UNIVERSITY OF KWAZULU-NATAL Exploring the use of mobile banking services: Case study of Wizzit Bank, South Africa Mildred. P. Makore 210545830 A dissertation submitted in partial fulfilment of the requirements for the degree of Masters in Development Studies in the School of Built Environment and Development Studies, University of KwaZulu-Natal, Durban. November 2014 1 ‘What matters most about a new technology is not how it works, but how people use it and the changes it brings about in human lives…’ Frances Cairncross 2001 pg vii For my father, Freddy Bhedhu Makore, for all I am and all I will be……. Murambwi, Zororai Murugare. 2 ACKNOWLEDGEMENTS The Institute of Money, Technology and Financial Inclusion (IMTFI), housed at the University of California, provided the financial support for this study. My eternal gratitude for believing in the story I wanted to tell and to Jenny for all the understanding and support through the ups and downs. I would like to thank my supervisor, Kathleen Diga, for her patience and enthusiasm for my study. Also, for her encouragement and inspiration to continue despite all the odds and for keeping me on my toes to finally submit this dissertation. Finally…. to my supervisor, Dr Shauna Mottiar, for not even hesitating to help when you were asked…..thank you!!! Thank you Susan Buwu for being the true friend that you are; the friend that I truly needed over all these years and the voice of reason always!! Do not ever change!! I would like to thank Babamukuru Dhakwa for his encouragement and his frequent requests for updates to ensure completion. Thank you! To my brother, Tsungai Makore, whose idea this all was…and for the financial support. Thank you!!!To Ethel, my niece, my friend, my shoulder to cry on. Thank you for always being there for me. To C.S Tengwana, thank you for all the support over the years. Ndinotenda!! And finally, to God Almighty, who gave me strength when times were hard. He is faithful always. 3 COLLEGE OF HUMANITIES DECLARATION - PLAGIARISM I, Mildred.P.Makore, declare that: 1. The research reported in this thesis, except where otherwise indicated, is my original research. 2. This thesis has not been submitted for any degree or examination at any other university. 3. This thesis does not contain other persons’ data, pictures, graphs or other information, unless specifically acknowledged as being sourced from other persons. 4. This thesis does not contain other persons' writing, unless specifically acknowledged as being sourced from other researchers. Where other written sources have been quoted, then: a. Their words have been re-written but the general information attributed to them has been referenced. b. Where their exact words have been used, then their writing has been placed in italics and inside quotation marks, and referenced. 5. This thesis does not contain text, graphics or tables copied and pasted from the Internet, unless specifically acknowledged, and the source being detailed in the thesis and in the References sections. Signed ……………………………………………………………………………… 4 I……Kathleen Diga…………………………………….as the candidate’s supervisor have approved this short dissertation for submission. Signed ……………………………………………………………………………… I……Shauna Mottiar…………………………as the candidate’s co-supervisor have approved this short dissertation for submission. Signed ……………………………………………………………………………… 5 ABSTRACT The rate of penetration of the mobile phone has exceeded all other communication technology, particularly in the developing world. This has seen the introduction of mobile- based financial services to address financial exclusion. However, there is limited research on the usage of these mobile banking services by the poor. This study therefore seeks to explore how mobile banking services are being used by the urban poor in four townships in Johannesburg, South Africa (SA). It seeks to explore the social, technological and economic factors that have enhanced or inhibited use of mobile banking initiatives. In-depth interviews with 10 users of a mobile banking initiative and a focus group were conducted. The study applied the Capabilities Approach by Amartya Sen to analyse the contexts that can affect use of mobile banking services. Analysis of the data shows that mobile phone ownership and uptake does not directly translate to mobile banking uptake and usage. The study finds that there are contextual influences of uptake and usage - specifically the social, technological, personal and factors related to the banking environment that the usage decision is made in. However, social factors seem to impact the usage decisions most, as decisions whether to use or not to use the Wizzit Bank services were highly dependent on trust. The study also finds that mobile banking has the potential to contribute to development through expansion of freedoms. Mobile banking gives low income users the freedom to participate socially and economically in ways that can improve their livelihoods. 6 LIST OF ACRONYMS AND ABBREVIATIONS AFI Alliance for Financial Inclusion ATM Automatic Teller Machines B2P Business to Person CCD Capable and Conviviality Design CEO Chief Executive Officer CFI Centre for Financial Inclusion CGAP Consultative Group to Assist the Poor DoC Department of Communication EC European Commission FICA Financial Intelligence Centre Act G2P Government to Person GSMA Groupe Speciale Mobile Association GDP Gross Domestic Product ICASA Independent Communications Authority of South Africa ICT Information Communication Technologies ICT4D Information Communication Technologies for Development IFC International Finance Corporation IMTFI Institute of Money, Technology and Financial Inclusion ITU International Telecommunications Union 7 JSE Johannesburg Stock Exchange MNO Mobile Network Operator NPS National Payment Systems NGO Non-Governmental Organisation OECD Organisation for Economic Corporation and Development PASA Payment Association of South Africa P2B Person to Business P2P Person to Person POS Point of Sale RICA Regulation of Interception of Communications Act ROSCA Rotating Savings and Credit Association SA South Africa SARB South Africa Reserve Bank SASSA South Africa Social Security Agency SLF Sustainable Livelihoods Framework SMS Short Message Service SOE State Owned Enterprises TAM Technology Acceptance Model TRE Telecom Regulatory Environment USAASA Universal Service and Access Agency of South Africa 8 UNCTAD United Nations Conference on Trade and Development USSD Unstructured Supplementary Service Data 9 TABLE OF CONTENTS ACKNOWLEDGEMENTS_________________________________________________________________3 DECLARATION OF ORIGINALITY________________________________________________________4 ABSTRACT_____________________________________________________________________________ 6 LIST OF ACRONYMS AND ABBREVIATIONS______________________________________________7 LIST OF FIGURES _______________________________________________________________________12 LIST OF TABLES ________________________________________________________________________13 CHAPTER 1: INTRODUCTION____________________________________________________________14 1.1 BACKGROUND AND RESEARCH PROBLEM_________________________________________________14 1.2 PRESENT STUDY -PURPOSE OF STUDY____________________________________________________18 1.3 RESEARCH PROBLEM_________________________________________________________________18 1.4 RESEARCH OBJECTIVES_______________________________________________________________19 1.5 RESEARCH QUESTIONS _______________________________________________________________19 1.6 AMARTYA SEN’S CAPABILITIES APPROACH_______________________________________________19 1.7 LOCATION OF STUDY - SOUTH AFRICA, JOHANNESBURG_____________________________________20 1.8 STRUCTURE OF THE STUDY____________________________________________________________20 1.9 CHAPTER CONCLUSION_______________________________________________________________21 CHAPTER 2: LITERATURE REVIEW______________________________________________________22 2.1 INFORMATION COMMUNICATION TECHNOLOGIES (ICT’S)____________________________________22 2.2 ICT, INEQUALITY AND DEVELOPMENT___________________________________________________23 2.3 ICTS AND ECONOMIC GROWTH_________________________________________________________24 2.4 ICTS AND POVERTY REDUCTION________________________________________________________25 2.5 MOBILE PHONE TECHNOLOGY, DEVELOPMENT AND POVERTY ALLEVIATION______________________27 2.6 MOBILE PHONES AND ECONOMIC GROWTH________________________________________________30 2.7 FINANCIAL EXCLUSION AND PROFILE OF THE EXCLUDED_____________________________________31 2.8 BRANCHLESS BANKING_______________________________________________________________37 2.9 MOBILE PHONE TECHNOLOGY AND FINANCIAL SERVICES ____________________________________38 2.10 MOBILE BANKING IN THE DEVELOPING WORLD__________________________________________40 2.11 MOBILE BANKING USE AND ADOPTION_________________________________________________43 2.12 THEORETICAL FRAMEWORK_________________________________________________________48 2.13 AMARTYA SEN’S CAPABILITIES APPROACH ____________________________________________50 2.13.1 CAPABILITIES AND FUNCTIONINGS_________________________________________________50 2.13.2 CONVERSION FACTORS __________________________________________________________51 2.13.3 FREEDOMS____________________________________________________________________52 2.14 RATIONALE FOR CHOICE OF FRAMEWORK AND SUITABILITY________________________________56 2.15 CHAPTER CONCLUSION_____________________________________________________________57 CHAPTER 3: CONTEXT OF STUDY- ICTS AND BANKING THE UNBANKED IN SOUTH AFRICA _________________________________________________________________________________________58 3.1 THE UNBANKED AND THE FINANCIAL SECTOR IN SOUTH AFRICA ______________________________58 3.2 BANKING SERVICES FOR THE UNBANKED POOR IN SOUTH AFRICA _____________________________62 3.3 TRENDS IN THE SOUTH AFRICAN TELECOMMUNICATIONS SECTOR _____________________________65 3.4 MOBILE BANKING IN SOUTH AFRICA ____________________________________________________68 3.5 REGULATIONS AND POLICY ON MOBILE BANKING IN SOUTH AFRICA____________________________71 3.6 WIZZIT BANK ______________________________________________________________________76 10