Mobile-Financial.com recently interviewed the Mobile Financial visionary behind FNB’s Mobile Banking operations, Len Pienaar. Len is the CEO of First National Bank Mobile and Transact Solutions. In our exclusive interview Mr. Pienaar explains in detail what it takes for a bank to build and scale a new electronic banking channel that supports millions of customers, transacting millions of times a month, all from their mobile phone.

Have you wondered whether or not mobile banking is here to stay?  Well wonder no more.  Mobile banking is here to stay and South Africa’s First National Bank (FNB) is a shining example of mobile banking at its best.

FNB launched mobile banking in 2005 and currently operates one of the most heavily used mobile banking services in the world.  FNB registers between 3,000 and 5,000 new mobile banking customers on any given day.  Subscribers perform over 6 million transactions a month, including account balance inquiries, funds transfers, bill payments, and more.

Mobile-Financial.com recently interviewed the Mobile Financial visionary behind FNB’s mobile banking operations, Len Pienaar.  Len is the CEO of First National Bank Mobile and Transact Solutions.  In our exclusive interview with Mr. Pienaar he explains in detail what it takes for a bank to build and scale a new electronic banking channel that supports millions of customers, transacting millions of times a month, all from their mobile phone.

The following are excerpts from our interview.  To listen to the interview in its entirety, please access the Mobile Financial Services Podcast by Mobile-Financial.com available in iTunes.  This podcast is part of a series of interviews that Mobile-Financial.com conducts with pioneers, leaders, and experts within the mobile financial services industry.   To access the podcast, please click here.  If you have any questions about the podcast or interview, please send an email to:  contactus@mobile-financial.com.

Len, would you be able to start things off by providing an overview of your role at First National Bank and what mobile banking products and services First National Bank offers?

My role is to look after a bunch of very dedicated people whose sole job is to supply mobile and related services to our customers.

What are the products and services that First National Bank currently offers?

We started in March 2005 with an objective of adding a channel to our traditional bank account - a difference from a lot of the initiatives you see today.  We didn’t plan to launch a new bank, we simply added a channel to existing bank accounts.

So the initial (Mobile Banking) value proposition was to give electronic access to existing bank subscribers?

Yes but the difference from our previous attempts was we decided that this time it has to work on every phone, on any of our national networks, without changing your SIM card or having to download anything to your phone, and I think the real reason for our success, and the massive growth we’ve seen, was that approach.

What has the adoption and usage been like for the various products and services that you offer?

We have just passed one and a half million registered customers and, I think to put it in perspective, South Africa is a country of about fifty million people and my bank has roughly six million customers.  So in terms of penetration this exceeded our wildest dreams.

You mentioned that one of the goals was to provide universal access via mobile across any network.  Has that been the major reason for the success and adoption that you’ve seen or are there additional factors that have played out?

I think a prerequisite is the mobile service is easy to access.  So apart from the technology that we chose on the phone, we also made it easy to register.  So from your handset, to branches, ATM, internet and call centres, we gave customers a number of options to start using the service.  And we had a very big focus on marketing, advertising, and education.

Would you mind providing an overview of the major services that you’re providing customers?

We took a progressive approach to cell phone banking or mobile banking and started with a simple SMS subscription service called In-Contact. That service has proven to be so popular that we’re sending about 2 to 3 million SMS messages a day at the moment, with more than 80% of our customers registered and using the service.

The next service we offer is what we call full cell phone banking, which is really an extension of simple banking transactions through the cell phone.

We were very conservative when we started and we didn’t even allow payments initially.  Payments finally followed about six months into the program.

So basically, there’s five key services; payments, transfers in our bank that’s between your own accounts, we then offer a number of prepaid purchase options, balance inquiries and statements on the service.

What was the trigger for you to think that payments would be a viable service?

Initially, when we did research our customers didn’t indicate that they needed or wanted payment services on their phone. Their biggest concern actually was security and risk, so for us this was a good way of entrenching the channel in the market without letting people worry about the ability that the phone provided to pay. However, over the last four years we’ve seen a gradual increase in the demand for payment, up to the point now where we do more than 600 million Rand worth of payments per month on the cell phone.

What has your experience been within South Africa in terms of the take up of banking based payment services verses Mobile Network Operator enabled payment services?

I believe that there is a place for both in our market and in the rest of Africa.

We have seen the fact that there’s already a trusted brand behind the deposit accounts, has made our life so much simpler. We didn’t have to convince people to deposit their money with us; we simply facilitate transactions on a trusted bank account.

One of the services that has proven to be very popular, although smaller in monetary value terms, is prepaid purchases and not only of airtime.  Today we sell data bundles, electricity, SMS bundles, and even long term contracts from the cell phone.

So these are additional value added services that subscribers, once they’re subscribing to the various mobile banking products, have the ability to purchase or top?

Yes and interestingly enough, normally the first transaction that they do would be one for prepaid airtime. And from there gradually we can see how their confidence increases where after two or three months you would see the first payment and with many of our customers this is their first and only electronic channel that they have access to, so it becomes a very key part of bank customers’ lives once they get used to the service.

So to your point about electronic access, do you see the online banking space being the compliment to your mobile banking?  Or once people have gone mobile banking, they’re not really demanding the type of online access that you offer as well?

I’m openly biased in favour of mobile.  Once sold on cell phone banking they won’t go anywhere else. But practically, we position it as a complimentary service to our online banking customers and we see typically seasonal usage of it from online banking or PC banking customers. So, when they go on holiday we would see a bigger shift towards the mobile channel and when they’re back in the office they would go back to traditional pc banking. That’s with people with online access.

In South Africa that number’s limited to a few million people and most of my customers do not have access to PC based internet services, and this is normally their first channel they access it from.

Do you see mobile banking and the m-commerce that it enables as a competitive advantage for banks, or is it almost to the point where it’s a fundamental feature that each bank should have to just maintain a status quo position?

At the moment I think it’s still a competitive advantage.  Only two of the major four banks in South Africa really have managed to get mobile taking off inside their customer base.  I believe in the next two years that will change where cell phone banking in South Africa definitely will be part and parcel of retail banking.

Today we make sure when you leave our branches, you leave it with a piece of plastic in your hand that you can swipe; cell phone banking is quickly going in the same direction.

In South Africa, a big chunk of our customers are really marginally banked.  Although they have a bank account, they have to travel vast distances to access a branch or an ATM, and cell phones are the only way that South Africans can really deepen access through that base and people that do not currently have bank accounts.

With some of the features that you offer for instance SMS notifications on account activity, credits, debits, I assume that those are features that resonate both with marginally banked constituents, as well as the top of the pyramid customers that you have as well?

And I think that’s what’s so amazing about cell phone technology is that it’s as applicable on the fringes of the city and in our expensive and affluent suburbs...And I think we’ve seen with customers that it’s such a powerful retention tool that people are preferring to use our cards to our competitors card because that SMS is there the moment you swipe your card.

What’s also interesting to note, is that the way that people use interactive cell phone banking, that even in our entry level customer base, the type of transactions is the same as in our older and established customer base.  So this is really the first technology that crosses not only social, but also income barriers.

Recently, I believe that FNB was nominated and recognized with an industry analyst award from industry analyst firm Celent as a Model Bank.  What does this award mean and what does it say about FNB and mobile banking?

We were very honoured to receive the nomination and the award. Celent looks at banks and basically blueprints specific technology adoption in banks.  I don’t think a bank can be perfect so, but they try to achieve a highlight of excellence in specific fields of technology adoption and we’ve been fortunate to be chosen as the model bank in the distribution channel.

With the technology and services that you have delivered and the success that you’ve had within South Africa do you feel that similar successes of mobile banking can be achieved by banks in both Africa and beyond?

Yes, and I don’t think that our success is limited to South Africa.  We also run subscription services in four other countries and internet services in two countries, and we hope to expand that to three or five in the next two years, and the pattern has been the same in every country we’ve gone to service.

And is that pattern first providing the In-Contact service, with the SMS notifications, and then moving to more transactional based m-commerce and mobile payments?

Up to date we’ve followed the same path in all the countries that we’ve entered, although I think we’re confident enough now to launch a full sweep of services in the next country.

And to your point about success being contingent on the education of consumers, do you find the education or the marketing model will have to adjust with that approach?

I quite often see people launching some mobile commerce services then claiming that it didn’t work, didn’t take off and if you look at how they’ve launched it, it’s been an entire technology project and they’ve just simply put it on the market and walked away.

We spend the same amount of money on marketing and advertising that we spend on technology and I would subscribe more than fifty percent of our success around the way we market and educate our customers.

What other key factors for success would you recommend for those other banks that are entertaining mobile banking?

For me, apart from the marketing and education, you have to have a mobile service that is bank grade in terms of availability and reliability. You won’t launch an ATM network that’s down ten percent of the time. One of our objectives when we launched the service was that we would be able to match any of the other banking channels.  And people become so reliant on the service, that you have to be able to fulfill that promise.

Do the customer support operations have to adjust or evolve to support the mobile channel or does customer support look at mobile banking as just another channel that exists within the bank?

Very good point. In our case we’ve actually created a dedicated call centre that only looks after our mobile common services. That was done mainly because two thirds of our customers actually hold what we call entry level or basis bank accounts. These are people that have never done electronic transactions apart from withdrawing cash at an ATM before…The type of advice and the way you give advice has to adapt from your traditional online banking call centre.

So does that include advice about just banking in general or also what type of phone you’re using or the USSD menu structure or something like that?

It’s a combination.  We rely heavily on our branches as part of that education drive.  What’s amazing is that ninety percent of our registrations today actually happen inside our branches. When we started this service we thought we could really do a virtual branchless banking model but our customers actually want to talk to someone. They want to see how the service works and they want that personal education part. What’s amazing is that once they are on the service, they leave the branch and we see transactions in that environment drop dramatically from those customers.

So they’re educated on the service and they’re getting whatever support they need to buy the service as well too?

It’s a combination. The key bit is that when they’re registered they understand how to start using the service and then after that we support them either from a call centre but also through a series of education and marketing campaigns. For instance, currently we are running an infomercial on morning television very much around the classic infomercial style of telling people how to buy or get something in this case, and it’s proven to be a tremendously successful way.

So mobile isn’t about just developing the application and putting it into the hands of the user, you have to figure out means to support and educate the different channels that are coming in through mobile?

Yes and I think that’s where so many launches I’ve seen have fallen flat.  People think once they’ve launched it that it will take off by itself but with any product that a bank puts out, you have to put education behind it.

You’ve mentioned that the service needs to be simple, and needs to be available on any phone and on any network. Are you getting demands for Smartphone access as well or Smartphone dedicated applications for any of your constituent base?

I wouldn’t say on a very large scale. There are definitely people that would take up that service. In South Africa Smartphones are limited to a very small percentage of our customer base and although they are an important part of it, we currently service them through a WAP application or WAP access service.

But it does sound like you have got the solution and the technology behind the service - whatever channel the mobile is coming through?

I think what any bank that launches this service has to realize is that cell phone banking is an evolving technology. So we actually started our interactive service based on SMS.  Quickly however we’ve seen customers move from SMS to USSD, literally in about six to eight months.  Where SMS is now making up less than one percent of our traffic, USSD is about ninety seven percent and we’ve seen WAP starting to take off but it’s only making up about two percent of our traffic. We however foresee that changing rapidly over the next two years.

One service that I believe FNB offers that marries online commerce with mobile banking is called Cell Pay Point. Would you be able to give an overview of FNB’s Cell Pay Point service?

Yes, Cell Pay Point allows our cell phone banking customers to pay for goods and services online.

In South Africa, we do not allow our debit cards to be used in a card not present format, and that created a huge alternative payment demand especially for our youth customers; and Cell Pay Point point is the perfect tool for that. In simple terms, we provide an interface to merchants that displays a unique dial string for a payment, customers dial it, put their mobile pin in, and the transaction is confirmed. It literally takes about three to four seconds and the beauty about it is that you don’t disclose anything personally to the merchant; not your card number, or your bank account details, or even your name.

So even someone that has a credit card, they can still use Cell Pay Point against savings accounts, or use their credit card as well too?

Yes, because this is a bank channel you can subscribe any of your products against it. So for instance, in my case, I would have my home loan, my credit card and my transaction account linked to my cell phone banking product.

That sounds fantastic.  I mean it sounds like you’ve got PayPal but from a real banking perspective, and from the source of funds for your consumers.

And I think today there’s a lot of talk about new types of mobile banking services, but I think banks discount themselves of the tremendous value that this channel can offer to their customers, whether they are fully banked or marginally banked, and I believe for banks this channel will allow them to reach further into the unbanked market.

So how about some of the future roadmap for mobile banking at FNB? Do you have some thoughts about where you see mobile banking evolving with your operations?

Our focus now is to expand deeper and deeper into our existing customer base.  So we have got a two year plan around education and communication that we’re following and this would be to deepen our payment services and currently there is only a very specific set of payment services we offer and we intend to widen that to include person to person payment at one point in the future.

How about international remittance or remittance within Africa and beyond?

Yes, interesting that you ask that.  We’ve already launched a service that allows customers to buy prepaid airtime cross border, and today from South Africa you can buy for friends and family in other cities.  Our intention is to expand that to a number of countries around us and I think what we’ve seen is that the need for communication and allowing your family to communicate is massive and very important. We haven’t ventured into cross border money remittances yet, although we are working on some solutions around that.

So the airtime or value transfer that you have, I guess that’s step one and cross border remittances are down the road?

Yes and we’re currently working through a number of exchange legislation issues around it.  I think because we’re a bank it is very important for us to make sure we operate within existing legislation and, when necessary, take our regulators with us and make sure they understand what we’re doing.

To listen to the interview in its entirety, please access the Mobile Financial Services Podcast by Mobile-Financial.com available in iTunes.  This podcast is part of a series of interviews that Mobile-Financial.com conducts with pioneers, leaders, and experts within the mobile financial services industry.   To access the podcast, please click here.  If you have any questions about the podcast or interview, please send an email to:  ContactUs@mobile-financial.com.