Financial Sector Development in Africa: Opportunities ... - World Bank

48 Porteous
offer an Internet channel. However, the functionality of mobile (and
Internet) banking is often very restricted; for example, in many cases,
customers can only obtain balance information or transactional alerts
but cannot make payments. A few banks, however, chose a more aggressive
path.
First National Bank (FNB), a large retail bank in South Africa, is widely
recognized as having a successful and profitable mobile channel that was
launched in 2005. By 2010, the bank reported some 2 million active
mobile customers, a significant proportion of its retail customer base.
FNB had adopted an explicit strategy of migrating marginal customers
(whom it could not serve profitably using conventional bank channels
such as branches or even automated teller machines, or ATMs) to the
mobile as their main banking channel. FNB’s profitability comes mainly
from the commission that FNB receives from MNOs each time its clients
buy prepaid airtime directly from their bank accounts. Other banks in
South Africa have pursued similar strategies, resulting in twice as many
South Africans (30 percent of the banked population) using mobile banking
than use Internet banking. However, FNB’s success came in the relatively
well-developed retail banking environment of a middle-income
country in which half the adult population was already banked. Also,
access to cash-handling channels such as ATMs or points of sale was widespread
in urban areas in that country, so FNB did not have to build new
channels for mobile usage. While a number of banks entered mobile
banking in this first generation, FNB stands out for its focus on this
channel, and for its success.
Second-generation providers had to go further. They sought to provide
electronic payment services in countries such as Zambia, which
lacked electronic payment infrastructure. The need to find cheaper and
more effective ways of selling prepaid airtime was an early driver for
MNOs because distributing physical scratch cards was more expensive
and risky than selling airtime as a digital good (digital airtime could be
bought in smaller quantities, which made it more accessible for poorer
customers). Distributing airtime in this way necessitated a cost-effective
payment solution. An electronic wallet offered promise: it could be
stocked with money deposited via agents, and then the money could
easily be transferred at the push of a few buttons either to purchase digital
goods (predominantly airtime) or to send remittances.
This latter usage, person-to-person transfers, was an important driver
in the launch of mobile financial services in the Philippines in 2001.
The Philippines is a large country with many rural and remote areas