Banks in a rush for mobile apps

by Moyagabo Maake,

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Farren Roper, FNB Connect's head of ISP and business operations. Picture: RUSSELL ROBERTS

IT WILL limit cash heists and save money — but cut margins from fees
Banks have had a busy April, with some taking their first plunge into the increasingly crowded pool of mobile banking applications.
Already, more than 13% of South Africans access banking services on their phones and tablets, according to research company FinScope —  something that is both good and bad for the banks.
Although the banks now have to transport less cash around, which reduces the chances of heists, mobile transactions are likely to hit banks' margins, because they earn billions every year from fees.
Nonetheless, the demand from their increasingly tech-savvy 22.5-million South African clients means the banks have had little choice but to go mobile.
This month, Investec launched its app for private clients and the specialist bank was soon followed by Absa. Last week, FNB launched its banking app specially for tablets and it became the most-downloaded free iPad app from the South African Apple online store within hours of its Monday launch. Absa and Investec were in second and third place.
The move by South Africa's banks places the country firmly at the centre of a global boom in mobile payments, forecast to be worth an estimated R11.96-trillion by 2017.
Deutsche Bank research on global financial markets shows mobile transactions growing nearly sixfold within four years - from an estimated 17-billion transactions this year. There were about 3billion mobile transactions around the world in 2009.
Farren Roper of FNB Connect's ISP and business operations said: "We have seen a 16% year-on-year increase — [from] December 2011 [to] December 2012 — of customers using our electronic channels."
FNB has had a popular app for some time, but decided to launch the new app because 26% of those 450000 customers using the smartphone app were, in fact, logging on using their tablets.
And it seems the banks are just in time. Research by Merchants, a division of information technology services provider Dimension Data, showed that although clients preferred traditional banking, they might eventually follow the lead of developed countries, which have embraced online, social media and mobile channels.
This could have implications for bank fees, which Finance Minister Pravin Gordhan has repeatedly said are too high. Research by trade union Solidarity showed that three of the big four banks slashed fees on their cheapest accounts by between 18.2% and 38.5%; Nedbank raised fees 4.5%.
Mr Roper said FNB had a "deliberate strategy" to persuade customers to use electronic channels because this would help to cut costs. "We believe that the pricing of our digital channels, which are lower than traditional channels, deliberately incentivises the use of these channels," said Roper. "The benefits of this are passed on to the customer."
Nedbank's app suite, which was launched late last year, has 200000 registered users. Vanesha Palani, the head of mainstream banking at Nedbank, said the app helped clients to contain their bank fees. "From a bank perspective, the Nedbank app suite provides a more cost-effective means of reaching and servicing clients than traditional bricks and mortar branches."
The eventual rise of self-service channels such as apps would cut the reliance on cash for transactions, which in turn would reduce the need to physically move money around.
Although it is not clear how often secure transport companies are used, police statistics show there has been a steep drop in cash-in-transit robberies. In the 2011-12 year, there were 182 reported cases nationally, off an eight-year high of 467 in 2006-07.
Although cash is still king — FNB banking app users are just 6% of the 7.5-million customers reported in parent company FirstRand's latest annual report - global trends indicate a rapid shift towards mobile transactions in the coming years.
"With monthly active users growing in excess of 40000 a month, the app is set to have more than half a million users by its second birthday," said Mr Roper.
"As smartphone penetration grows, the need for app banking is going to become more prevalent and we foresee additional growth on this platform."
Lyndon Subroyen, chief information officer of Investec Wealth and Investment, said the bank's app had been well received by clients.
"We have seen a substantial uptake of the platform and constant use of the new mobile channel for both viewing and transacting," he said. "Within the first two weeks, we have had over 10% of our private client base using the iPad version alone."