South Africa: Mobile banking reaches beyond the city

April 16, 2009    

Globally, there are only a few examples of successful banking services that reach poor people in remote areas. Working with the CGAP Technology Program, WIZZIT, a division of the South African Bank of Athens Limited, will demonstrate how the reach of such services can be expanded with mobile technology and local agents who handle cash.

"Getting a service offering in front of target customers is one of the major challenges for a start-up like WIZZIT, which doesn't have a big budget but wants to reach lots of potential clients,” says Mark Pickens, a microfinance analyst at CGAP. “This project will ally WIZZIT with some of South Africa's best known and trusted brands in the Post Office, a major retailer like Dunns, and perhaps the most ubiquitous 'brand' of all - the corner spaza shop where people buy everything from Coca Cola to bread and sugar."

Kuli’s Place is a spaza shop where neighbors go to buy cold drinks and food. The shop’s owner has begun to use WIZZIT to buy her supplies and pay bills, reducing the need for her to close shop and travel to the next town over.

The project's three key components use point-of-sale devices in combination with WIZZIT's mobile phone banking platform.
• A mobile banking payment service for the major wholesalers serving more than 500 microentrepreneurs (spaza shops) in the township of Motherwell, where three in five people are unbanked.
• A pilot program for easy account opening and preferred pricing at Dunns outlets -- a leading South African clothing retailer. If successful, this pilot program will expand to 289 stores throughout the country. To encourage sign-ups and use, customers will be given incentives to make purchases with their Maestro debit card rather than cash.
• Easy account opening using a direct sales model and the South African Post Office for distribution.

“The aim of all three of the projects is not only to bring easily accessible and affordable bank accounts to individuals and businesses – but also to reduce the dependence on cash that many individuals and businesses have as a result of limited access to banking services,” says Brian Richardson, co-founder of WIZZIT Bank.

Motherwell
With a population of around 500,000 people, Motherwell is a bustling area of activity and a melting pot of African culture in Port Elizabeth, South Africa. As with many similar peri-urban areas in South Africa, Motherwell is dotted with hundreds of small businesses and spaza shops, which service the community with everything from cold beverages, bread, milk, haircuts, beer, and even clothing — forming the basis for the community’s economy.

Currently in Motherwell, there are an estimated five major suppliers that deliver dairy products, baked goods, beverages, and basic commodities to 10–20 wholesalers that, in turn, service an estimated 555 spaza shops.

In Polokwane, WIZZIT has partnered with the local radio station Capricorn FM (so named for the area’s proximity to the Tropic of Capricorn) to increase awareness about the benefits of having a transactional bank account. The station reaches 1.5 million people in four of South Africa’s 11 official languages.

In the wholesaler–distributor relationship, it is generally accepted that the wholesaler will pay the distributor’s driver in cash for the delivery of a consignment of stock. The driver takes the cash back to the distributor’s head office, where a number of people in a secure counting room sort any counterfeit notes from real notes and count remaining money. This cash is then collected by a cash management company and deposited at the bank for a fee.

Apart from the costs associated with handling cash, the security aspect is one that remains top-of-mind for employers. With truck drivers sometimes carrying tens of thousands of rands at a time, they are soft targets for hijackers and thieves, who operate extensively in these peri-urban areas. In this project, wholesalers will be given incentives to promote WIZZIT to their spaza shop customers to use it as payment channel to both buy goods and sell goods to consumers.

A major feature of the WIZZIT system is the ability to buy cellular airtime, which will introduce a cost-effective revenue-generation opportunity for spaza shop owners — being able to sell airtime on the spot or give customers the necessary tool to buy their own airtime on demand.

Dunns
Dunns customers are lower income earners in urban, peri-urban, and rural areas. The Dunns brand is widely trusted among its customers. The WIZZIT Bank and Dunns collaboration leverages Dunns’ “trusted brand” status among lower income earners. Unbanked people will now be able to open WIZZIT Bank accounts at selected Dunns retail outlets.

“The benefits of using a debit card for purchases aside — such as lower bank fees from withdrawing ATM cash and increased security because money is safe in the bank — the ability to use a debit card to make a purchase has an aspirational quality that really appeals to consumers,” Richardson explains. In addition, less cash on the premises means that Dunns has less security risks and spends less money on processing and handling the cash until it is finally deposited into its bank account.

WIZZKids are entrepreneurial ‘agents’ who help explain the benefits of a bank account to others. They receive commissions for opening new accounts.

Limpopo
Covering an area of just under 124,000 km2, Limpopo Province is South Africa’s third most densely populated province. And of the estimated 5.4 million people living in the province, around 80 percent are unbanked — essentially excluding the vast majority of its residents from meaningful participation in the country’s economy. As part of the strategy to help reduce the huge dependency on cash in this area, it has identified the critical need to bank the unbanked majority that live in the province.

Opening a bank will now be as easy as making a call to a dedicated call center and collecting their bank card from their nearest Post Office. This model is particularly exciting as this is the first time a bank in South Africa has embarked on a direct sales strategy to ensure that people living in even the remotest parts of the country are able to easily apply for and own a fully functional transactional bank account.

WIZZIT will be able to reach more unbanked people by expanding on its WIZZKid model and its ability to engage directly with people on the ground on a face-to-face basis — as well as using the Post Office — the largest branch infrastructure in the South Africa with 2800 outlets, 288 of them in Limpopo Province.