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With First National Bank (FNB) the first South African bank to launch a banking application (app) for smartphones and tablets only this past quarter, we are some way behind those countries, notably Japan, that are leading the way with smartphone banking apps.
In the United States, for example, banking apps are old news. The focus has moved to which banks offer apps that allow you to use your cellphone to photograph a cheque for deposit and send the image to the bank, instead of your making a trip to the bank branch to deposit the cheque.
The local banks’ tardiness in supplying us with banking by app, despite the rapid uptake of smartphones, is typical of developing countries, where the focus is on using cellphone technology to give the unbanked access to bank accounts or even to receive payments without the benefit of an account. Hence the launch and rapid growth of products that allow account-free transfers, such as Absa’s CashSend, FNB’s eWallet, Nedbank’s MPesa and Standard Bank’s Instant Money.
The latest Mobility 2011 research conducted by World Wide Worx found that 44 percent of urban cellphone users use cellphone banking services, compared with 27 percent a year earlier. But many South Africans who bank with their cellphones are using, and will continue for some time to use, SMS-based banking or, for those with newer cellphones with internet access, their bank’s mobi website.
The number of users of smartphones – phones that can run apps or programs and operate like mini-computers – remains small, at about 20 percent of the local cellphone market, according to a statistic quoted by Vodacom recently. Local mobile network operators have embarked on aggressive campaigns to sell smartphones, and sales are expected to grow at 55 percent this year and soon to outpace those of personal computers, notebooks and netbooks.
As more people buy smartphones and tablets, local banks will be forced to keep their clients happy by developing banking apps.
FNB says more than 30 000 active clients downloaded its app in the first two months after it was launched. In that time, some 100 000 transactions worth R200 million were conducted via the app.
Although the number of clients using the app is a small portion of FNB’s 1.1 million internet banking users, it is clear that many people want to be able to access their bank accounts wherever they happen to be with their cellphones.
To use the app, you have to be registered with FNB as an internet banking user.
You also have to have a phone or tablet with one of the following operating systems: iOS (an Apple iPhone, iPad or iPod); RIM (a Blackberry phone with touch-screen capability or a Blackberry Curve or Bold); Android (later versions of Motorola, Samsung, HTC and Huawei phones); or Symbian (Nokia phones).
If you have the appropriate phone, you can download the app for free from the app “store” on your smartphone or tablet and request that your phone be paired with your internet banking profile.
Then you need to log on to your internet banking website on your computer and confirm that you have asked for your smartphone or tablet to be linked to your online banking profile. Once you have linked your device, you can log in to the FNB app and transact.
FNB’s app enables you to view your account balances and transaction history, pay third parties and transfer funds between your accounts.
According to Farren Roper, FNB’s head of digital, the app can’t yet do all that you can do on internet banking. For example, he says, you cannot make once-off payments, but FNB has extensive plans to develop the full range of banking services and more.
Why are apps so desirable to people with smartphones or tablets? Roper says the app is easier to access, because there is only one step to logging on, instead of the three steps required to log on to internet banking. But the exciting thing about the app, he says, is its potential to offer you other services. Already, the FNB app offers you the ability to find your closest FNB branch or ATM, to call FNB for free, and to call or SMS other FNB app users for free, Roper says.
The services are really only free to the extent that your data services are free. Blackberry phone users enjoy a free data service as part of their internet package. Users of other phones will be charged by their network provider for the data they access. FNB offers its cheque account clients subsidised 3G connectivity.
Absa says it will soon launch an app for its clients, but it is focusing first on upgrading what it calls the core engine that drives all its digital channels, including ATMs, the internet and cellphones.
Christo Vrey, Absa’s managing executive for digital channels, says Absa will launch a comprehensive app that transcends the challenge posed by the different cellphone and tablet operating systems. The launch will be timed to coincide with the expected growth in the number of tablets and smartphones in South Africa. Smartphones are expected to make up 80 percent of the local cellphone market by 2014.
Itumeleng Monale, the director of direct channels at Standard Bank, says Standard Bank is also working on an app, but the range of available devices and operating systems has required “intensive development”. However, Monale says, for Standard Bank the most exciting frontier is taking banking to the underbanked via mobile banking.
While those who are smartphone and tablet savvy in South Africa may be a bit frustrated by the lack of banking apps, the upside is that security problems are being discovered and overcome in developed markets where banking apps are the norm for all larger banks. US banks, for example, have had to address how cellphones store your bank details and the potential for these details to be hacked.
Developed markets are also pioneering the way for the next leap in cellphone technology, which will revolutionise how we pay for goods and services from our bank accounts.
According to research quoted on mobithinking. com (www.mobithinking.com) in December last year, more than 10 million of Japan’s 121 million cellphone users pay for goods and services with their phones. Japan is using a technology known as tap-and-go, and 47 million Japanese have phones capable of using this technology. You tap your cellphone at a retailer’s point of sale and your goods are paid for from either your credit card or your bank account.
Last year, Absa introduced on a trial basis a bank card that uses the tap-and-go payment system but with funds prepaid into the card. Absa’s card enables consumers to pay for low-value purchases – less than R200 – at tills at a few key retailers. Transactions and the amount that can be loaded onto the card are limited so that the card can be issued to people who do not have bank accounts and Absa can still comply with the requirements of the Financial Intelligence Centre Act.
Absa says this tap-and-go card payment may be a precursor to a similar cellphone payment system.
However, mobithinking says the world is likely to go with a technology known as near field communication (NFC). To use this technology, your cellphone will have to be NFC-enabled and you will download an app and encrypted information to a secure area of your phone.
The phone will communicate with a merchant’s point-of-sale system; the payment and settlement process is similar to that used when you pay with a credit or debit card that has a magnetic strip.
NFC is being tested by retailers such as the US-based Starbucks coffee shop chain and is already being put to limited use in South Africa. The Gautrain, for instance, uses NFC for its train cards.
Fuelling the enthusiasm for NFC are announcements such as that from Google that it is using NFC for Google Wallet, an app that will be able to store all the cards you currently have in your wallet and more.
In future, Google says, all your payment cards, loyalty cards, gift cards, boarding passes, tickets and even your keys will be synced to your Google Wallet, and you will pay, board trains, redeem loyalty points and unlock doors with a tap of your NFC-enabled phone.
Monale says that most high-end phones will be NFC-enabled from next year, but there will be a five- to 10-year roll out of this kind of payment system in our market.
Both she and Roper say the banks can enable the payment systems, but the merchants have to agree to have NFC-enabled point-of-sale devices.
Roper says while the NFC environment may be a way off, FNB plans to be ahead of the game when it goes mainstream.
Monale says the different cellphone providers will have to agree on a single payment system, which will have to be attractive to merchants.
Payments made via NFC will always be relatively low-value ones to ensure that the transaction can be authenticated quickly, she says.
But Vrey says in future you could use your cellphone to make payments from your credit card, transfer funds from your transmission account or even send money from your account to another person using only his or her cellphone number or email address. The person who accepts the transfer will then route it to the bank account of his or her choice.
Vrey, Monale and Roper all agree there are many exciting opportunities for banks and us, their clients, in the future.
* This article was first published in the fourth-quarter 2011 edition of Personal Finance magazine.