A Wizard called Wizzit

 With all due respect to Harry Potter, wizardry isn’t always found at Hogwarts School of Witchcraft. Take a look at South Africa’s newest bank, Wizzit.  A virtual bank launched  in 2005 by a group of local entrepreneurs, it has no branches of its own. Its customers use their mobile phones to transfer money, purchase pre-paid electricity vouchers, buy airtime for a pre-paid mobile phone and a host of other services.

As a recent GTF story explains, the bank appeals to the 40 % of the local population who don’t have a bank account or those low-income workers with accounts who can spend an hour getting to a bank, an hour in a queue and an hour going home just to make a deposit or withdrawal. Thanks to the wizardry of the mobile phone, Wizzit customers can now do all this by text message and for substantially less than traditional banks charge.

Not a topic worthy of a blockbuster movie, perhaps, but surely just as magical.

Two steps forward, one step back

 In 1993, only 16 African countries had mobile networks and none of them had any competition. Today, all 55 countries have mobile networks, and 44 of them are operating in competitive markets.

According to the World Economic Forum’s 2007 Africa Competitiveness Report, nearly half of Africa’s telecom service providers have at least some private-sector ownership, with 25 fixed-line operators wholly or partially privatised over the past ten years or so. That’s the good news. Here’s the bad: Africa still  has the greatest number of monopoly service providers of any region worldwide.

Some progress in Kenya, though. After years of dithering, it now looks like the government intends to sell a 40% stake of fixed-line monopoly holder Telkom Kenya, most likely to a consortium led by British Telecom. If BT succeeds, it will need to re-brand Telkom, long synonymous with inefficiency and corruption. How else to explain the fact that the country now has over 9m mobile phone owners and less than 300,000 people with a fixed line service?

M-pressive prospects

A new report has given some insights into Kenya’s burgeoning mobile payments market. First launched by Vodafone and Safaricom in October 2005, the country’s M-Pesa scheme has grown rapidly ever since. But what is most striking is the potential for such a service to not just facilitate smoother transactions—but perhaps to replace banks altogether. 

Users of the service can deposit and withdraw funds in much the same way they top up their mobile phones. Money can be instantly sent to any phone, which the recipient can then cash in—and it can also be used to buy goods and services. In short, it acts much like a virtual bank card, with Safaricom resellers acting as bank branches. Users don’t even need a bank account.

The need for this is great. In a country with some 36 million people, there are just 450 bank branches. The North Eastern part of Kenya, home to some 587,000 people, has just three branches. Being able to easily send and receive money from any part of the country, via one’s mobile phone, provides a major benefit to locals.

There are many examples of how it is being used: remote truck drivers being sent money for lorry repairs; travellers depositing money at home and withdrawing it at their destination, as a protection against theft; and even taxi drivers preferring M-Pesa for payment, rather than having to carry lots of cash.

Mobile payment systems may not have gained much currency in developed markets, where banking services are easily available and most transactions can be done easily online. But for developing markets, with poor infrastructure, few banks and bigger security risks, the potential seems very great indeed.