Background information

Wizzit Bank

2009
A brief history

Affordable access to banking services is a major challenge in developing

countries.

Back in 2004 a conversation with a major South African political figure, Cyril
Ramaphosa, and two head-strong entrepreneurs Bryan Richardson and
Charles Rowlinson, sparked an idea that with the addition of business
partner Pakie Mphahlele would address this specific challenge.

The conversation circulated around the idea that it was increasingly difficult
for both the young and the poor people of South Africa to open and afford
to maintain a full-feature transactional bank account both from an
administrative and cost perspective.

Something that also came to the forefront was the issue of crime, which
lead them to ask if there was an alternative to cash as a payment method
for the unbanked people of South Africa.

Richardson, Mphahlele and Rowlinson came to the realisation that not only
was there a huge number of un- or under-banked people in the world, but
that the issues facing these people did not differ much from region to region
in the developing world.

The World Bank estimates that up to five out of six people in developing
countries do not have even basic access to banking services.

It is also estimated that South Africa has 11 million un-banked or “under-

banked” citizens (50% of the adult population according to Finance Minister
Trevor Manuel) – a huge chunk of the nation that is largely excluded from
meaningful and convenient access to economic participation.

According to the FinMark Trust‟s FinScope survey, the overwhelming

majority of unbanked South Africans cite unemployment or a lack of
sufficient money as the reason for not having a bank account.

And with no bank account, these South Africans are obliged to stash their
cash in the proverbial cookie jar or under the mattress.

Physical access to a bank is also a major issue, particularly for South

Africa‟s 8.1 million rural poor, only 5% of whom have a bank „nearby‟.

Unsurprisingly, it takes the average South African 37 minutes to access a

financial services point. A trip, or rather an expedition, to the bank becomes
a costly experience for the very people who can afford it the least.

Furthermore transferring money to friends and family, who do not live in

the cities or with the wage earner, is a major problem.

An estimated R12bn (US $1.6bn) was transferred by migrant labourers

around the country in 2005.
Most of this was done through informal means, including taxi drivers, at a
large cost, with them taking sometimes as much as 25% of the money
being transferred. To be poor is expensive in today‟s world.

With 6.5bn people in the world, only 1bn actually have a bank account,
which translates to a horrific state of affairs when it comes to peoples‟
ability to live as economic citizens in their respective countries.

The logical question to ask is: “why?” and the fact of the matter is that,
certainly in an African context, people are either excluded from having a
bank account by high barriers to entry or people choose to be un-banked
because of a lack of trust in or knowledge about the banking organisations
and services they offer.

According to Brian Richardson, the managing director of WIZZIT, where

South Africans do seem to have a certain level of trust in the banking
systems already in place, the traditional commercial banks have not found it
in their revenue models to cater for the lower ends of the market.

This has resulted in a gap between the banked middle- and upper-class and
the un- or under-banked middle-to-lower class in their ability to transact
safely, securely and affordably.

The issue is not to criticise the traditional commercial banks because they
are, of course, businesses and they do have on-going costs that need
recouping (especially in relation to physical brick-and-mortar branches,
human resources, etc.).

The reality is that the typical paradigm of most large banks is that banking
equals branches and this is an incredibly expensive model, particularly in
relatively “poor” rural areas.

The cost of banking the lower-end of the market (with its perceived low
value) can be crippling, which is why there was a need to investigate a new
model for banking the un- and under-banked people of South Africa.

But it was that very question of “why and how?”, which formed the basis for
the start of the journey that would see the three business partners begin a
unique and innovative concept to bank the un-banked of South Africa –
WIZZIT.

In 2005, WIZZIT was officially formed as a division of the South African

Bank of Athens Limited. It currently offers a full-service cellular phone-
based banking facility unrestricted by various networks, type of SIM card or
age of cellphone.

WIZZIT is an accredited issuer of MasterCard‟s Maestro debit card and

MasterCard has certified WIZZIT‟s unique cell phone technology as a
payments channel. KPMG has also conducted a security audit on the
systems and although the challenge of banking the unbanked is not about
technology, it is critical that the technology that is used is safe and secure
as well as being very easy to use.
In recent research sponsored by The Consultative Group to Assist the Poor
(CGAP), MasterCard and Finmark Trust, it was noted that WIZZIT has
created a “cult following” amongst its ever-growing user-base.

WIZZIT is ahead of its forecasts in terms of both number of accounts

opened as well as transactional usage.

The three “As” of banking the un-banked

For any initiative to be successful in the developing world, Richardson

believes that it is imperative to adhere to what he calls “the three A‟s” of
doing business and those are affordability, accessibility and availability.

To make any service or product affordable for the lower end of the market
is common sense. But this does not mean positioning a product “for the
poor”.

Nobody likes to be called poor and creating a lack of affinity in any product
that is aimed at lower income earners or, indeed, the un- or under-banked
is just as good as committing business suicide.

But that‟s not saying that something must either be “cheap” or “free”.
While the lower end of the market does not have a lot of money to spend on
elaborate or unnecessary products or services, it has been proven that no
matter how affluent anyone is, they are always willing to pay a reasonable
price for a product or service that adds value to their lives.

On the issue of accessibility and availability, it goes without saying that

putting a product or service in the market that is unattainable by or
unavailable to its intended audiences is pointless.

When looking at banking products, particularly in South Africa, the four

major banks that do offer a specific product to the un-banked people of the
country still keep strict business hours and are also located in major
metropolitan areas.

The caveat is that a large percentage of the un- and under-banked people
that will really benefit from these products and services either live in rural
areas or do not have the time or level of literacy to comply with the
administrative demands placed on them by the banks.

The point, Richardson says, is to view the base of the pyramid as an

opportunity and not a handicap.

While it may seem logical that these three “A‟s” would be part of any
successful business strategy, the truth is that many businesses who profess
to cater for the bottom of the pyramid seem to miss the mark when it
comes to either affordability, accessibility or availability.
Mistakes are also made in the positioning of the particular brand as well as
the marketing of the service. WIZZIT certainly admits that it does not have
all the answers and is learning every day.

Affordability

WIZZIT prides itself in being one of the only banks in South Africa that
offers a fully-fledged transactional account with no monthly fees and no
minimum balance requirement.

Unlike many of the traditional accounts offered in South Africa, WIZZIT‟s fee
structure is based on a “pay-as-you-use” model. This means that account
holders pay a competitive fee per transaction, with charges ranging from
ZAR 0,99 (US$ 0,13) to a maximum fee of ZAR4,99 (US$ 0,67) irrespective
of value.

WIZZIT has not gone to the market with the “lowest cost” strategy but
rather on a sound value proposition of making peoples‟ lives easier.

The account also does not require the account holder to maintain a
minimum balance, which is very important for people who live on the
poverty line and cannot afford to forfeit a percentage of their money to
keep a bank account open.

This is also particularly attractive to the hundreds of thousands of workers

employed in areas such as agriculture and construction, where their main
earning and spending patterns may be seasonal.

Accessibility

Easy access to affordable and accessible banking facilities could be very

beneficial and convenient for the 11 million people who have been excluded
as economic citizens.

Coupled with this is the opportunity afforded by the fact that there are 36
million cell phones in South Africa and it is estimated that 40% of the 11
million unbanked people have cell phones.

WIZZIT has pioneered technology that enables people to become banked

just by having a cellphone, which is proven to be one of the cheapest and
most effective ways of providing banking facilities to the un-banked and
under-banked markets.

Utilising cell phone technology WIZZIT has also been very innovative in the
signing up of customers and the opening and activation of bank accounts
which can happen 24/7 from wherever the person happens to be.

True banking is when an individual has access to his/her money as and

when they so require. The fact is that sometimes you can‟t access, deposit,
transfer money, or purchase simply because banks are only accessible
between 9AM and 3:30PM.
Because WIZZIT does not have branches, customers open accounts through
field agents called WIZZkids who are previously-unemployed members of
local communities – playing both an upliftment and economic empowerment
role for South Africa‟s base of the pyramid.

These WIZZkids carry ZAR 39,99 (US $5,50) starter packs around, which
include a WIZZIT Maestro debit card and all the documentation to get up
and running with a new bank account, in minutes.

WIZZkids promote the product and help unbanked customers open

accounts. To date the company has trained over 3,000 of these independent
agents. Once fully trained and certified they receive corporate clothing,
marketing material and portable gazebos to help grow their businesses.

Many of WIZZIT‟s customers have never had a bank account so the

WIZZkids, who earn a commission on each sale, also play an educational
role.

Customers who require help can call a dedicated 18-hour call centre and the
service is available in all 11 official languages.

To become a WIZZkid one has to be an existing WIZZIT client and is

required to complete a training course and pass a test before becoming
certified.

To open an account takes as little as two minutes. All a WIZZkid needs is a

copy of a client‟s Identification document – with no need for salary slips,
proof of employment, credit checks or anything else.

This is particularly important for low income earners and people living in
rural areas because the Financial Intelligence Centre Act (FICA) of 2001,
requires that all banks verify the identity of their customers with proof of
income, identification and residential address – a near-impossible task for
people who live in rural areas or informal settlements - this complies with
the KYC (Know your Customer) regulations that are in place in most
countries around the world.

Because WIZZIT focuses on bringing the lower income earner into the
banking system, they are able to make use of exemption 17 of the Financial
Intelligence Centre Act.

This exemption means that a customer who holds a balance of less than
ZAR 25,000 (US $3,400) and makes transactions of less than ZAR 5,000
(US $650) a day, does not need to provide proof of residence and can sign
up with just his/her ID book.

WIZZIT has an arrangement with one of the four major banks in South
Africa, Absa (with around 800 branches country-wide) and the South
African Post Office (with 2,800 outlets) as well as the South African Bank of
Athens Ltd. whereby deposits can be made by account holders at these
institutions into their WIZZIT accounts.
This gives WIZZIT the largest deposit-taking footprint of any financial
institution in the country.

Availability

A WIZZIT account is available to everyone with a cellphone, regardless of

the make, model or age of the device.

In fact, you don‟t even need to have your own cell phone. Many households
make use of one cell phone and for many WIZZIT customers they simply
need their own SIM card (available at very low cost) and whenever they
need to check their balance, buy airtime or pay accounts, they insert their
SIM card into the household handset.

With around 3bn cellphones in circulation world wide, according to the

World Bank, it is one of the most pervasive and widely-accessible
technologies in the world and using cellphones as a banking medium has a
compounding effect on the service‟s availability.

WIZZIT uses a technology, supported in all GSM networks, called

unstructured supplementary services data (USSD).

Response times for interactive USSD-based services are generally quicker

than those that use short message service (SMS) and are also cheaper than
SMS.

WIZZIT coined the phrase “My bank in my pocket” because anyone can
have access to their bank account via their cellphone or the MasterCard
Maestro-branded debit card, at any time of the day.

A key strategy for WIZZIT in banking the un- and under-banked people of
South Africa is enlisting the support of small-to-medium size businesses.

With the burgeoning small business sector in South Africa, the opportunity
exists to offer quality banking services to companies and individuals, whose
primary objective is to survive and make money at the same time.

A large percentage of small businesses in South Africa very easily fall into
the trap of paying too much in bank fees, sitting with unpaid debts or non-
paying creditors, ultimately leading to the business suffering. For large
business this poses a problem so for small business it could be a death
sentence.

In addition, being able to reduce the costs and risks associated with
handling lots of cash on worker paydays or issuing numerous cheques,
businesses find it in their best interests to ensure that their workers have
access to an affordable and easy-to-use bank account.

The proof
Goldport Estates in Mpumulanga is one of the farms that recently opened
accounts for its 200 farm workers after having been involved in an armed
robbery some months ago.

According to farm manager Wilhelm Roth, the farm decided to find a

solution to reduce the cash payments made to workers. WIZZIT was
recommended to him by fellow farmers Marisa and Riaan van der Heever of
Elandslaagte Farm.

For Marisa van der Heever, banking was a critical need for her employees
and over a year ago she signed her workers onto WIZZIT.

Rather than having to give her employees time off to go into town to open
accounts, Beyers Coetzee, who is responsible for WIZZIT‟s farm initiative,
flew to her farm in his two-seater plane and opened accounts for her 54
workers in less than an hour.

The best thing was that they were able to do it one at a time so that the
farm‟s production line wasn‟t interrupted.

For Van der Heever the service levels are also critical. “Previously when one
of my workers would lose their card, it would take a month for the bank to
send a replacement card and only after time spent in queues at a branch.

“Most of the time it meant a long time for workers to be unable to access
their money. Now we keep replacement starter packs (which include a
Maestro Debit card and all related documentation) which the workers can
activate in a few minutes through the call centre,” she adds.

Van der Heever says the fact that the call centre is open past normal
banking hours and speaks all 11 South African languages makes it far more
efficient if they experience any problems.

“Any time I have had a problem, even at ten at night, it has taken just a
few minutes to resolve over the phone,” she says.

Many farmers like the van der Heevers use the WIZZIT payroll system
called iWIZZ, which facilitates the payment of workers on a payment
schedule set up in advance so that the farmer does not waste time on a
Friday making the bank payments.

Van der Heever says she has also seen a change in her employees‟ banking
behaviour after a year of using the service.

Initially the workers would withdraw all their cash immediately as they were
still building up trust in the product.

However once they built up the confidence that any money not withdrawn
would still be there the following month, they began to leave a portion of
savings. The workers have also started to use the card at point of sale at
local stores in the area.
WIZZIT cards can be used for cash-back transactions at selected stores as
well. What this means is that a cardholder can use a point of sale as a
mini-ATM. When paying for goods, he/she can ask to have a higher amount
swiped through the POS device and the balance can be paid back to the
cardholder in cash.

WIZZIT is not only appealing to farm workers. Many of the farmers, tired of
overpaying for banking services, have now started to adopt WIZZIT for their
personal accounts.

In a nutshell, WIZZIT is a completely functional virtual bank. This means

that it does not have a branch network to support and is therefore
extremely cost efficient. WIZZIT accounts can be opened on the spot within
a few seconds by properly accredited WIZZkids, who operate as human
bank branches.

“That‟s what attracted us to WIZZIT from the outset,” says Stephanie Lowe,
general manager of Biltworx, a medium-sized construction company that
specialises in commercial, industrial and residential construction.

“The fact that WIZZIT aims to bring easy-to-use banking products to the
unbanked people of South Africa and that it aims to drive education and
financial literacy in previously-unbanked populations was something that we
thought would fit in with our business model very well,” she says.

“We make it a prerequisite that all sub-contractors and their staff get bank
accounts before we will pay them. The fact that WIZZIT accounts can be
opened so quickly, on the spot means that less time is spent on all the
administration associated with regular bank accounts.

“We therefore encourage all our unbanked sub-contractors to open WIZZIT

accounts when we take them on,” Lowe says..

This move has reduced the amount of cash that needs to be held on the
premises by nearly 80%, which means that construction site managers run
less of a risk of being robbed and employees‟ money is safe when they
leave the site after every payday.

“From the outset, we‟ve been saving money in bank fees with WIZZIT,”
says Pedro Marques, manager of Bellini‟s, a continental bistro situated in
Illovo, Johannesburg.

“We use iWIZZ to pay all of our suppliers, which saves us a substantial
amount in bank fees every month,” he says.

“In addition, by encouraging patrons who have WIZZIT accounts to pay

using their cellphones, we have cut down on the amount of cash being held
on the premises. We also save on the costs associated with using a credit
card point of sale (POS) system if customers pay using their cellphones.”

Banking the un-banked – not for the meek

Taking on the feat of banking the un- and under-banked people of South
Africa is no easy task and WIZZIT continues to face daily challenges in its
business.

Although the business is growing at a good rate and demand for its services
continues to increase momentum, a legacy of neglect and exclusion has
made the task of bringing services to the lower end of the market and
creating trust in banks as a whole a daunting one.

The key, according to WIZZIT‟s Richardson, is being able to create product

affinity in that segment of the market and not to position products as
“specially tailored to the poor” or “inferior because of the target audience”.

Many WIZZIT customers believe that their WIZZIT accounts make their
lives far easier and safer and having a bank account has also created a
sense of pride among the very people who have been excluded as economic
citizens for so long.

Richardson concedes that the lower end of the market is not going to make
WIZZIT rich overnight.

“We never entered the market with a view to a quick return but at the end
of the day every business has to ultimately be profitable to survive,”
Richardson points out.

As with any business, there needs to be a profit but the social responsibility
of banking the un- and under-banked of the country far outweighs the need
to make billions in profit, at least initially.

The key factor is seeing the base of the pyramid from a different
perspective – as an opportunity to do good and not just another “reason to
comply” from mandates from government to help alleviate poverty.

WIZZIT is justifiably proud of its achievements to date in its very short

history and has genuinely made a huge difference in the lives of many
people – customers and employees alike.

ENDS

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