MICROCAPITAL STORY: CGAP and WIZZIT Collaborate to Expand Mobile Technology Services to Provide Branchless Banking to Poor Citizens in Rural South Africa

CGAP has recently announced that they intend to collaborate with WIZZIT to expand mobile technology services to provide branchless banking to poor citizens in rural South Africa. CGAP insists that mobile services, for the first time, will link poor citizens in small towns and rural areas to banking services and local agents who manage cash.

According to Elizabeth Littlefield, CEO of CGAP, the project’s three key components use point-of-sale devices in combination with WIZZIT’s mobile phone banking platform:

• A mobile banking payment service for the major wholesalers serving more than 500 microentrepreneurs (spaza shops) in the township of Motherwell, where three in five people are unbanked.

• A pilot program for easy account opening and preferred pricing at Dunn’s outlets—a leading South African clothing retailer. If successful, this pilot program will expand to 289 stores throughout the country. To encourage sign-ups and use, customers will be given incentives to make purchases with their Maestro debit card rather than cash.

• Easy account opening using a direct sales model and the South African Post Office for distribution.

Mobile phone operators have had strong incentives to team up with microfinance companies serving untapped markets. In addition, mobile operators such as M-PESA in Kenya, GCash and Smart Money in the Philippines have been successful in implementing and offering financial services to the poor, with a combined several million users utilizing mobile money transfer services.

In August 2007 CGAP reported that data provided by Wireless Intelligence suggested that branchless banking and mobile payments are more likely to happen in poor countries than rich ones. CGAP further stated that with the “world’s three billionth mobile phone connection made, the first billion mobile connections took a dozen years, and the second just two and a half years, with 82 percent of new subscribers coming from developing countries. The third billion was just under two years. The growth of mobile is centered squarely in places like Mumbai, not London.”

MicroCapital reported in March 2009 that a key concern is that as the mobile financial services branchless banking technologies continue to rapidly evolve and increase in scale; regulators are likely to see more sophisticated frauds and new consumer safety issues. Existing loopholes must be addressed and non-bank providers of branchless banking services must be required to disclose prices and service offerings, and observe agent qualification, data privacy, and security rules.

Furthermore, as noted by MicroCapital and outlined by CGAP’s article “Regulating Transformational Branchless Banking”, the challenge will be to develop regulations that are proportionate to the risk. The regulations must provide sufficient consumer protection, while at the same time permit innovation and scaling-up of mobile financial services that are potentially very valuable to low-income clients.

CGAP (Housed at the World Bank, is an independent policy and research center dedicated to advancing financial access for the world’s poor and is supported by 30 development agencies CGAP has five core areas: 1) Developing and strengthening a wide range of institutions and means, both financial and non-financial, that deliver financial services to the poor. 2) Improving the quality and availability of information about institutional financial performance. 3) Establishing supportive legal and regulatory frameworks. 4) Improving aid effectiveness. 5) Reaching poor and underserved clients and ensuring impact on their lives.

WIZZIT (a division of the South African Bank of Athens Limited that offers a full-service cell phone based banking facility unrestricted by various networks, type of SIM card or age of cell phone) offers secure payment mechanism to the unbanked and under-banked people of South Africa.

Formed in 2005, the WIZZIT mobile banking product is a transactional bank account that utilizes cell phones for making person-to-person payments, transfers, pre-paid purchases, and a Maestro debit card for making payments in the formal retail environment. Its target market is the estimated 16 million unbanked or underbanked South Africans, which makes up about 60 percent of the country’s population.

By Zoran Stanisljevic

CGAP, April 2009: CGAP and WIZZIT partner on mobile banking for poor people in rural South Africa

CGAP, August 2008: Should banks play offense or defense with the poor?

CGAP, September 2007: M-payments, m-banking and the future of mobile phone banking

MicroCapital Story, March 2009: Challenges to Regulation of Mobile Transaction Services, E-Money, and other Branchless Banking Technologies

CGAP: Homepage

WIZZIT: Homepage