Uganda: Standard Bank in Move to Counter Mobile Money

Faridah Kulabako

23 June 2011

The advent of mobile money has transformed telecom companies into financial institutions.

The platform that allows people to use their mobile phones to transfer money, pay for goods and services and conduct banking services has seen telecoms eat into commercial banks’ market share.

This is because telecoms including MTN, Airtel and Uganda Telecom tapped into the once ignored low income segment, which constitutes the biggest number of the unbanked population.

This low end market was deemed unprofitable by commercial banks.

Currently, one out of every five Ugandans has either used the platform to send or receive money, pay utility bills, school fees, and merchandise or buy airtime.

Uganda has a population of 31 million people but only 3 million people have bank accounts.

However, in a move to give a new meaning to commercial banking, altering the perception that it’s a service offered by people in suits sitting in air conditioned buildings, Standard Bank-Stanbic Bank’s parent company is planning to introduce “bank-shops” in Uganda.

“Bank-shops” is a branchless banking model designed especially for the low income segment of society, intended to bring on board the unbanked population.

Standard Bank installed banking facilities in shops that sell airtime, snacks, butcheries and other household items in townships of Tembisa, Limpopo, Eastern and Western Cape among others, where the model has thrived.

At a “bank-shop”, one can deposit money, withdraw, transfer money, check balance and pay utility bills.

The banking model was developed to secure South Africa’s unbanked and under banked population estimated at 15 million people.

Since its inception two years ago, Standard Bank, the only financial institution with such a banking model in Southern African, has established over 8,700 “bank-shops” across the country and attracted about 300,000 customers.

Standard Bank Business Support Manager, Bank Shops Channel, Mr Jacobs Cheslyn told Smart Money recently that the model is cost-effective and enables the bank to grow its customers base at minimal cost.

“We have got a very low-cost banking product. We don’t have to pay rent. We can open up accounts quickly. We don’t have to spend money on infrastructure,” Mr Cheslyn says.

The “bank-shop” banking model was designed on principles of affordability, accessibility and simplicity.

The maximum that clients can withdraw from a “bank-shop” is R5,000 (about Shs1.7 million) daily and R25,000 (Shs8.8 million) monthly with no fee charges.

Unlike Mobile Money service where no ATM card is provided, with Standard Bank’s “bank-shop” model, an ATM card is provided, which can be used at any bank’s ATM point, Standard Bank branch, Point of Sale Terminal or bank shop to transact.

However, Mr Cheslyn states that they discourage clients from using conventional channels like branches to help reduce the traffic in branches.

Thus, it is cheaper to open an account in a “bank shop” than in a branch.

“Clients in the lower-end of the market often went to a branch to only get a balance enquiry, something that cost the bank, in terms of efficiency,” he adds.

With a “bank-shop” an account holder can get his balance on his or her mobile phone.

Mr Cheslyn says currently there are about 8,000 “bank shops” and the plan is to expand to over 10,000 by the end of the year and 20,000 by end of 2012.

The model took services closer to the people instead of journeying long distances to carry out small transactions.

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