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Will SA’s unbanked masses embrace M-Pesa?

On paper, the argument for embracing M-Pesa, a mobile-phone based money transfer service, is a compelling one. But implementation needs to be perfect if it is to gain traction with wary South African consumers.

Cellular service provider Vodacom, in conjunction with banking giant Nedbank, have finally begun rolling out M-PESA to South African consumers, having seen the critical role it plays in the Kenyan economy, where it is reported that almost 20% of all transactions are done through M-PESA.

Days after I interviewed Mark Taylor, MD of Vodacom Payment Services, I received an SMS telling me I had received R20.00 from a Vodacom rep, which I should use to test out the system. A few days later, I wandered over to a Nedbank ATM in an upmarket shopping mall, looking to test out the system. Having pressed the M-PESA button, I was asked to enter my Vodacom cell number, which caused some confusion seeing as I’m not with Vodacom. But I did enter my cell number and it seemed to work fine. But those kind of user experience issues could send potential customers scurrying back to the familiarity of cash.

With over R12-billion still unbanked in South Africa, according to the Banking Association of SA, cash is still a vital form of exchange. Many people still use verbal agreements with taxi and bus drivers to transport money back to friends and family in the rural areas. Government grants and small businesses still pay out using cash, and anything left over is often saved under the proverbial mattress.

These are just some sectors of the economy where M-Pesa could have a significant impact in South Africa, argues Taylor. In Kenya, the population has embraced M-Pesa to the extent that it is used to pay for services ranging from medical aid to school fees, emergency relief and collective savings schemes. Taylor is betting on South Africa moving towards a cashless society, arguing that it will be safer, easier and cheaper in the long run if mobile banking gains broad traction in the South African market.

But is there really anything new on offer for customers who are faced with a bewildering array of banking options? “What is new is the ease that you can send money to anyone in the country without even needing a bank account,” says Taylor. “No-one else is doing it at this level. Another key differentiator is that you can accumulate money on it. So I can send money to my kids, my wife can too and that money becomes a total amount. They can then redeem the total or just take a little at a time”.

My own attempts to withdraw R20.00 from the ATM didn’t exactly follow the script. In order to withdraw the money, I had to enter a “Code” from the SMS, but for the life of me I couldn’t find a way to enter it into the ATM keypad. Try entering a four letter code, like UUYV, into a regular numerical ATM keyboard. It’s literally impossible. Defeated and ashamed, I went in to the branch to enquire what I had done wrong.

Advertising to this target market requires a specialised agency, and the campaign is being driven by Draft FCB. The strategy it is adopting includes 400 road shows that are planned countrywide, a campaign to recruit rural chiefs as key influencers, as well as using information in community newspapers and on community radio and a broad mass-media strategy.

With such a strong focus on the working class, Nedbank would seem like a strange choice as the bank to roll out a mass-market banking solution. Not according to Ingrid Johnson, Managing Executive of Retail and Business Banking, who acknowledges that Nedbank was seen as elitist during the 1990’s, but claims it has worked hard to change that perception.

Statistics show Nedbank has signed up more than 30% of all the Mzansi accounts in South Africa, and is delivering in rural areas where they are rolling out a new, differentiated strategy.

According to Vodacom’s Taylor, once the Reserve Bank stipulated that Vodacom required a banking partner to bring M-Pesa to South Africa, Nedbank was the bank that wanted it the most and have proven their credentials by expanding aggressively into the rural areas.

Nedbank are not the only partners in this deal. Taylor explained that a number of partnership deals are in the offing with Blue Label, Smartcall, various wholesale distributors, Pep group, Pick ‘nPay, Edcon, Jet, CNA, Massmart and the Spaza association, which should see broad penetration into the lower end of the market.

Back to my faltering attempts to convert my M-Pesa credits to cash. Once I entered the bank, the Nedbank staff bent over backwards to help me. But they were as stumped as I was in how to access this elusive money. Sheepishly, they admitted that I was their first M-Pesa customer, which is not really that surprising in an upmarket, suburban mall. After about 10 minutes, a consultant with a large, screen-less mobile keyboard arrived and began punching in data and was finally able to release my R20.

Apparently there are different kinds of money transfers via M-Pesa — some that you can do via ATM and some that you need to go into the branch for. They also mentioned something about the first 48 hours when you can use an ATM. How was I to know?

The M-Pesa offering is a good thing and may even turn into something great. It could do wonderful things for the unbanked, but it is vital that the process is really as simple for the man on the street as all the banking executives want it to be.

In an economy as tight as this one, when every rand matters, anything that feels risky or difficult will struggle for wide-spread adoption, and ruin a system that could potentially transform an entire sector of the economy.