As alluded to earlier today, we had the opportunity recently to talk to CABS Managing Director Kevin Terry, about their mobile banking service, Textacash. We discussed how they introduced the new mobile phone (and card) based banking product in a radically changed financial sector. We also how they are reaching the unbanked and briefly touched on the role of mobile operators and the regulators. Below is an edited transcript of the interview.
Techzim: Some background on Textacash?
Terry: From the bank’s point of view, mobile, obviously as a delivery channel is very attractive, because the cost of service for customers is so low. So from a strategic point of view we’d been watching this technology’s development for a long time. CABS has always had a big element of mass market and so it made business sense for us to venture into the mobile banking world, and not only to increase convenience for our clients but for us to also embrace and assimilate the latest technological trends into our banking model. We researched similar products that have been launched in Africa and we looked at M-PESA in Kenya for reference.
When we embarked on this project, we had a lot of interest from our clients. You will recall in 2009, following the introduction of the multi-currency system, NGOs focused on providing basic commodities to households, agriculture input support, restoring the agriculture supply chains and so on. We got involved in offering these various organizations financial solutions, which led us to developing simple, affordable and efficient mobile products to meet this need.
It also meant our brand would tap into the unbanked and under-banked sectors of the community. While CABS has a very profitable upper market we saw our huge mass market base as an opportunity to grow our business and so we considered other avenues that would lower the costs for customers whilst increasing our market share.
Our experience in the mobile banking space has given rise to the reality that mobile banking requires great mobile network coverage, which is not always available in the rural areas. We will still require the foot print of our branches where there is no coverage. Strategically we realized that we would still need to consider
We called this product Textacash, a mobile offering plus a bank card. So it’s our version of the wallet, but the wallet has a card attached to it.
The attraction of the Textacash account was that there is no minimum balance and no monthly fees.
Techzim: You were going it alone initially?
Terry: We started off doing this alone. Then I had what I call my St. Paul moment when I fell off my donkey at a conference down in South Africa at the beginning of 2011, and I realised that actually in order to make this mobile stuff work you needed an ecosystem where everybody is connected. It doesn’t work well when you are alone, you need to try and be part of an ecosystem.
Zimswitch at the same time had been working on their own mobile offering and so we decided to partner them from a technical perspective. I realized that sooner rather than later, Mobile channels becomes like ATMs and POS devices, which are shared across banks. Effectively with Zimswitch that’s what we’ve been driving. We are also working with mobile phone service providers where we are encouraging existing customers to sign up for Textacash. Currently we have Telecel operating well and we’ve got customers now starting to sign up using NetOne.
Ours has been a hybrid offering, with a bank account and a mobile facility, branded as Textacash. We plan to migrate this to a position where you have an account that has mobile functionality and Textacash will just be the payment platform, texting cash. The plan going forward is to add as many payment services onto your phone as you can, so pay for DSTV, pay for ZESA, etc.
With Textacash you can transfer money to any local mobile network. So the other thing we realized is that the key to a successful roll out is to have agents. The more agents you have the better it works. With the widest branch network and a healthy portfolio of agents across the country, we believe CABS is at the forefront of extending banking to the previously unbanked.
The advantage we have as bankers is that we have some level of experience in managing the potential risks around agents. Our strategy is to make our agents function as banking agents not just mobile remittance agents. We also pay them incentives for signing up people for mobile and we aim to roll out agents as fast as we can countrywide. Mobile banking is new in the country and it takes a lot of hard work and investing into We therefore constantly have to manage and monitor the agent space.
The distribution network is one thing. But you also have to have the products and the desire to have customers in those market segments. And there are very few players that really want people in the under-banked and unbanked space.
Techzim: But have you exhausted those unbanked that are at least within coverage
Terry: We have a phased roll out strategy that is designed to eventually cover the entire country. The interesting thing is a lot of the money remittance doesn’t happen necessarily urban to rural, it also happens urban to urban. So it’s people just sending money across town.
Techzim: What would be your ideal regulation to ensure that MNO and banks are playing nicely?
Terry: The regulation must ensure that the playing field is level and is conducive to the creation of an ecosystem where everybody is connected.
Techzim: Has anything being said about this?
Terry: Bankers Association of Zimbabwe has made this point to the Regulators and the Ministry of Finance in this current discussion about fees and charges. With an ecosystem approach, we can bring the costs down and in turn ensure that our customers get an efficient and affordable mobile product that meets their needs.
Techzim: Milestones you have achieved?
Terry: In addition to the widest branch network, we have a good number of agents across the country. They have a POS device where they can do a lot of banking transactions, print out a receipt, pay out in cash, sell airtime and recently we added the ability to pay DSTV subs. We obviously target those agents who might have cash supplies of their own because of the nature of their business. And other agents we supply cash or they come and collect cash at branches.
Techzim: How busy are these guys? How many average transactions are they carrying out?
Terry: The highest agent last month (December 2012) had 480 transactions and the average was 60.
Total transactions across our mobile card base in December were over 250,000. A lot of this happens in traditional retailers, where customers are using cards to make purchases and get cash. So in terms of our model I’m very happy because it starts to acquire the same volumes as our traditional customer type banking halls and POS devices, and it’s a very low cost transaction channel so that’s where the model comes in for a bank. It can help you serve these customers, a) affordable, and b) low cost to us. So it’s a win, win.
Techzim: So is it growing, how does it compare to 2011 numbers?
Terry: A year ago we were doing 95,000, so effectively we’ve grown by over 160%. Word of mouth has a lot to be said for this sort of thing.
Techzim: How does it compare to the traditional banking CABS customer base?
Terry: CABS customer base is about 200,000. We’re probably still the biggest player locally. And then 75,000 mobile customers on top of that.
TZ: And in terms of the value of these mobile customers compared to the traditional banking ones?
Terry: This segment has potential to grow and as it grows it generates exponentially more revenue than costs.
The key to the success of this product is that you want your customers to use it every month; it needs to be part of their lifestyle. And the way you do that is you start adding more benefits to it. You add the value added services on top of that. The highest usage from most of our customers is on airtime purchases and balance enquiries and then you have the transfers and Textacash transactions.
Techzim: Any challenges you have faced going into mobile?
Terry: The challenges have been around mobile coverage and the reliability of signal because our POS devices are GPRS and in Zimbabwe mobile operators don’t reserve a chunk of the channel for data only. So data also competes with voice resulting in voice crowding data out. If you’ve got a POS device that’s trying to connect, it often drops transactions so that is a challenge for us.
Other challenges are clearly around monitoring agents, training them and finding the right ones in the first place.
Techzim: What kind of agents do you target?
Terry: We targetrural businesseswho we think can support cash payouts. So the more cash they generate themselves the less we have to get cash to them. So we try and target successful rural business people.
The other challenge is the ecosystem. Everything has got to be connected. If you read all the research in the rest of the world with these mobile environments, the more interoperability there is, the more successful they are. Because everything is linked, it’s a bit like the internet; it doesn’t work until you can get anywhere and do anything. But part of the back of my mind says that the next thing is information services as well by USSD. Having said that I think the world of smartphones is going to overtake the USSD channel in emerging markets.
Techzim: How long do you think that’s going to take, for it to be critical mass enough?
Terry: It wouldn’t surprise me if we start to see critical mass in 2014 for smartphone type stuff. The biggest growth in smartphone sales is in emerging markets because people hunger for information. And if you’ve got a smartphone it’s a device that gives you access to browsing and you’ve got all this information and it’s there. It’s not a laptop but it’s the same.
Techzim: But this middle class in Harare that is buying low cost smartphones now, are these the majority of people in Zimbabwe?
Terry: They are not. But I think for upliftment in rural areas, technology has a role to play because information is key to all this. It was reinforced as I was driving back from Nyanga recently and I was going through Macheke, and there were 50 people all selling tomatoes on the side of the road. This is a whole rank of people all selling exactly the same thing, and I’m saying so how many of these tomatoes rot. Why are they all growing tomatoes? If they knew the price of tomatoes in Harare would they be sending them in town? I don’t know. I just get the sense that from a markets point of view the rural guy doesn’t have access to information about pricing and what the markets require.
And also the other side of the coin is that your access to financial services must assist somehow. I don’t think the financial services products are yet there for the lower end of the market. I think we have a long way to go to figure out what kind of financial services the unbanked could use, and we also haven’t got particular products in the mobile space for financial services. So, savings products, Life and Insurance products that don’t require regular monthly premium but are pay-as-you go type cover, and health cover and all those sort of things. I think that’s coming because more and more people are starting to invest time in trying to work out how to give financial access to people at the bottom of the pyramid.
Techzim: Online payments?
Terry: What’s happening with Zimswitch is that they have got this Vpayments project where we have been running a pilot with uMAX. uMAX customers who are registered with us can use their CABS account to buy bandwidth online, having registered their accounts with us. We now have regulatory approval to roll this out. So now we can link it to the phone as well and it becomes another product that you connect into your payments system. So we can have a mobile wallet and you can use that to shop online.