The Mzansi bank account : determining its success and the way forward

Abstract

The Mzansi bank account, launched in the latter part of October 2004, arose out of the financial services charter and is aimed at low income, previously unbanked individuals and households. Since its inception, it has been supported by the following financial institutions: Amalgamated banks of South Africa (ABSA), Standard Bank of South Africa (SBSA), First National Bank (FNB), Nedbank (essentially the four major retail banks in South Africa) and the Postbank (a subsidiary of the Post Office).This study investigates the performance of the Mzansi account from both the customer and supporting financial institutions' perspective. The investigation's primary objectives focused on determining how accessibility to financial services (and to the account itself) may be improved for customers, determining what Mzansi customers needs are, and how the account may be expanded or enhanced to meet these needs. The secondary objectives concentrated on problems the supporting financial institutions faced: improving accessibility for customers (without too costly an investment in supporting infrastructure), differentiating the product and service significantly from other competing institutions, limiting product cannibalisation (where the Mzansi account is chosen over higher order retail bank products) and limiting overall costs of the account to ensure profitability. The research methodology consisted of a literature study and empirical research that in turn encompassed administering survey questionnaires to current Mzansi customers. The literature study focused on both national and international attempts at banking the unbanked, distilled common learnings from these attempts and ultimately described best practices with particular reference to improving accessibility to financial services and tailoring financial services options to meet the most critical needs of the unbanked market. The literature study also found that a definite business case exists for financial institutions willing to pursue this market, provided that the core value proposition was adequately adapted. Previous findings on how to avoid product cannibalisation, as well as how to differentiate products and services to entrench greater customer appeal completed the literature study. The empirical research encompassed the development of a survey questionnaire aimed at understanding five core research areas: the Mzansi customer profile (for a sample of one hundred and forty seven existing customers and transacting at Gauteng branches and outlets and evenly distributed across each of the supporting financial institutions), gauging how well customers understood their accounts, determining the service customers had received, understanding customer transaction and the value they attach to these transactions, and finally affording customers the opportunity to suggest ways in which the account may be improved. The questionnaire comprised both open and closed ended question (the latter questions used a five point Likert-type scale to determine scoring). The results, apart from compiling an overall demographic profile of the customer, showed that significant work still needs to be accomplished by the financial institutions to ensure customers understand their accounts and the various transactions and channels available to customers. AIM transaction for instance caused customers problems; to the extent that customers were willing to pay almost twice as much for branch transactions instead. The service received by customers also proved to be average, with more customer orientated demonstrations and a greater amount of time spent during the account opening procedure being seen as valuable ways to improve the overall service received. Customers valued cash withdrawal transactions the most, favouring the use of the branch channel. Customer needs were identified to be primarily credit based; with different credit facilities being required. Customer motivated improvements also extended to a greater range of free transactions on the account, improved interest rates on credit balances and some form of loyalty based discount on certain transactions. Practical ways suggested to improve access to the account included account proliferation techniques (where third parties may initiate the opening of an Mzansi account on behalf of a customer) and the use of mobile banking facilities. The product functionality was also recommended to be expanded to include limited numbers of debit and stop orders for the retail banks' offering, while a strong emphasis was placed on approaches to improving customer financial literacy by way of education programs that are community based. The later aspects were also seen as strong departure points that the supporting financial institutions could leverage to significantly differentiate their service and product offering. The objectives of the study were deemed to have been met, despite the fact that the study's geographical bias, customers possibly misrepresenting their income and possible translation bias.