Smartphones set to change mobile banking for good

The way we do banking on our mobile phones is changing rapidly, very rapidly.

While most cellphone banking in emerging markets like South Africa is still conducted via text messages, people are increasingly also using phone browsers for their banking.

In fact, the latest survey results from tech research company World Wide Worx suggest that more than a third of South Africans now use their browsers for mobile banking.

That said, only five percent of cellphone bankers exclusively use phone browsers for the purpose, but a further 36% use their browsers as well as text-based services like USSD and SMS.

According to Ravesh Ramlakan, of FNB Cellphone Banking, “The growing sophistication of phones — both feature and smartphones — is resulting in new options and opportunities for customers of cellphone banking. The customer is driving the pace of innovation in banking, and our job is to be available to them where they want to transact.”

FNB itself has been something of a leader when it comes to smartphone banking in the country. It was the first to launch a smartphone app in the country and in May launched its own innovative Geo-payments system.

The study suggests that the single most popular transactional service in cellphone banking remains airtime purchases, with 74% of customers using it for this purpose, and only 15% paying accounts via their phones.

Phone-based purchases of physical products that are delivered to the buyer are made by only four percent of urban cellphone users, but by no rural users whatsoever. As smartphones become more widely affordable however, these transactions will probably become more widespread — especially as phones equipped with NFC hit the market.

Along with airtime purchases, remaining the core of mobile commerce, more than half of cellphone banking customers also transfer airtime, with rural users (69%) far more likely to do so than urban users (51%). The same gap exists in mobile purchases of pre-paid electricity, with 33% of rural cellphone banking users and only 21% of urban users doing so via their phones. The pattern is repeated in sending money to other individuals via cellphone banking: 44% rural, 34% urban.

The urban-rural divide also reveals itself in other areas, most notably in the proportion of pre-paid users. While 80% of urban users have pre-paid accounts, the proportion of rural pre-paid users is 94%. The average phone spend of contract users is R387 per month, more than double that of rural users, who spend on average R165 a month.

“The popularity of money and airtime transfers via cellphone banking is one of the clues to why stand-alone mobile money transfer services have not taken off in South Africa,” says World Wide Worx managing director Arthur Goldstuck. “There simply is no desperate need for them, as there is in other African countries.”

Conquering that rural-urban divide does however represent a massive opportunity. According to Ramlakan: “This highlights the priority that needs to be placed on providing services that both simplify the lives of all, and reduce their costs of using financial services,” says Ramlakan. “While cellphone banking brings convenience and savings to urban customers, it can change the lives of rural users.”

Goldstuck reckons another area of opportunity lies in mobile commerce, but cautions that “virtual business will always need infrastructure, and that remains the barrier to cellphone purchases of physical product.”