Bankable Frontier Weblog

11 August 2005

Today, newspapers in SA announced the launch of a significant mobile banking service:  two large players-- MTN (press release here), with some 8 million cell phone subscribers, and Standard Bank, with 6 million banked customers, announced the launch of their joint venture: MTN Banking.

Even though this is the first major announcement of its type in South Africa, cell phone banking is not new: for example, the stories of Smart in the Philippines and Celpay in Zambia were covered in a previous blog post. The same post related how MTN has already been innovative in creating person-to-person transfers of airtime, and broadening the ways credit cards can be accepted by small merchants. Nor is the joint venturing approach between cell phone companies and banks—see the DoCoMo-Sumitomo Card Division post.

What is different about the MTN-Standard launch is that the new Mobile Money account explicitly targets low end customers. Ease of opening an account is facilitated in that the account number is based on the cell phone number. Account charges are similar to those of low end Mzansi accounts—that is, no monthly fee, but transaction-based fees, such as around US$0.5 for a person to person transfer (presumably only within the Mobile Money account base) and around US$0.8 for an ATM withdrawal, using an ATM card. This may signal the bank’s acceptance that the lower account fees made possible by new generation distribution at much lower cost should be generally available, not only on Mzansi accounts. Indeed, if products like Mobile Money really take off, they will make Mzansi accounts in their present form much less relevant; but will increase the pressures for complete interoperability of the new class of mobile accounts too.

MTN and Standard already speak of rolling out the product into other African markets. MTN is dominant in Uganda and Nigeria, for example; Standard has a presence in 17 African countries, and is seeking to grow its retail business in many of these. So the diffusion into lower income markets could be very rapid, not least because competitors like Vodafone/Vodacom cannot be far behind.

This is one product launch to watch carefully. As I have argued time and again, a key success factor is how quickly critical mass is achieved with such network products. This is because a core part of the value to the customer is being able to transfer safely and cheaply to other customers in the network. But MTN and Standard Bank, which are already among the top South African consumer brands, must be acutely aware of this. They are likely to do everything in their marketing power to ensure rapid success of their product, and entrench their first mover advantage. This event is indeed likely to move the bankable frontier in Africa!