Battling for South Africa’s Hidden Cash

Banks and phone companies try to expand their reach | “Better to have an account instead of putting money under your bed”

Chris Spillane

M-Pesa, a big success in Kenya, is making another run at the South African market


Standard Bank Group hired Itumeleng Heymann to convince her neighbors that their cash would be better off in a bank account than hidden at home. “A lot of people around here don’t have accounts,” says Heymann, 27, wearing a bright blue Standard Bank T-shirt as she works the morning rush at a market in South Africa’s Tembisa township. They “don’t want to open accounts because they are scared that maybe there’s lots of fees. We explain to them why it’s better to have an account instead of putting money under your bed.”

Heymann is part of an army of 1,000 salespeople who are helping the bank battle mobile-wireless companies like Vodacom for the more than 11 million mostly poor South Africans — a third of the adult population — who don’t have bank accounts. Both companies are No. 1 in their industries in South Africa. Johannesburg-based Standard Bank has 31 percent of the nation’s banking assets, according to the Banking Association of South Africa; Vodacom, a unit of Vodafone Group based in Johannesburg, says it controls more than half the wireless market.

For millions of Africans, mobile phones act as bank accounts through a service such as Vodacom’s M-Pesa, which allows customers to transfer funds to other people and pay bills. To add money to their accounts, they go to designated supermarkets, newsstands, or other retailers that serve as M-Pesa agents. M-Pesa has 17.1 million customers in Kenya and almost 5 million in Tanzania.

In South Africa, Vodacom has signed up just 1.2 million customers since introducing M-Pesa almost three years ago in partnership with South Africa’s Nedbank. Vodacom struggled in South Africa in part because they didn’t offer customers enough places to withdraw cash, and because it faced more competition from banks than it did elsewhere in Africa, says Vodacom Chief Executive Officer Shameel Joosub.

Vodacom and Nedbank say they will reintroduce M-Pesa in South Africa in the coming months with new technology that lets customers conduct transactions at more locations; they may also sign up more local retailers to serve as agents. M-Pesa customers pay 6 rand (60¢) for a cash withdrawal of less than 1,000 rand and 2.45 rand to transfer amounts less than 5,000 rand.

Standard Bank’s answer to M-Pesa is the AccessAccount, which offers 24-hour banking through cell phones and ATM cards that can be used at 7,000 locations. AccessAccounts cost 59 rand a month, with no fees for transfers or withdrawals at Standard Bank branches and AccessPoints — retailers and other stores that the bank has signed up. “We’ve got something that’s neatly positioned to the M-Pesa product,” says Audrey Mothupi, Standard Bank’s head of inclusive banking.

More than 550,000 customers have signed up for AccessAccounts since March 2012. One of them, Sarah Manyaka, a furniture saleswoman, says she’s happy with the service. “I was eating money like peanuts,” she says, speaking of her spending habits before having a bank account. “Since I had this account, I’m so happy because everywhere you can deposit or get your money straightaway.”

The two giants aren’t the only ones vying for banking business in South Africa. First National Bank acquired a telecommunications license and offers its 8 million customers free data that they can use for banking or phone calls to other FNB customers. That has helped First National become the dominant company in mobile phone banking, with 40 percent market share, according to CEO Michael Jordaan. “We’re always paranoid about every form of competition, and we’re particularly paranoid about the competition that comes from the nonconventional guys,” he says. “What we’re doing to telcos is going to be far more disruptive than what telcos are going to do in banking.”

The bottom line Banks and phone companies are rolling out new services to reach 11 million South Africans who don’t have bank accounts.


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