South Africa gets cell phone banking

JOHANNESBURG, South Africa — The idea emerged from a conversation with prominent South African businessman Cyril Ramaphosa, a former leader of the ruling African National Congress, who was complaining about the frustrations of trying to open a bank account for his son.

If a member of the urban elite like Ramaphosa had troubles with banking, then the millions of South Africans from disadvantaged backgrounds must really be struggling, thought Brian Richardson, a former banker.

This idea spurred Richardson and a partner to found Wizzit, a mobile banking service launched in 2004 that aims to provide affordable, accessible banking for low-income people. In South Africa, many people don’t use banks because they are seen as expensive and elitist, and they don’t have locations and hours that meet the needs of the country’s poor, often rural, people.

The key innovation: understanding how mobile phones are actually used in South Africa.

Almost everyone in South Africa now has one, despite their economic standing. Cell phone penetration is estimated at 98 percent in the country. “Interestingly, in Africa they might not have shoes, but they have a cell phone,” Richardson said.

By the end of 2008, the company had an estimated 250,000 customers in South Africa, and today it has 2 million customers across Africa and Europe.

“Five years ago, people were saying, ‘Who in their right mind would do a payment on a mobile?’” said Richardson. “I think that’s been put to bed.”

Customers are given Maestro debit cards, which can be used at ATMs and points of sale. They can use their cell phones for such functions as viewing bank statements, sending money and paying bills, all with low transaction fees.

Mobile banking is an example of cell phones being used in innovative ways to bypass the gaps in traditional infrastructure in Africa — in this case the shortage of bricks-and-mortar banks in rural areas, and lack of internet access.

Other companies are also offering mobile banking services, such as the popular M-Pesa service in Kenya, which allows customers to do money transfers from their phones. Some of South Africa’s big banks, which were slow to get into the mobile business, have begun providing mobile services for customers who already have a bank account.

“It’s very difficult to build a sustainable, viable economy when the bulk of your population is unbanked,” Richardson said. “There is the equivalent of $2 billion under mattresses in South Africa at any time. If even a portion of that was in banks, it would have a huge impact on the economy.”

The Johannesburg-based company has since expanded into Zambia, Rwanda, Tanzania and Romania, and plans to launch in three more African countries, with talk of expanding into other major emerging markets.

According to a 2009 survey by the World Bank's Consultative Group to Assist the Poor, about 2.7 billion people globally don’t have banking services. Access to banking can help people to lift themselves out of poverty by providing ways to save money and make payments without having to travel.

Wizzit customers tend to be employed on contract or temporary work, for example at a farm, mine or construction site, where they are usually paid in cash. They are often from rural areas and need to regularly send money home, so Wizzit is invaluable in helping them avoid the risks of crime and the cost and hassle of travel, Richardson said.

Wizzit has a sales force of young, previously unemployed people, known as “Wizzkids,” who earn a commission by selling start-up kits, which include a debit card, for as little as $10. In South Africa, the company only hires only unemployed people.

Lindiwe Ngubeni, who works as a Wizzkid in Soweto, the township near Johannesburg, said that she sometimes gets calls from customers thanking her for teaching them how to bank.

“It helps a lot of people,” she said. “And at least we’re not idling around the townships — we’re actually doing something that puts food on the table at the end of the day.”