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Speaking at The Economist Conference in Johannesburg, late 2014, Finance Minister Nhlanhla Nene said, “There is a perception that financial inclusion efforts will necessarily lead to increased financial risk and hence have a negative effect on financial stability. However, if financial inclusion is approached from a systemic perspective and pursued responsibly, the opposite is true”. This tells, without a doubt, that government is eager for a nation where no one is financially excluded; where the poor, the marginalised and those who live in far-flung areas have no access to banks and other financial services. Mobile money is an efficient and reliable answer to this. It has the potential to transform lives by bringing into the system those who have been left behind due to high costs of banking and general lack of access to banks due to distance.
Mobile money thrives on convenience. There are towns in South Africa where banks do not exist which force residents to travel great distances and long hours just for an ATM. This market has been neglected for a long time and it is even estimated that in South Africa about R12 billion is kept “under mattresses”. The National Development Plan touches on this saying “while the South African banking and insurance sector is viewed as relatively sophisticated in a global context, banks and insurers find it hard to extend services to this market segment using traditional channels because of their high costs and limited potential for income”. The NDP would like South Africa to reach 90% of financial inclusion by 2030.
Mobile money in its simplest definition is the ability for a person to pay for goods and services, transfer or deposit money, apply for insurance or a small loan, send money or receive money from another person using a cell phone. The mobile money system must also allow that particular individual to spend the money without exchanging it into cash. This also means the local enterprises, supermarkets, retailers, general dealers etc, must be able to accept mobile money as another form of payment alongside cards and cash. Mobile money can also allow citizens to pay for municipal bills, receive salaries, social grants, and travel without using cash.
There are few questions that are always asked regarding mobile money in South Africa like, how safe is it and what can South Africa do to emulate Kenya’s success story where 77% of its population are living within 5 km of financial access, thanks to mobile money agents. South Africa is, at the moment, advancing technologically at a rapid pace which also means the execution of the mobile money system should not be a challenge. Mobile money compared to cards that can be cloned or susceptible to fraud and cash that can be lost or robbed still rates the safest.
The key to mobile money security is to make it as easy to use but as secure as possible. This is done by using security measures like location tracking, two step verification even more advance security features like biomatrix. Although every mobile money solution applies its own security methods they all have one thing in common, as our phones become smarter, so do the criminals. Lack of consumer education allows criminals to elicit information from unsuspecting mobile money customers which is used in fraudulent activities. Mobile operators and financial institutions need to work closely to provide greater levels of security and a safe mobile banking experience.
At Wallettec, for example, we ensure that all data is encrypted between the POS and the mobile money provider. No data is stored on any third party devices like the POS or any other device except on the mobile money provider’s system. All data transmitted by Wallettec is encrypted using a 1024-bit RSA key. The Wallettec solution enables secure end-to-end encryption of messages from the handset, over the air, through the mobile networks, to the mobile payment or banking platform and vice versa.
For South Africa to reach levels of high adoption a massive education campaign for citizens and businesses will need to be promoted and this can only succeed through a partnership between the private sector and government. Digital wallet companies will also need to abide by regulations to deliver a system that is safe, secure, reliable, accessible and definitely affordable. The success of the mobile money system must really be a co-ordinated effort by all to deliver a system that speaks to the needs of the people where no one is excluded because we are approaching a future where everything will be inter-connected and where a Smartphone will simplify people’s lives in ways unimaginable.