Efforts to increase access to financial services using cellphone technology could be dealt a blow once new surveillance legislation is enacted, say experts. The Regulation of Interception of Communications and Provision of Communication Related Information (Rica) Amendment Bill was due to have been implemented this month. However, implementation was postponed pending amendments to the act. These are expected to be addressed when Parliament reconvenes next month.

As it stands, the bill will require cellphone operators to identify and register more than 30-million customers within 12 months of implementation of the act. Those who cannot be identified will have their services suspended. The amendment bill is aimed at improving transparency in communications by monitoring cellular and fixed-line subscribers in an attempt to combat fraud and other crimes.

With cellphone banking being punted as a cheap and practical means to bank the millions of South Africans who have no access to financial services, the implementation of the new law could prove an impediment to this.

While the bill has been in the pipeline for a number of years, Prof Louis de Koker, director of the Centre for the Study of Economic Crime at the University of Johannesburg, said following a similar exercise among financial services companies, the Financial Intelligence Centre Act (Fica), cellphone networks had realised only recently what a mammoth task lay ahead for them.

The requirements of Rica were even more demanding than those of Fica as cellphone networks would have to obtain proof of identity and proof of residential and postal addresses from their users, while banks were required only to obtain proof of physical address from their customers, De Koker said.

While the home affairs department says only 1,5-million South Africans are without identity documents, De Koker said the number could run as high as 19% of the population.

"It's going to make it very difficult for those companies who are trying to increase access to financial services by using telecommunication services due to the barrier that is built into accessing these services," De Koker said.

De Koker said the effect would be worst on rural communities who might have difficulty in obtaining identity documents.

"Enacting it (Rica) would protect interests, but would drive out access to telephony, and there would be unintended consequences for other parties," said FinMark Trust executive director Jeremy Leach.

These parties included financial institutions that used cellphones as the main source of communication with customers, Leach said.

Leach said a significant percentage of prepaid cellphone users were from low-income groups, and might not have proof of address.

In the case of Fica, he said those earning less than R5000 a month were exempt from producing proof of address in terms of section 17 of the act. No such exemption had yet been introduced to Rica.

Charles Rowlinson, chairman of cellphone bank Wizzit, said while its customers had to have identity documents to open accounts under the Fica legislation, proving their addresses by producing utility bills could be a problem, particularly for customers in rural areas.

Rowlinson said an exemption, such as the Fica exemption, would help as the vast majority of Wizzit's customers earned less than R5000 a month. "We are totally focused on that market," he said.

A spokesman for MTN Banking said it was working with MTN to ensure customers would be Rica compliant. Johan de Ridder, executive director at African Bank Investments, which uses cellphones to communicate with its loan customers, said the bank did not expect any negative effect. “It's a very difficult thing to predict," De Ridder said.

"Given our experience with Fica, customers who want the service and to keep their numbers will identify themselves. We don't expect a massive impact," he said. De Ridder said the bank also obtained work and home contact numbers from customers to ensure they could reach them. "The lapse rates of prepaid numbers are already very high so if we had to rely on (cellphones) it would not be very good for our business," De Ridder said.

Business Day