1. Page 1 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Using technology to bank Africa Lessons Yolande van Wyk Head: Strategic Projects FNB Mobile and Transact Solutions

2. Page 2 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Topics A look at GSM and why its so successful in Africa Technologies typically available for mobile banking Typical business models for mobile banking A quick look at banking in Africa Mobile banking in Africa Other barriers to rolling out a successful solution Our lessons

3. Page 3 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Excuse me while I take my foot out of my mouth… Everything that can be invented has been invented. Charles H. Duell, Commissioner, U.S. Patent Office, 1899 The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular? David Sarnoffs associates in response to his urgings for investment in the radio in the 1920s This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us. Western Union, internal memo, 1876

4. Page 4 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider …and put the other one in Vodacom's initial growth projections catered for 250,000 subscribers within ten years. Vodacoms initial projections for the number of prepaid customers was 50 000 Coopers & Lybrand estimated 160,000 - 220,000 subscribers by the year 2002 M-Net Communications Technologies CE Ian Wilkinson calculated a potential base of 300,000 - 500,000 subscribers by 2004

5. Page 5 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider The ultimate disruption In 2004 Africa added almost 15 million new mobile cellular subscribers to its subscriber base; Equivalent to the total number of (fixed and mobile) telephone subscribers on the continent in 1996, just eight years earlier 1 ; Only 8% of people in Africa use a mobile phone but 52% of the population in low income countries as a whole live in areas with wireless reception 2 ; This difference fuels the expectation that growth will continue at rapid rates, with some analysts predicting that there will be close to 200 million mobile subscribers in Africa by 2010 3. Relative to mobile phones, internet usage is low: outside of South Africa, barely 1% of Africans access the internet. 1.ITU data, Gray (2005:1) 2.David Porteous - THE ENABLING ENVIRONMENT FOR MOBILE BANKING IN AFRICA 3.IT Web Market Monitor 5 May 2006

6. Page 6 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Why is GSM so successful in Africa 1 ? GSM technology vs Fixed line; The shorter payback period on investment compared to fixed line; Lower installation costs and faster build than fixed line; Straightforward scalability of mobile compared to other infrastructure investments. Greater ability to overcome geographic hurdles eg mountains,deserts. Complementary with lower levels of skills than needed for computers or the internet; Illiteracy and minority languages; Lower social/income entry barriers than the internet; Lower up-front expenditure - ( Vodacom SIM Pack Sold for R49.99 (approx $7)with R55 airtime voucher included ); Greater ease of sharing mobile handsets than fixed line telephony. Business model innovations: Pre-pay which helps overcome credit barriers; Micro-entrepreneurship; Mobiles as public telephones. Government and regulatory change: Competition with fixed incumbent, stimulating the growth of the telecommunications market; Liberalisation of the telecoms market; Rollout requirements in licences such as rural coverage. 1.Africa: The Impact of Mobile Phones, The Vodafone Policy Paper Series Number 2 March 2005

7. Page 7 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Technologies typically available for mobile banking SMS Good for notifications; Keyword based services; Micro Payment services via premium rated services; Available on any handset. USSD Menu based services; More intuitive than SMS; Available on any handset. WAP Handset limitations (growing penetration); Many networks in Africa not packet- data enabled yet (GPRS/3G/HSDPA); But will become the access medium of choice in the future. WIG/SIM Toolkit Application has to be downloaded; SMS based; Encrypted; Usability an issue? Java Complicated to implement; Application has to be downloaded; J2ME compatibility not ubiquitous.

8. Page 8 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Technologies deployed in South Africa SMSUSSDWIGWAP FNB (division of FirstRand) ABSA Wizzit (division of Bank of Athens) Standard Bank Nedbank MTN Banking (division of Standard Bank)

9. Page 9 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Typical business models for mobile banking Additive model Primarily target existing banked customers; Offers the mobile channel as an additional channel; Alongside or as part of others (such as internet). FNB, ABSA, Standard Bank, Nedbank Transformational model Intentionally reaches out to markets beyond the existing banked groups; Product offering which meets the known needs of the unbanked groups. Wizzit, Celpay.

10. Page 10 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Business models deployed in South Africa AdditiveTransformational FNB (division of FirstRand) ABSA Wizzit (division of Bank of Athens) Standard Bank Nedbank MTN Banking (division of Standard Bank)

11. Page 11 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Sophisticated markets (e.g. South Africa) Well established and strong banking sector; Good penetration; Banking a trusted sector; High level of technology and innovation. Developing markets (e.g. Zambia): Banking established for a significant period; Processes bureaucratic and old-fashioned; Technology limited and developing. Conflict/post-war (e.g. DRC): Lack of trust in the banking sector; Low level of savings; Marred by inaccessibility; Lack of services and infrastructure; Corruption: environment of distrust. Banking in Africa? Depends where you are…

12. Page 12 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider What do the poor want from their bank 1 ? Keep my money safe Take my cash, give me cash I want to pay my bills and send money home 1.David Porteous - THE ENABLING ENVIRONMENT FOR MOBILE BANKING IN AFRICA

13. Page 13 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Good product mix for mobile banking in Africa Balance enquiry; Payments and peer-to-peer payments; Prepaid airtime. …and supported by adequate access to deposit and cash withdrawal facilities. NOTE: Transactional services such as Celpay Zambia & Celpay DRC can provide the retail access point for banks that do not have a comprehensive retail network.

14. Page 14 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Other barriers to rolling out a successful solution Regulation as an inhibitor to the development of a successful solution: Technology is bypassing regulatory guidelines; Current regulations do not cater for new technology; "Realness" is lost; Practicality of implementing regulation is difficult. Customer education: Usability; Difficult to "teach" customers due to remoteness. Support and process: The support of the solution is critical Also keep in mind: Network coverage; Balance the "High-tech" of the solution with levels of education and literacy;

15. Page 15 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider South Africa: 18 Months in review All four major South African banks have launched or relaunched a cellphone banking offering Cellphone Banking has moved from a first to market product to a significant transaction channel for banks, with millions of transactions worth hundred millions of rands per month reported Major customer awareness and education campaigns have been undertaken by all banks, with collective marketing spend estimated at over R100 million for the past year A proliferation of technology and business models has been adopted, with no clear winner in terms of technology or business models emerging Adoption by all walks of life has been seen, with the collective registered base in South Africa estimated more than 500 000 Related services, like FNBs inContact service now have more than 3 million registered customers

16. Page 16 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Our lessons Technology alone cannot guarantee success; Technology is an enabler; It has to be supported by a solid product offering; 3 Ps – Product, people, process. Registration Education The needs of the market will dictate the choice of technology and the service/product offered to the market; We need to understand the needs of our customers; Handset capabilities; Market segments and their needs. Be Afro-centric, traditional European models can not be applied; Regulation should incubate, not inhibit; How do we encourage access to banking, but limit: Risks related to money laundering? Credit exposure? We need to find the middle ground. Success through strong relationships: Financial institutions; Regulatory bodies; Mobile network operators. Good product design is crucial: Keep it simple: Easy to understand, easy to use; If it breaks once, they will not try again;

17. Page 17 | 12 June 2014 | First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Service Provider Thank you We must be the change we wish to see. – Mahatma Ghandi