South Africa: Cellphone banking grows up as penetration rate doubles

Mergers, Acquisitions and Financial Results

The penetration of cellphone banking in South Africa has more than doubled in one year, according to the Mobility 2007 research study, released in November 2007. And that usage will climb even more sharply in the coming year.

The latest edition of World Wide Worx’s annual study of mobile technology, mobile commerce and cellphone banking in South Africa, Mobility 2007, was once again sponsored by First National Bank (FNB). It is respected in the mobile industry for its in-depth research among consumers, corporate technology decision-makers, and small and medium enterprises.

In last year’s consumer phase of the project, a survey among urban cellphone users, 17% of respondents said they had used their cellphones for banking services, compared to only 8% of urban respondents in 2006. The numbers were even more dramatic when cellphone users were asked about their intentions for this year: an additional 24% are expected to begin using cellphone banking.

Head of FNB Mobile and Transact Solutions Len Pienaar said the bank’s own research findings had uncovered a similar growth pattern on a national level.

"It’s been many years in the making, but we finally see evidence of cellphone banking maturing in the South African market. Acceptance of the channel across all market segments is significant and accelerating. In the mainstream market, in particular, latest figures illustrate that it is now the most used electronic banking channel among FNB customers in this segment."

The good news is that FNB Cellphone Banking, which last year celebrated reaching its 1-million transactions per month mark, is still widely believed to offer the best mobile banking services across all mobile bankers.

According to Pienaar, the secret to the bank’s ongoing success in the cellphone banking industry lay in FNB’s approach to strategy development, which has always targeted the mainstream market with innovative solutions.

"Cellphones allow the delivery of essential services like prepaid airtime and electricity to even the most rural doorsteps, as cellphone coverage and penetration is constantly improving within Africa."

"To date, FNB has focused on getting the African cellphone banking market established by addressing customers’ concerns around simple registration, ease of use, and affordable access to the service and security. Through this exercise, we are turning the improved market awareness of cellphone banking into customer behaviour that embraces it as a convenient banking channel," said Pienaar.

One of the most unexpected findings of the research is that the likelihood of using cellphones for banking services increases with age, in contrast to the usage of most advanced cellphone functions going down as users get older.

"Urban cellphone users aged from 46 to 55 years are twice as likely to use cellphones for banking as those in the 19 to 24 age group," says Peter Searll, CEO of Dashboard Research, who led the field work for the consumer research on behalf of World Wide Worx.

"This may be counter-intuitive, until one considers that more economically-able consumers would be more likely to embrace most forms of financial service. This is backed up by the fact that, after 55, people are less likely to use cellphone banking," explains Searll.

There are substantial differences in cellphone banking from region to region, with Gauteng residents being the most likely to use the channel, as well as the most likely to take it up in the future.

There is also a big gender gap – for now. In 2007, cellphone banking was dominated by men. Twenty percent of male respondents, versus 15% of female respondents have already used the channel. However, in 2008 the numbers will begin balancing out, with the same proportion of men as women intending to take it up.

Mobile commerce – purchases and payments via a cellphone – has also increased significantly, from 7% of urban cellphone users in 2006 to 12% in 2007. However, most of these purchases are for prepaid airtime top-ups – simple to do on a cellphone – as opposed to product or service payments.

Despite this, future prospects for mobile commerce are bright: 58% of respondents were aware of the possibility of payments by cellphone, compared to only 32% in 2006.

"This does not mean mobile commerce will take off at the same rate as cellphone banking," says World Wide Worx MD Arthur Goldstuck, who led the overall research project.

"Just as cellphone banking only began showing substantial growth when it became extremely simple to use, so mobile payments must first overcome numerous obstacles, including access to the service and ease of use. But the research shows that, if the channel gets it right, the market is ready," says Goldstuck.

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