Alan Greenspan observed that, “… New technologies that evolved from the cumulative innovations of the past half-century have now begun to bring about dramatic changes in the way goods and services are produced and in the way they are distributed to final users. Those innovations, exemplified most recently by the multiplying uses of the Internet, have brought on a flood of startup firms, many of which claim to offer the chance to revolutionise and dominate large shares of the nation’s production and distribution system.”
One such innovation of the 1990s was a cellphone. Many view a cellphone as only an innovative tool that seeks to replace the traditional telephone; ignoring the abundance of opportunities which it presents to those who are ready and determined to exploit them.
Mobile banking, which is the provision of account information and transaction opportunities as well as the reduction of the need for interaction with bricks and mortar in order to conduct transactional banking, has become a more prevalent and accepted method of banking.
But something is greatly lacking – why in 2008 are consumers still using debit and credit cards when they can use cellphones to transact and make payments?
Banks in South Africa have not developed a cellphone-based solution specifically aimed at facilitating direct payments at point-of-sale by consumers through the use of a cellphone. There is always a growing need for innovative distribution channels and service delivery, especially now that banks are under pressure to cut banking fees. Perhaps a slump in revenues generated by banks through fees will provide them with the challenge to develop new banking methods and delivery channels to their consumers.
Already in countries like Japan, Philippines, UK and the US, non-financial institutions have revolutionised, through the use of cellphones, the manner in which payments are conducted. There exists something for local banks and mobile network operators to learn and implement for the benefit of consumers.
In South Korea, Visa and SK Telecoms have formed partnerships to boost convergence of mobile and payment industries by giving consumers fast and secure access to new payment applications.
The new wireless payment system uses EMV (Europay / MasterCard / Visa) smart-card and infrared technology. The wireless payment solution integrates the EMV global smart-card standard with IrFM (Infrared Financial Messaging), the global interoperable standard for infrared transmission.
The system will allow Visa cardholders and SKT subscribers to pay for goods and services by beaming an infrared signal securely from the cellphones to a small infrared receiver located at retail point-of-sale terminals, vending machines, subway stalls, tollgates, buses and other payment locations. The cardholder’s payment details are stored securely on an EMV chip within the handset. Possibilities are indeed endless.
In the Philippines customers of Globe Telecom, the second largest mobile network operator, can use prepaid airtime dealers to deposit cash into virtual “e-money” accounts tied to their cellphones. Customers can use their cellphones to send and receive what they call “G-cash”, make payments to other people and shops, and store money for future use. Globe Telecom together with SMART has offered branchless banking in the Philippines since 2000. Most of the 1.3 million users buy airtime and send money to friends and family with the service.
Those suffering from chronic tech-phobia need not worry as cellphones offer much superior security features for the consumers compared to debit and credit cards or other forms of payment. In this digital age, nothing should be beyond our imagination and preventing consumers from making payments for their purchases through the use of cellphones.
The time has arrived for banks and mobile network operators to come together and provide a mobile payment solution to all South Africans.