The first panel of the roundtable on mobile banking for the bottom billion included two panelists, Brian Richardson from WIZZIT, South Africa and Bold Magvan from XacBank, Mongolia. The panel sought to identify ways to move beyond early adopters, who are generally characterized as young, migrant labor males comfortable with technology. The moderator of the panel asked the panelists to describe how their service work and what they are banking.
WIZZIT is in the business of banking the unbanked, ie, of bringing the bank to the bottom billion rather than the other way around. In this sense, WIZZIT is both a model and methodology. The company’s mission is to make economic citizens since “one can’t be an economic citizen of any country less one has access to a bank account.”
Relying on cash is very expensive for the bottom billion. Some conventional banks in South Africa (SA) charge customers monthly fees to keep their money in an account. Some 24% of a deposit’s original value is lost after just one year. Another factor that makes reliance on cash expensive is crime, which is widespread in SA.
Brian gave an example of person who was mugged four times in one year while bringing his pay back home. At the Bottom of the Pyramid (BoP), one by definition has little to no savings, most income is spent just to survive. So banking the unbanked provides the latter with more financial security (in more than one sense of the word).
To this end, WIZZIT provides the unbanked with fully functioning bank accounts on mobile phones. Brian emphasized the security aspect of mobile banking, “a safe place to keep money,” as an important incentive for early adopters. WIZZIT allows customers to make remote payments and pay bills. Account holders can also use visa cards but the necessary infrastructure to support this service remains be completed. In the future, WIZZIT plans to additional transactional services.
Bold Magvan from XacBank highlighted the geographical and climatic challenges that a country like Mongolia poses for mobile banking (mBanking). Mongolia has a population of 2 million and a surface area comparable to that of the United States. Temperatures drop to -20 degrees C in Winter and rise above 30 in the summer. These factors present important barriers to mobility.
Bold argues that the introduction of mBanking services will bring unlimited opportunities for poor people. In the near future, branchless banking services will include micro-insurance, which will increase the financial resilience of the bottom billion.
Says Bold, “mobile banking is all about cost effectiveness, efficiency and speed.” At the end of the day, however, people still need access to their cash, so a network of agents, (aka, points of service, or POS), is necessary. This is why XacBank creates synergies with pre-existing networks of suppliers such as gas stations and post offices instead of building new banking branches. In the future, XacBank plans to provide additional services to facilitate remittances, allow withdrawal services, transfer between accounts, micro-loans and micro-insurance policies.
The moderator asked the two panelists to identify the top 2 factors that drive mass customer adoption and the winning formula.
Brian of WIZZIT identified building trust/credibility in the brand and improving brand awareness (get the poor to trust mobile banking is not a scam) as the two most important drivers of mass adoption. This requires untraditional marketing. For Brian, the winning formula depends on what success looks like. In his opinion, “success is growing commercially viable sustainable business that is replicable and scalable; increased frequency and value of transactions via mobile phones.”
Bold of XacBank emphasized the need to find common interests and incentives with existing distribution networks and the involvement of youth (70% of Mongolia’s population) as the top 2 factors necessary to drive mass market adoption. As for the winning formula, Bold believes mBanking is already a winner vis-a-vis environmental impact: “mobile banking is environmentally friendly.” In addition, by using off-the-shelf applications, mBanking is more effective, flexible and rapid than depending on an external provider. Recall the “three A’s” of mBanking: “affordability, accessibility and availability.”
One of the first questions posed during the Q&A session addressed the issue of building trust, i.e., how to convince new customers that mBanking is not a scam.
Brian pointed out that being able to purchase airtime/credits using mobile phones is already creating trust. Customers are also reassured by the ability to check their balance from their mobile phones as often as they desire. According to Brian, “customers will gain confidence by starting with small transactions, i.e., low risk, low value transactions. This will create trust which will ensure customers that they can also safely transfer larger sums more frequently.” The key in all of this, however, is technology; the technology has to work every time or else trust in the system flies out the window.
Another question posed focused on why rates of uptakes (initial customer adoption) are often higher than continuing usage.
Brian addressed the question by explaining why WIZZIT chose to charge a token amount for opening an account. “The decision was made to render value to the service. If we allowed for accounts to be opened freely, customers would simply not place as much value in the service.” WIZZIT charges $4 to open an account. Yet people are still voluntarily opening accounts without ever using the services they offer. “This is one of the biggest mysteries of the universe,” said Brian. The key to addressing this issue, however, is improving financial literacy at the Bottom of the Pyramid (BoP).
One of the questions posed to the panelists was from a participant from the European Commission who was following the roundtable online: “what should larger donors do to support mobile banking?”
The panelists agreed that there is a great need from donors to provide assistance on the regulatory side of this issue; regulatory bodies in developing countries lack knowledge on this, they need support, guidance, and assistance to better understand the issues at play.
For example, regulatory bodies need to understand the difference between telecom- and bank-led approaches. In addition, according to one statistic some 30% of mBanking customers do not own a mobile phone. Donors could help change this.
Nick Hughes of Vodafone (one of the panelists on the second panel) expressed caution. “Donors can help build the framework regulations; the UK government, for example, gave Vodafone GBP 1 million, which was key to Vodafone’s contribution to mBanking. However, these projects need to be able to stand on their own two feet, so we ought to discourage large donor donations and think about more sustainable entrepreneurship models.