Liberate mobile payments for a more inclusive economy

The main reason for this is our severe banking laws, which further entrench banks in the payments industry while stopping innovative mobile operators and developers from bringing cheap, easy and secure (card-free) payments to the masses.

This raises questions about the seriousness of local lawmakers with bringing the country's previously disadvantaged and unbanked into the economy.

M-PESA - a Kenyan success

M-PESA market share for cash transfers, growing to 6.5 million subscribers within two years. Estimates put M-PESA transfers at 13% of Kenyan GDP in 2010.

The service has also met with success in Tanzania and Afghanistan, was then rolled out in South Africa (with a difference), and is slated to hit Egypt and India next.

Missed the boat in SA?

M-PESA's launch in SA, a country with 13 million unbanked citizens, happened in October 2010. Unexpectedly, it took off slowly. Only 150 000 accounts were opened in the first nine months of the service, and it became clear to its creators that its value proposition didn't suit the low-income customer targeted at launch.

The main problem was that Vodacom, the mobile network involved, may not facilitate transactions without the involvement of Nedbank, the other partner. M-PESA is backed by Nedbank's banking licence, making it less cost-effective than if Vodacom were to offer remittances on its own ticket - in emulation of the Kenyan model.

For this reason, M-PESA essentially failed to ignite an economic revolution. It never took off among lower-LSM populace (arguably its primary audience), and was subsequently re-launched as a higher-LSM service - a missed opportunity.

Other mobile payment efforts

All the other major banks also have mobile wallet solutions - FNB offers eWallet, Standard Mimoney, and Absa CashSend. In addition, FNB has launched a new service called Pay2Cell, which allows its account holders to make payments to other FNB account holders, using only the recipient's cellphone number and not their bank or card details.

As another evolution in electronic and cardless banking, this is to be welcomed, and FNB's invitation to other banks to "copy the service" is noted as support for speeding up its adoption.

Nevertheless, this does nothing to wrest control over payments from banks and thus cutting the costs of transfers. Like the banks' approach to m-payments, card-less cell-to-cell payments will only be successful if all banks adopt it and a huge amount of integration is done.

To a great extent, the driving force for payment liberalisation will come from the government, which must modernise policy. Included in this is the abovementioned issue of banking licence regulation. By making banking licences available to mobile operators, the mobile payments ecosystem will be sufficiently rationalised to simplify interoperability and bring down the cost of transactions.

The dynamism of the mobile networks will also speed up rollout, which will further bring down the cost of transactions. Operators must also invest in cheap 'smart phone' handsets, possibly Android-based, which can handle m-payments. Again, the Kenyan example is instructive, where this tactic contributed to mass uptake.

Banks' position

In all this, the banks need not lose out - Digital.co.za/product/mobile-platform/ mobile payments are just the thin end of the wedge.

As more and more of the unbanked join the economy, the banking services they're likely to adopt in time will benefit the banking fraternity, a new wave of consumers, and the economy as a whole.

Great opportunity

Africans have better access to mobile phones than to clean drinking water. This sad statistic is likely to persist unless opportunities like these are seized upon, making it easier for Africa's poor to access funds and conduct low-volume trade in entrepreneurial services that can include anything from taxi transport to utility services, fresh produce, travel and tourism.

It is an enormous opportunity for South Africa - at once a crucial step towards ensuring the sustainability of our GDP growth and a platform to show the world what responsible capitalism can achieve. It is time for bold new banking regulation, vision from bankers and energetic action from mobile operators.

*Pesa is Swahili for money, while M refers to mobility, hence the meaning 'mobile money'.