Mondex and biometrics (i.e., Mastercard and IDX) in South Africa, from the London Times of January 13:
An e-purse trial in South Africa may show the way for payment systems
THE CONGREGATION of 10,000 sat patiently under the scorching sun in the remote Venda region of South Africa's Northern Province. Having travelled for days to the furthest corner of the country near the border with Zimbabwe, the robed elders chanted while others danced on the parched red earth to the sound of drums.
This, however, was no ordinary church service. Bishop E.M.M. Miriri was not out to save the souls gathered in the open field. This time he had come to preach the virtues of electronic banking and a nifty smartcard application developed by Mondex International, a subsidiary of MasterCard.
The unlikely union between God and Mammon took place just before Christmas at the United African Apostolic Church (UAAC) annual conference. It was at this meeting that a new electronic purse system designed to bring banking services to the disadvantaged made its debut.
The initiative, which is initially costing the Church Pounds 100,000 to roll out, is the brainchild of the bishop himself.
In a country where 36 million people have little access to financial services and many of the established banks are still strongly associated with the old apartheid regime, the move makes sense.
The Church wanted a cheap and simple banking system that would eventually allow its 3.5 million members to receive payments, pensions and other state benefits without having to walk for days and queue for hours at benefit payout points in the nearest town.
For Mondex, the UK-based smartcard business, the Venda programme offers a showcase for its bid to run the South African Post Office's payment systems in a public-private partnership. As the South African Government starts the process of putting the delivery of pension payments out to tender - and amid interest in other nations in the concept of universal banks - Mondex wants a piece of the action ahead of Visa, its biggest international rival.
Mondex is hoping that its good deeds will mean that its application becomes the industry standard and is adopted for South Africa's 2,000 post offices. Under the system, customers will be able to use their smartcards in specially designed electronic kiosks to receive payments, pensions and other state benefits without having to travel into town or having to pay to cash cheques. The card will also let users make payments or set aside cash into several different "savings pots" by selecting icons on the touch-screen.
The problem of illiteracy is overcome by replacing words on the screen with graphics depicting different savings pots for household expenses, funeral costs, payments to the Church and longer-term savings. The security system on the application relies on biometric data stored in the chip to match each user to their "account". Before a transaction, the machine identifies the user by matching his or her fingerprints to a stored template on the card.
So far 8,500 UAAC members have signed up for the e-purse. The Church and Mondex expect many more to request their own plastic by the time the system is fully up and running in Venda. But this is just the start.
Mondex sees this initiative as the start of a national programme. It is already in talks with other South African Churches, including the Zion Christian Church.
Mondex's next target is Eastern Province where the Post Office is currently pitching for the pension payment tender.
For millions of ordinary South Africans living outside the bigger cities, access to banking services has been difficult not only because of distance, but also as a result of the bureaucracy involved in setting up an account.
"In the past, the need for a minimum salary guarantee, credit references, formal identification, as well as previous banking history, essentially ruled out 36 million South Africans," says Alison Greensmith, head of business development for Mondex.
Greensmith cites the example of a 70-year-old who died while waiting to collect his pension at a payout point in Durban. Overcome by a long wait and the heat, the man collapsed after refusing to return to hospital for fear of missing that week's payment.
Often, pension payments are made only at a specific pay point on a certain date. Those who do not make it are left empty-handed.
In Britain, where 3.5 million people still have no bank account, the concept of creating a "universal bank" for the poor run by the Post Office is nothing new.
Indeed, it has been the subject of much debate between the Government, the high street banks and the Post Office over the past couple of years. So far, nothing concrete has emerged and the banks have done little more than launch basic current accounts with no overdraft facilities as a token gesture.
The banks' argument that such an idea would not be viable was given extra weight by a recent report by the Commons Trade and Industry Select Committee. It noted that the Post Office "probably cannot afford to run a bank just for the poor" and that banks are unlikely to want basic accounts to swamp their systems with unprofitable business.
Mondex believes that there are no practical reasons why the same e-purse technology could not be developed over here to distribute welfare benefits and pensions through special kiosks at post offices, corner shops or even churches. However, it admits that the will to build such a system does not exist in the UK financial services sector.
When it comes to the crunch, electronic purse systems used for low-value payments rely on high volumes to make any profits. In the UK, where financial services companies are vying for every profitable penny, the volumes may not be worth the bother.
However, uncharted territories such as South Africa, where existing banks serve only the minority, can provide the mass numbers to make the sums work.
"It's a question of appetite," says Greensmith. "The take-up of the universal bank in this country has been underwhelming. But in South Africa, where the need is greater and there has been a bigger political drive to build a new model, the financial institutions have been more open to discussion." |
