South Africa’s unbanked
Throughout the world, prepaid debit cards are increasingly being
viewed as a solution to providing financial services to unbanked
people. In South Africa, this is an untested route that two prepaid
debit card companies, US-based FundsTech and South Africa-based
ProCard Technologies, have joined forces to embark on.
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The initial phase of the initiative will focus on providing prepaid
cards to companies that pay workers in cash, a service that has
never been made available in South Africa, ProCard CEO Martinus du
Toit told EPI. “It is a concept that will not be difficult to sell;
there is a lot of hanging fruit in that market,” said du
Toit.
He continued that the initial goal is to have 800,000 cards being
utilised by ProCard’s customers within the next 18 months. The fee
paid by employers using ProCard’s service would be about $12 per
card per month.
Indicative of the potential size of the market, FinMark Trust, a
UK-backed non-profit financial research body, estimated that the
number of unbanked South Africans stood at 15.3 million people, or
49 percent of the adult population, at the end of 2006. Initiatives
such as the banking industry’s Mzansi account for low-income
earners have helped reduce the number of unbanked, but only to a
limited extent. According to FinMark Trust, 54.4 percent of the
adult population was unbanked in 2004.
Safer than cash
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By GlobalDataFrom a security perspective, reducing the use of cash for wage
payments is a high priority for many employers, said du Toit.
Employers’ enthusiasm is underscored by statistics from the South
African Police Services that reveal there were 467 cash-in-transit
robberies in the 12 months to March 2007, a 21.3 percent increase
compared with the previous corresponding period.
ProCard, which has received accreditation from MasterCard and is
awaiting accreditation from Visa, is utilising FundsTech’s software
and will source cards from FundsTech, said du Toit. He continued
that the wage payment card would be the first of a number of new
products ProCard would launch in conjunction with FundsTech.
He explained that the second phase of product roll-out will
introduce a card that would be available for use at multiple
retailers and would facilitate cash withdrawals. The card would
also permit remote top-up, a feature aimed at migrant workers faced
with the daunting task of remitting money home. Notably, FinMark
Trust estimates that in 2005, ZAR12 billion ($1.7 billion) was
transferred by migrant workers to their families in rural areas.
Most of this was done through informal means at a high cost,
sometimes as much as 25 percent of the money being
transferred.
The ProCard/FundsTech alliance will ultimately target other
markets. “We expect ProCard to aggressively market our prepaid card
solutions to the unbanked and under-banked population in Africa and
the Middle East,” said Victoria Vaksman, FundsTech’s executive
vice-president, Europe, Middle East and Africa. Among other
products ProCard would be promoting in these regions are
FundsTech’s prepaid payroll card, gift card and health card, she
added.
A number of alliances
ProCard is the latest in a number of players in the payments market
to team up with FundsTech. In August, FundsTech and Isle of
Man-based online debit and credit card payment processor Business
Intelligent Processing Systems (BIPS) forged a strategic alliance
to distribute FundsTech’s products in Canada, Asia-Pacific, Latin
America, the Caribbean, Central and Eastern Europe and the Middle
East. BIPS processes about $1 billion in payments annually.
Other recent alliances include that with US merchant account and
health care payment processing and systems provider Atlas Merchants
Services. The alliance encompasses the marketing of FundsTech’s
prepaid payroll, gift, travel, business-to-business and teen card
programmes.
In addition to these ventures, FundsTech has implemented a prepaid
card solution in Europe that will initially be offered in Germany,
followed by Austria and the UK. Funds-Tech’s strategic goal is to
have at least 15 million cards in issue by 2011 in all regions it
serves, said its president, David Fann.
FundsTech backed its ambitious growth plans with a listing on the
Frankfurt Stock Exchange in August this year. “We believe that the
listing will allow our investment story to reach a much larger
private and institutional German and European investor audience as
we ramp up our corporate development profile,” said Fann.
