Pocket-sized: Connecting with more customers via non-traditional channels

The African continent is synonymous with mobile banking. Ever since MP esa, the world’s first mobile banking service, was launched in Kenya in 2007 by Safaricom, millions of people have used their mobile phone as a banking device. Similar initiatives have spread throughout the continent, bringing banking and payment services to some of the world’s poorest people. Until recently, however, Gabon’s mobile communications towers transmitted only voices, not money. A new service by Bharti Airtel, Airtel Money, is about to change this. Similar to MP esa, Airtel Money will allow mobile phone subscribers to deposit and withdraw money and pay bills with their telephones.

PORTABLE MONEY: When mobile phones were first introduced in Africa a few decades ago, they were marketed to the elite: handsets and SIM cards were expensive, airtime was only available with a subscription and coverage was spotty outside of urban areas. Today, the African continent is one of the most dynamic markets for mobile telephony with dozens of operators, thriving competition and penetration rates that rival the West. Indeed, in Gabon, the mobile penetration rate stands at 97%.

By comparison, the banking sector in many African countries today resembles the early days of mobile telephones. Lenders target wealthy customers with full-service products in urban areas. Gabon is no exception, with estimates of banking penetration ranging from 6-15%, despite the fact that the country has a relatively high GDP per capita. Moreover, most of the banking services in the country are centred in Libreville, Port-Gentil and Franceville.

The impact of MP esa on the banking sector in Kenya was profound. Today MP esa handles about $4bn annually and 68% of the country’s adults use mobile money. It has brought banking services to people who would have otherwise lacked access to a bank, either because of geographic or socioeconomic position or both. These individuals can now save money, pay bills and transfer funds with ease.

The service has already caught on in many other African countries. Yoban’tel in Senegal is run by a consortium that includes the mobile operator Tigo and French bank Société Générale. In Ghana, MTN Mobile Money is operating in conjunction with several local banks. In Somalia, a third of adults said that they used mobile money during 2011, according to a survey conducted by Gallup.

The system itself is very simple. Customers open an account and register their SIM card. They can then deposit and withdraw money at designated cash points via SMS. Similarly, customers can pay bills and receive paycheques and remittances with their mobile money account. Mobile banking represents a good solution for a country like Gabon with a dispersed and relatively poor rural population, as well as limited branch networks. The low-cost scalability of mobile banking can easily extend to those areas where banks are few and far between.

FIRST ENTRANT: Following the success of Safaricom's MP esa initiative, as well as similar programmes in Egypt and Senegal, banks and mobile operators around the continent increasingly began to look at mobile money transfer as a potential source of both revenue and clients. In July 2010 Airtel, which is the local subsidiary operator of India's Bharti Airtel, inked a partnership agreement with BGFIB ank to provisionally launch mobile money services. A request for a licence was submitted by the venture later that year to the Bank of Central African States (Banque des États de l'Afrique Centrale, BEAC), which then responded by granting approval for a pilot study.

Airtel Money launched as a pilot service limited to the employees of BGFIB ank and Airtel in January 2011. Following a technical evaluation of the pilot, which was conducted in March 2011, all the operators that had requested a mobile banking licence met with the BEAC in Yaoundé in June 2011. Four initial licences were granted during August 2011: two in Cameroon; one in Congo-Brazzaville; and one in Gabon. In March 2012, Airtel Money was officially launched. By the end of August 2012, some 80,000 customers had registered with Airtel Money, and 900 points of service, where customers can cash in their electronic money, had been installed in local businesses. More than 200 points of payment have also been identified, although only 50% of them were operational at the time of printing. This is still a significant figure for a country like Gabon, where the number of ATMs stands at about 120, according to the World Bank.

Airtel Money targets three key categories clients. Merchants who need to transfer money from the interior of the country will now be able to do so without access to a bank. Airtime will also become much easier to buy, as people can use their mobile credit to recharge. Finally, customers can use the service to pay bills. “One of the areas with the biggest impact is the payment of utility bills. Currently, customers have to line up for hours to pay their bills every month. Our partnership with Société d’Electricité et d’Eaux du Gabon, for example, means that customers can save countless hours every month,” Charles Boukinda, the manager of Airtel Money, told OBG.

Companies can also use the service to pay their employees who do not have bank accounts. Airtel Money already has one such client, Société Gabonaise de Services, and Olam International, which has invested in large plantations in Gabon, is considering such a plan. Eventually, migrant workers might be able to use their mobile money accounts to send funds back home. Even aid agencies are interested in using the service to give microgrants to the poor.

COMPETITION: At the time of publication, Airtel was the only fully mobile banking service in Gabon. BICIG has invested in a platform to offer similar services and is looking for a mobile operator as a partner. BICIG is currently working with Moov, Azur and is finalising a deal with Libertis. The bank will also need BEAC approval before it can begin operations. Since June 2012 BICIG has offered a service called BICIG Cash, which is designed to supply mobile payment systems to merchants travelling in the interior. Meanwhile, other lenders have started to offer e-banking services. For example, Citibank offers online payments for its corporate clients. BGFI, UGB and Ecobank also offer online access to bank accounts and SMS alerts when an account is accessed.

IMPACT: Mobile money could have a significant impact in Gabon. In Kenya, those with mobile banking accounts were in turn more likely to open regular bank accounts, increasing the country’s banking penetration rate, although this has yet to happen in other markets like Tanzania and South Africa.

In Gabon, the spread of mobile banking could encourage the installation of more branches in the interior, according to Roger Owono Mba, the director-general of the Banque Gabonaise de Dé veloppement. “Even with the introduction of e-banking and a stronger mobile banking penetration, the Gabonese banking sector still needs to develop its presence in the interior. The spur of new technologies won’t negatively affect the spread and creation of new branches,” he told OBG.

Airtel Money’s initial success bodes well for mobile banking services in Gabon. As mobile banking catches on across the country, it will bring banking services to thousands of potential clients out of reach of traditional banks. At the same time, the service should encourage traditional banks to put more effort into increasing the coverage of their existing branch networks, as more people become accustomed to the benefits of banking services.

In the short term, the success of mobile banking in Gabon seems assured. Over the longer term, however, as internet service is rolled out across the country, SMS-based banking could be replaced with more feature-heavy smartphone apps, as these devices fall in price and internet access expands in the interior. Regardless of its eventual form, the introduction of mobile banking to Gabon is sure to have an impact on the banking sector for the foreseeable future.