Consumers slow to use advances in money
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Johannesburg - Distrust of mobile payments costs bank customers money for every transfer they make.
Studies show mobile payments are now the cheapest method of transacting – at about 8 US cents (83c) a transaction compared with $0.17 online and $3.75 in bank branches. But 44 percent of people surveyed by Ericsson are not taking advantage of this because they do not trust mobile money or mobile commerce (m-commerce).
These transaction costs represent an average of numerous studies done by consulting firms, including PwC and Capgemini.
About 75 percent of all transactions around the globe are still done in hard cash, even though figures from Mastercard show cash handling costs eat into a country’s gross domestic product by between 0.6 percent and 1.5 percent.
Mobile money services such as M-Pesa have done well to include formerly unbanked communities in Tanzania and Kenya, but the concept has not gained the same traction in some other African countries.
In South Africa, Vodacom and Nedbank announced their M-Pesa joint venture in 2010 but the service has not gained a foothold as fast as in Tanzania and Kenya. FNB’s e-Wallet is becoming popular among customers who transact with the unbanked and Nedbank recently launched its PocketPOS.
Speaking at the AfricaCom conference, Faraz Salahuddin, the engagement consultant for m-commerce at Ericsson, said businesses and merchants in informal trade were sceptical about the extra transaction costs that accepting payments done by cellphone would bring.
He said: “There are different merchant responses from different areas. For instance, in Zimbabwe, it took a while to get Eco-cash to be accepted.”
He said merchants there had seen a considerable reduction in the risk and logistics attached to handling cash.
Mobile money works both for bank account holders and for unbanked individuals, who are able to transact simply by having a cellphone number.
A network operator and a bank typically form a partnership, although M-Pesa, which now operates as a bank, is the exception. Customers open an account with the network operators or their agents, which include airtime resellers and retail outlets. They can then deposit and withdraw money from these agents.
According to Informa Telecoms and Media, countries that have embraced mobile money include the Democratic Republic of Congo, where the government is now looking at paying all civil servants using mobile wallets after the successful implementation of payments for the police and army officers.
Another example is Mauritius, which has started collecting tax using mobile wallets.
Thecla Mbongue, a senior analyst at Informa Telecoms and Media, said the payment of utility bills using cellphones was already widespread. Institutions such as the University of Togo were taking mobile money a step further and fees could be paid this way.
But much more could be achieved to link the unbanked to financial services, she said. For instance, insurance companies could collect premiums for funeral cover from remote communities by partnering with cellular network providers.
Dave Parrat, the head of new business development at Oltio, a mobile money joint venture between Standard Bank and MTN, pointed out how mobile payments could increase South Africa’s online shopping activity.
He said that although South Africa had good banking penetration, only 3 percent of Oltio’s MTN customers qualified for credit cards even though 97 percent had debit cards. This meant only 3 percent were able to shop online.
Online shopping in South Africa accounted for only 0.36 percent of retail sales because people could not transact online with debit cards.
In response, the company has developed an application that requires no credit card but just a cellphone SIM card and the user’s banking PIN. - Business Report