This story was first published on July 7, 2015. It has been updated to change headline and add last paragraph.
It is not a secret anymore that Africa is leading the world over in mobile banking services that allow subscribers to perform banking and payment operations on their mobile phones. There is however another revolution that is just about to change the way mobile banking is done in Africa.
After being outsmarted by telecoms when they introduced money transfer services, commercial banks across the continent have woken up to the realization that they cannot dissociate their businesses from providing cellphone services.
Some commercial banks are moving a step further than just offering mobile banking services to now also offering other telecommunication services through what has come to be known as thin SIM technology that allows banks to ride on existing mobile service provider’s infrastructure.
In June, South Africa’s First National Bank (FNB), the country’s third largest bank by assets, launched a cellphone service to its direct-deposit account holders.
The service allows the bank’s customers to access both their financial and mobile accounts. There they can pay their phone bills, buy data service packages, and activate international roaming. FNB resells the airtime from Cell C, a mobile operator.
“We bring new customers into our ecosystem and keep existing customers within the ecosystem,” Ravesh Ramlakan, CEO of FNB Connect, the unit that offers the mobile service, told American Banker.
Ramlakan say this service, which is not limited to its customers, will help FNB retain customers.
Already several banks in Africa have moved their customers to mobile money accounts that enable them to check balance, deposit and withdraw money, make cash transfers to sister banks and even save and access small loans.
All this is still however being enabled by existing telecommunication providers such as MTN, Airtel and Vodafone.
Given that relatively few Africans have traditional bank accounts while most now own a mobile phone, it is of little wonder the region has taken the global lead in using the devices for banking.
According to a report done by Swedish telecom company Ericsson, over 635 million out of the 1.1 billion people living in Africa have access to a mobile phones. This number is expected to rise to 930 million by the end of 2019.
In Kenya, where telecom companies dominate the mobile payment market, an attempt by the republic’s largest bank by customers, Equity Bank, to introduce a thin SIM was met with stiff resistance from the country’s largest mobile service provider, Safaricom.
Early in 2014, Equity Bank acquired a telecom license and made plans to distribute its customers Thin SIM cards that would enable them to access all their accounts without stepping in any bank branch.
“We have a major problem with the mobile provider also providing financial services,” John Staley, Equity’s chief of finance, innovation and technology told Wall Street Journal. “You can’t have a freight company controlling the tracks.”
Safaricom, which controls over 60 percent of the country’s subscribers, however could not take this lying down and took all steps to stop Equity Bank by filing a petition to the communication regulator saying that the thin SIM technology could compromise the security of its mobile money service — MPesa — users.
“These complaints are just another attempt to create barriers to entry in order to reduce competition,” the late Mwangi Kimenyi, senior fellow and former director of the Africa Growth Initiative (AGI) at the Brookings Institution, said in an opinion piece.
The outcome of the petition brought by Safaricom was however not favourable to the telecom company. Equity Bank was allowed to go ahead with the thin SIM distribution.
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