Standard Bank Group Ltd. (SBK) hired Itumeleng Heymann to persuade her neighbors that for about $6 a month, their cash would be better off with Africa’s largest lender than in its current hiding place: under the bed.
For millions of Africans, a simple Nokia mobile phone acts as a bank account, allowing them to transfer funds with services like M-Pesa, run by Vodacom Group Ltd. (VOD) and Safaricom Ltd. Now Standard Bank is turning to an army of 1,000 township residents such as Heymann as it tries to block Vodacom, South Africa’s largest wireless operator, and companies like it from muscling in on the nation’s expanding banking market as they have in Kenya, Tanzania and elsewhere. So far, the banks are winning.
“A lot of people around here don’t have accounts,” said Heymann, 27, wearing braids and a bright blue Standard Bank T-shirt as she worked the morning rush at a market in South Africa’s Tembisa township. “A lot of people don’t want to open accounts because they are scared that maybe there’s lots of fees. We explain to them why it’s better to have an account instead of putting money under your bed.”
Wireless companies like Vodacom are finding the going far more difficult in South Africa than the rest of sub-Saharan Africa because of the biggest economy in the region’s more developed banking and regulatory systems and the wireless operators’ own false starts. At stake are the more than 11 million people, a third of the adult population, who don’t have bank accounts.
The contest pits two companies that are both No. 1 in their industries in South Africa. Johannesburg-based Standard Bank has 31 percent of the nation’s banking assets, according to the Banking Association of South Africa; Vodacom, also based in Johannesburg, said it controls more than half the wireless market. Standard Bank has a market value of 181 billion rand ($18 billion), while Vodacom is worth 167 billion rand.
Vodacom is overhauling M-Pesa for South Africa after just 1.2 million people registered for the service since its introduction more than 2 1/2 years ago in partnership with Nedbank Group Ltd. (NED), the smallest of the country’s four largest banks. By contrast, 17.1 million Kenyans and almost five million Tanzanians use M-Pesa and more than 550,000 people since March 2012 have signed up for Standard Bank’s AccessAccount, which also registers them for mobile-phone banking. Standard Bank has 11 million customers in its retail bank in South Africa.
Mobile-phone payment services like M-Pesa have blossomed in east Africa, while in South Africa they have struggled because of regulation and a lack of a network to deposit and withdraw cash, said Vodacom Chief Executive Officer Shameel Joosub.
“The big issue has been regulation and cracking the distribution,” Joosub, 42, said in an interview in Johannesburg. “In Tanzania, the banks are using M-Pesa as a solution to reach the unbanked, whereas here it was a separate product and you had lots of competing products.”
Vodacom, which is Vodafone Group Plc (VOD)’s largest African operation, will probably reintroduce M-Pesa to South Africa in a few months and take advantage of eased regulation on transactions of less than 1,000 rand, he said.
Vodacom may also add more locations where customers can deposit and withdraw cash with M-Pesa. The service costs 6 rand for a cash withdrawal of less than 1,000 rand, and a money transfer is 2.45 rand for amounts under 5,000 rand. Vodacom will work with Nedbank as the banking-license provider, the company said by e-mail. Nedbank didn’t respond to calls and an e-mail seeking comment.
As Vodacom struggled with a viable alternative to banking in South Africa, FirstRand Ltd. (FSR)’s First National Bank decided to become more like a mobile-phone company. The lender acquired a full telecommunications license and is now the dominant company in mobile-phone banking with 40 percent market share, according to CEO Michael Jordaan.
“We’re always paranoid about every form of competition, and we’re particularly paranoid about the competition that comes from the non-conventional guys,” he said in an interview. “We do see convergence between these two industries. What we’re doing to telcos is going to be far more disruptive than what telcos are going to do in banking.”
The license lets FNB give its eight million consumers free data that they can use for banking or free phone calls to other FNB customers. That’s been a boon for those in a country where data is sold by the megabyte.
Jordaan credits M-Pesa’s success in east Africa to the region’s unsophisticated banking system, lack of competition for its owner and Kenya’s biggest mobile-phone company, Safaricom, which is 40 percent owned by Vodafone, and the ease of access to M-Pesa agents. The opposite is true for South Africa, said Arthur Goldstuck, managing director of research and consulting firm World Wide Worx in Johannesburg.
“M-Pesa was launched by Nedbank with the service only available at Nedbank branches and that’s not going to appeal to the socio-economic setting that M-Pesa was built for,” he said in an interview. “The things that will give M-Pesa reason for existence are an agent network that allows access anywhere and the costs are lower than any other banking service.”
M-Pesa’s success in South Africa will depend on consumers changing behavior and using a mobile phone as their sole means of conducting financial services, Audrey Mothupi, Standard Bank’s head of inclusive banking, said in an interview.
The banks introduced accounts called Mzansi, which means South Africa, in 2004 for customers who couldn’t afford typical bank charges. The accounts were criticized by an antitrust panel as too expensive, lacking transparent fees and having limited access to automated teller machines.
Standard Bank upgraded Mzansi customers to AccessAccounts in March, offering 24-hour banking and 7,000 locations where money can be deposited or withdrawn for 59 rand a month.
“We’ve got something that’s neatly positioned to the M-Pesa product,” Mothupi said by telephone. “There are billions hidden underneath mattresses. The average informal market customer lives 50 kilometers (31 miles) from a bank branch. By creating the accessibility, one makes sure that you’re closing the gap.”
Other banks are looking to expand their mobile-banking operations, including London-based Standard Chartered Plc, which is seeking partners with retailers and phone companies in Nigeria and South Africa.
“We see the opportunity in mostly partnering with telcos so that we can leap to financial inclusion,” Kariuki Ngari, Standard Chartered’s head of consumer banking for Africa, said by telephone from Nairobi.
MTN Group Ltd. (MTN), Africa’s largest wireless company, allows subscribers to access accounts with Standard Bank, Nedbank and First National Bank using WAP and WIG technology on their mobile phones. Days after Vodacom, its biggest competitor, said it would relaunch M-Pesa, Johannesburg-based MTN placed a full page ad in the country’s City Press newspaper promoting its mobile-money service.
Sub-Saharan Africa had a population of 875 million in 2011 and more than 75 percent of adults don’t have bank accounts, according to a World Bank study. About 5 percent of mobile payments in Africa and the Middle East were for shopping or contactless payments in 2012, according to Bain & Co., a Boston-based consulting firm.
Of the 11 million South Africans without accounts, about 88 percent are black and 2 in every 5 households earn less than 2,999 rand a month, according to a report by the FinMark Trust, an independent trust established through the U.K.’s Department for International Development.
South Africa’s median annual family income rose to 119,542 rand in 2011 from 74,589 rand in 2006, the nation’s statistics agency reported last year. Gross domestic product growth slowed to an annualized 0.9 percent in the first quarter from 2.1 percent in the previous three months, Statistics South Africa said last week.
The average black African family has an income of 69,632 rand compared with 387,011 rand for white households. And Tembisa, a township of 510,000 neighboring Johannesburg, is now a prime target as the banks and the wireless companies mine for new customers.
Founded in 1957 as part of the ruling National Party’s segregationist policy, Tembisa has become much more developed in the past five years with fewer shacks and more solar-energy units sprinkled on rooftops, making it increasingly attractive to companies such as Standard Bank.
The lender said it opens about 60,000 checking accounts and 30,000 savings accounts a month in townships including Tembisa, which means promise or hope in Zulu.
Florence Khoza, who sells wood-fired corn on the cob from under a corrugated tin roof, and Sarah Manyaka are just the kind of customers Heymann, the Standard Bank agent in the blue T-shirt, is prospecting for in Tembisa. And so far, Manyaka, a 44-year-old furniture saleswoman, is a satisfied customer.
“I was eating money like peanuts,” she said, speaking of the way she spent money before having a bank account. “But since I had this account, I’m so happy because everywhere you can deposit or get your money straightaway.”
To contact the reporter on this story: Christopher Spillane in London at firstname.lastname@example.org