banks to reach the traditionally unbanked markets.

Analyst house, Berg Insight, predicts the number of global mobile banking users will increase by 59% a year from 55 million users in 2009 to 894 million users in 2015.

I would argue, though, that banks are still missing a trick when it comes to providing a relevant, secure mobile banking service to the bulk of their customers: the ones who already have a bank account do not necessarily have a high-end phone, and do not have easy access to the Internet – and this is where the greatest returns from mobile banking may be found.

To explain this, let us look at how mobile banking in South Africa has been implemented to date. In doing so, we will see that the current approach is far from scalable.

Undoubtedly, the other major South African banks are working hard at launching their own mobile banking applications to rival that of FNB. Their best opportunity to leapfrog the market leader is to develop mobile applications in a way that allows them to roll out services quickly and securely, across all devices, and scale effortlessly in this rapidly evolving market.

One size does not fit all

Up until July, South African mobile bankers were given a one-size-fits-all service based on USSD (see sidebar overleaf for more detail), irrespective of the sophistication of their mobile device. Banking mobi sites were pretty much dressed-up USSD services, and did not add anything in terms of improved usability or features.

It makes sense at the lower end of the market to offer a service that works across all entry-level phones. This is vital to provide banking services to people who do not have access to the Internet or who live some distance from a physical branch.

But choosing a lowest common denominator approach results in a sector of the market without a choice about how they interact with their banks, and having to deal with a less-than-optimum user experience and, crucially, security levels – compared to the applications (apps) they are used to on a high-end device.

Then FNB leapt in with a banking app for iPhones, Android smartphones and high-end BlackBerry’s.

As well as an improved user experience, FNB’s new applications include a handy tool using the phone’s built-in GPS to find the user’s closest ATM or branch, and offers free VoIP calls to any number of the bank’s call centres.

Could do better

As good a job as FNB has done with its apps, there are some things it might have done better, and some future issues it could have avoided.

Its first problem was trying to roll out a standardised service in terms of features and security across an incredibly fragmented handset market. It has launched, and will have to support, three disparate apps to cater for three operating systems, with a fourth “coming soon”.

Furthermore, as new mobile operating systems reach critical mass – think Windows Mobile 7 on Nokia phones from next year – apps for these will have to be launched rapidly, with the same services and security being offered by the other apps.

Another challenge that app developers have, is to ensure the app works across all devices available, running a specific operating system. FNB’s BlackBerry application appears to work only on the five top BlackBerry devices; and BlackBerry 7, which has just been released, is not compatible with previous versions. This points to how non-standardised the smartphone world is.

Further, one needs to consider the additional banking applications FNB could launch, such as internal applications for the broking and mortgage teams, business applications and enterprise resource planning applications. Very quickly, the bank is going to start looking more like a development house, as it builds teams to develop, support and standardise all these apps.

Following the money

Despite these challenges, FNB has made a great start at better serving the top end of the banking market. However, the bulk of a bank’s existing customers are not using smartphones, and are not likely to, either.

But neither are they using entry-level devices. Rather, most of them are using feature phones which, for many, are their primary means of accessing the Internet.

According to a Gartner statement last year: “[T]he dominant mobile device type shipped globally will be feature phones without an identifiable OS [operating system] because emerging markets dominate handset demand. Organisations operating in emerging markets should assume smartphones will be a niche device beyond 2014.”

Unfortunately, feature phone mobile banking users are forced to use the same basic services as entry-level phone users, with the same lower security levels. As mobile banking volumes increase, it is likely that criminals will start targeting these less secure channels. Technically, there is no reason that feature phone users need to settle for USSD service rather than run their own secure apps.

This sector is hugely neglected in the banking space. If I were a bank, I would be targeting these customers who already have a bank account, who are not online, but have a feature phone. This is where the largest return on a mobile strategy will be found.

Herding cats

Banks do have the option of using a mobile enterprise application platform (MEAP) as Virtual Mobile Technologies client, Imbongi Capital, did last year. It rolled out a full suite of banking applications across all feature- and smartphones.

With MEAP architecture, as new handsets or operating systems enter the market, Imbongi’s services are updated automatically with uniform features and security levels approved by the United States National Institute of Standards and Technology.

Mobile banking provides a win-win situation for both banks and customers.

It ticks all the boxes in terms of business drivers for the banks when compared to traditional channels: a lower cost of service; improved competitiveness; improved customer acquisition and retention; and a launchpad for future products and services.

Customers can closely track their finances and even transact on the go, whenever they like – and for free, or at a lower cost than traditional banking channels.

It is not about choosing one technology over another on behalf of customers, and forcing them to engage with a company in a certain way. Banks should allow customers to interact with them safely and conveniently over whichever channels they choose, with the best user experience and functionality.

Arno du Toit – Chief commercialisation officer: Virtual Mobile Technologies

ABC guide to mobile channels

• USSD (unstructured supplementary service data) – this is the communications channel used to top up prepaid phone accounts. Although it is not glamorous, it works on all phones.

• Mobi sites – these are websites optimised for use on a mobile phone.

• Applications (apps) – mobile software that can harness the additional processing power, larger screens and specific features of smart- and feature phones such as the GPS, camera or accelerometer.

• HTML5 – this is the new kid on the block, an evolution of the website mark-up language that will allow mobi sites to include features previously only available on apps. The language is still being standardised and there are some concerns over cross-browser interoperability.

These channels can complement each other, and customers are likely to migrate from one to another.

Customers first became familiar with SMS alerts and then banking via USSD. Then people started using banking mobi sites, and then mobile banking applications for smartphones and tablets, with the additional functionality allowed by these devices. It is likely that older channels will remain complementary, even for high-end smartphone owners, because users will choose the technology with which they are the most comfortable, for the specific task.