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Wireless transactions set to change the way SA spends

South African spending habits are about to be revolutionised by a combination of changes in banking infrastructure and the ubiquity of the cellphone, says Réan van Niekerk, managing director of Datalinx Technologies. There are products already in development, and due to hit the market within a year or two, that will make low-cost mobile banking available to all - and have the potential to generate a great deal of new economic activity.

Some early cellphone banking applications have already hit the market, but they are just a taste of what is to come. "I expect that very soon cellphones will incorporate smartcard features that will enable them to be used to pay for anything, anywhere and at any time - from petrol to restaurant bills to utility accounts to handing out children's pocket money," says Van Niekerk. "To people without the benefits of access to PCs and the Internet - which have saved untold hours for Internet banking customers - this will offer a previously undreamed-of flexibility and freedom."

One development driving this is the rapid rollout of banking facilities over the past couple of years, due partly to the introduction of the Msanzi account and partly to developments in the use of debit cards. The major banks have become huge issuers of cards, with the result that a massive 87% of all households in the country now have one or more bank cards, compared to just 15% in 1980.

The increase in the number of bank accounts is one part of the story; the other is the amazing success of our cellphone industry in enabling South Africa's communications infrastructure to leapfrog several decades of fixed-line development in just 10 years. There are now 21 million cellphones in the country, nearly one for every two people including children.

South Africans, ever resourceful, have not been slow to take advantage of the implications, as recent initiatives by MTN Banking and cellphone bank Wizzit confirm. A huge shift is under way in South African consumer habits, which will see voice becoming a secondary feature of cellphones compared to their transaction capabilities.

"The key to realising this potential is the creation of a country-wide cloud of wireless, secure communications, which is already well under way. This communications cloud will include GSM, satellite and other wireless technologies, all co-operating smoothly to give users ubiquitous communications at the lowest possible cost," Van Niekerk continues. "By 2007 we expect the convergence of communications technologies to have reached the point where your cellphone will double as a cordless home phone: you will be able to pick up a landline call on your handset, continue talking all the way into your car and onto the highway, and all the way to your weekend bushveld hideaway if necessary, all without noticing the handovers between different technologies and networks."

Security will be provided by point-to-point AES encryption, the symmetric cryptosystem recommended by the US National Institute of Standards and Technology as a successor to the DES and triple-DES standards currently used by the banking industry.

"This security is the key to future banking applications, providing the safety assurances that will encourage consumers - and, crucially, small and informal retailers - to adopt mobile banking technology. The next couple of years should see a slow but steady increase in the number of merchants able and willing to accept cellphone payments, although much of this may be invisible to relatively wealthy urban dwellers who already have access to most of the banking they need. Canny service providers will get into the market early - and when the trend reaches the mainstream, expect it to be huge," Van Niekerk concludes.

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