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In the latest “Gates Notes” annual letter, Microsoft founder and philanthropist Bill Gates wrote about the impact smart phones and mobile banking will have in the next 15 years. He observed that “digital banking will give the poor more control over their assets and help them transform their lives and by 2030, 2-billion people who don’t have a bank account today will be storing money and making payment with their phones”.
I have to say he’s spot on, and in all my years as a mobile technology professional I can say without doubt that the future of mobile money is inevitable — and this has some of the major financial institutions running scared. In South Africa alone, Nedbank has invested a lot in Pocket POS, FNB developed Cell Pay Point, ABSA has Payment Pebble and Standard Bank partnered with SnapScan. Not only did these banks invest in mobile payments but they invested in e-wallet services as well, confirming that the threat of mobile money or cashless transacting is real.
The fact is, South Africa has a huge unbanked population (some researchers estimate it’s as high as 67%), who get turned off by the banking system because of exorbitant banking fees, Fica requirements and a general lack of trust of banks. At the same time, South Africa has one of the highest mobile penetrations in the world, with 87% individual mobile phone ownership and 36% of those being smartphone owners, according to Mobile in South Africa 2014 AMPS Report.
I do believe that in the next couple years South Africa will see a massive switch in people’s mindset about mobile money. The advantages of mobile banking are endless: Mobile money means people can have money on them without the constant fear of losing it or being robbed. It gives them the ability to use a non-traditional banking system without being exploited. People can make use of their mobile phones to pay for taxi fare, to buy groceries at a local corner shop, to send money to relatives without carrying cash.
Countries such as Kenya, Tanzania, Botswana and Zimbabwe are already way ahead on this front. The time has arrived for every supermarket, retailer, spaza shop, coffee shop, taxi industry to embrace mobile money as another form of payment. It’s also encouraging to see more major companies in South Africa and the rest of the world working on including mobile money into their business models and allowing people to use mobile money in ways never imagined — from automated payments for parking, allowing your fridge to order milk, or even automated reward systems. Mobile money isn’t just a solution for the under-banked but the future for all.
And with big tech companies like Apple, Google, Samsung getting involved in mobile banking, the industry is growing at a very rapid rate. Regulators will be forced to adapt, which will make it possible for smaller businesses to adapt to mobile money and allow companies to launch their mobile money products. This will contribute to country’s economic growth.
In South Africa, the biggest factors behind the slow growth of mobile money are the limitations put in place by the regulating bodies. Another factor is the strong hold the top five banks have over the payment industry in South Africa. It’s almost impossible for any company to get a banking licence in South Africa. Without a banking licence or a banking partner it’s illegal for a company to start a proper mobile banking company in South Africa, which means the industry’s growth is limited.
South Africa cannot delay the issue anymore and needs to jump on the bandwagon because on a larger scale, we are really talking about the critical subject of financial inclusion. People are already using alternative digital mediums as currency. In other African countries, we find people using airtime as a currency. Bitcoin is becoming more and more popular. I do believe that these currencies will become another form of mobile money. As banks and regulators limit the growth of mobile money people will find different forms and means of making payments. In the near future we will find more people accepting Bitcoin or airtime as a form of payment.