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First National Bank Finds M-Banking Model That Works

The mobile banking channel offers banks a way to overcome the lack of an advanced infrastructure in South Africa.

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There are times when a service is deemed as "nice to have" in one country while offering that same service is a competitive necessity in another country. Such is the case of mobile banking in South Africa. While banks in the U.S. are just getting their feet wet with mobile services, in a country with a less extensive infrastructure, the mobile channel is proving to be a great servicing and customer acquisition tool.

Johannesburg-based First National Bank (FNB), a division of FirstRand Bank (US$127 billion in assets under management) began offering m-banking five years ago. Not only was the bank under pressure from its shareholders and the government to make banking more inclusive, it also needed to find ways to grow its customer base, according to Len Pienaar, CEO, mobile and transact solutions, with FNB. Since few South Africans have computers with Internet access in their homes but almost everyone in South Africa has a mobile phone, he explains, an m-banking service was a natural fit for the bank.

Of course, creating a mature mobile banking offering took time. FNB's initial m-banking foray in 2002 relied on an interface based on the WAP and WIG (a SIM card application) protocols, Pienaar relates. Largely because the protocols tend to be device- and network-dependent, however, Pienaar says, adoption was poor. So the bank redeveloped its m-banking platform in 2005, implementing an SMS/text-based program.

Adoption has been steadily climbing ever since, Pienaar says. "With the relaunch of cellphone banking in 2005, we were looking for a technology that could work on all mobile phones, all SIM cards and any network," he explains. "It needed to work without requiring any setup and be consistent across any network. SMS was the obvious choice."

FNB offers two related m-banking services: inContact and FNB Cellphone Banking. The inContact offering notifies customers in real time of account activity via SMS messages, providing them with up-to-the-minute account activity and helping to monitor for fraudulent activity. The interactive FNB Cellphone Banking service allows customers to make transfers among their FNB accounts; make electronic payments to third parties; check balances and view abbreviated statements; and purchase prepaid items, such as calling cards.

The applications were developed in-house, Pienaar notes. But FNB also works with Clickatell (Redwood City, Calif.), a provider of SMS messaging gateways over any network or device, for some of its international messaging.

Later in 2005, FNB also launched the FNB Cellphone Banking service on a platform based on unstructured supplementary service data (USSD) technology, which allows the bank to display an interactive menu on customers' phones. This application was executed with the cooperation of FNB's local mobile network operators. Pienaar says the bank received positive feedback on the service because it is user-friendly, adding that 90 percent of all FNB Cellphone Banking transactions occur on the platform. "USSD allowed us to overcome the keyword requirements of SMS without introducing the complexities associated with WAP," he explains.

FNB's m-banking services are proving popular. According to Pienaar, nearly 70 percent of the bank's customers in South Africa subscribe to the inContact service; the Cellphone Banking service has half a million customers signed up.

As for his U.S. counterparts that just now are climbing on the m-banking bandwagon, "Keep it simple," Pienaar suggests. "Don't look for customers for your solutions, but focus on getting solutions for your customers. ... [They] probably don't want a bank branch in their pocket on Day One."

Institution: First National Bank (Johannesburg), a division of FirstRand Bank.

Assets: US$127 billion in assets under management (FirstRand).

Mobile Banking Strategy: In a country where few homes have Internet access but most consumers have cellphones, FNB views m-banking as an opportunity to serve more consumers and expand its customer base.

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