A call to South Africa’s masses
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There is a faint air of the evangelical preacher about Brian Richardson, the 52-year-old chief executive and co-founder of Wizzit, a South African company that has become a pioneer in the business of mobile banking.
It is not just his austere uniform – smart black slacks and open-necked black shirt, its cuffs emblazoned with the company’s logo. As he explains his determination to challenge conventional banking prejudices and “bring affordable financial services to the mass market”, Mr Richardson is clearly an entrepreneur with a mission.
Once a marketing executive for the South African division of Barclays, he is sure that the “bureaucratic and process-driven style” of leading South African banks blinds them to a huge commercial opportunity: selling to the millions of black South Africans who 14 years after the end of apartheid remain rooted to the bottom of the country’s socioeconomic pyramid.
Conventional banks believe low-income groups offer too little in revenues to make it worth establishing branch networks. Yet Mr Richardson and his business partner Charles Rowlinson, a financial specialist, have focused instead on the way the poor are gradually entering consumer markets for the first time, a trend epitomised by the sharp take-up in the ownership of mobile phones.
Less than half of South Africans have bank accounts but nine out of 10 own a mobile phone, Mr Richardson says. “It is the fastest growing industry in Africa. The power that is embedded in a cell phone makes it an obvious choice as a channel to get to the market.”
Four years on, that insight has been converted into a business that is becoming viable. The company does not advertise the fact, but the industry reckons Wizzit has more than 250,000 customers, a handy foothold in a fiercely competitive market. Each pays a fee of just under R40 ($4.30, €3.10, £2.90) to open an account and a commission of a few rand on each transaction.
Mr Richardson used his “entire savings” (again he declines to say how much) to set up the company, has attracted venture capital from International Finance Corporation, the private-sector arm of the World Bank, and three local investors. He expects to break even next year, in line with the business plan.
And in the past few months, he has been sufficiently confident in the company’s prospects to launch its first ventures abroad, starting a mobile bank in Zambia in October and another last month in Romania, initially on a pilot basis.
Wizzit is not unique. As Mr Richardson knows only too well from industry conferences, the mobile banking market is “incredibly hot”, with a flurry of telecoms companies – including Vodafone of the UK, credit card issuers, banks, remittance transfer companies and development agencies – either setting up mobile banks or announcing plans to do so in the less developed markets of Africa and Asia.
But there are several reasons to think that Wizzit’s model might be imitated. Its technology is relatively simple and user-friendly, making use of a communications channel found on all handsets rather than depending on downloaded software.
And it can be used irrespective of which mobile company carries the call. Like the innovative telecoms companies that have led developments in the sector to date, Wizzit has been faster and more flexible than bigger banking rivals. “I have always said to my people: ‘If we ever start behaving like a big bank take a baseball bat and hit me over the head with it.’ We have never let procedure and process determine the way we do our business.”
But Mr Richardson has also been quite happy to do deals with individual banks. Wizzit customers can draw or deposit cash at branches of Absa – one of the country’s top four banks – as well as the South African Post Office, for example. And unlike some telecoms start-ups Wizzit has a full banking licence, secured in exchange for a regular fee from South Africa’s Bank of Athens as part of what Mr Richardson calls an “alliance banking model”.
At a time of rapid growth in mobile banking operations – including MobileMoney, a joint venture between Standard Bank and MTN – and greater regulatory scrutiny, this model could prove attractive. Complying with banking rules designed to protect customer deposits and prevent money laundering or other criminal activity could add hugely to the costs of pure telecoms companies that aspire to the mobile banking market, Mr Richardson believes.
And some of the most attractive markets, such as India, could soon be off limits unless mobile banks are properly regulated. “We may [be] seeing natural limits of [the] telco [model],” Mr Richardson says. “I think the regulators have really cooked their goose.”
Perhaps most importantly, however, Wizzit can claim to be closer to its target market than many of its international counterparts. Mr Richardson believes low-income groups in developing economies have more to gain than most from moving out of the cash economy, partly because they are much more vulnerable to rampant crime.
He has also brought his target market into Wizzit’s business in a more profound way. The group’s logo, image and name are the product of a team of five low-income black students from the Vega Brand Communications School in Johannesburg. “I’d gone to one international and two national agencies and what the students came up with was remarkable,” Mr Richardson says. He adds that the team members, none of whom had bank accounts, simply had a better feel for their potential customers than typical marketers.
Likewise, the formerly unemployed people who work at Wizzit’s call centre in Sandton, Johannesburg, know from experience the importance of small amounts of money for their customer base and are responsive to complaints.
The company’s direct salesforce – 3,000 formerly jobless young people who live in townships – help to break down the social barriers that sometimes make banks intimidating for poorer people. These so-called WizzKids, all sporting black T-shirts with the logo of four red splashes, cluster in shopping centres, earning a commission for selling accounts and persuading customers to make transactions.
“The market is much more likely to buy from you because they know you are from their community, their sports club or church group,” Mr Richardson says. “Banks have traditionally expected the unbanked to come to them. We decided to take the bank to the unbanked.”
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