Banker Sees a Rich Market in the Poor
Wednesday, May 14, 2008
JOHANNESBURG -- To Brian Richardson, the next frontier in banking looks like this: A farm laborer gets her wages not in cash but in an account she can access with her cellphone. With a few punches on the keypad, she pays her rent, buys groceries and sends money to her parents.
Along the way, she develops the kind of basic financial literacy that can help her start a business, or simply manage daily life more sensibly, providing a crucial first step in the journey out of poverty. As the farm laborer builds wealth, Richardson's company builds profits.
Such are the grand ambitions for Wizzit, a South African company that has garnered international attention for its creative approach to getting basic banking services to the world's poor. Or as Richardson, the Wizzit chief executive, calls them, "the unbanked."
"I really believe that the foothold for mobile banking will come out of the developing world," said Richardson, 50, who has sandy-colored hair, a slight build and hip rectangular glasses. "Mobile banking is far more compelling for the unbanked than for anybody else."
At a time of rising interest in how to effectively battle global poverty, Richardson has become a fixture at international conferences, where he proselytizes about the transformative power of easily accessible financial services. His pitch to World Bank officials proved so persuasive that its private-sector investment arm bought 10 percent of the company last year. Despite failing to make a profit in its first three years of business, Wizzit already is attempting to expand into Zambia and Eastern Europe.
Sitting in a fluorescent-lit conference room in Sandton, Johannesburg's financial district, Richardson wore all black -- slacks, shoes and a button-front shirt, the only color a splash of red in the shirt's lining and on the "Wizzit" logo on his cuffs. His manner is one of low-key reasonableness. But it grows more animated when he seizes on a telling statistic. He often speaks in metaphors.
"To me, the ultimate is to give people a compelling reason to move away from cash. If you've never had air conditioning in your motor car, you don't know what it is. So you've got to have it in order to appreciate it," he said. The goal "is to get people from centuries of money under the mattress, I live my life on cash, I've got no need for anything else, to sort of leap from there to a virtual mobile bank."
The world has roughly 5.5 billion people without access to even the most basic financial services, making it hard for them to manage bills and leaving them without credit and vulnerable to crime. Though they are mostly poor, Richardson sees them as a huge untapped market now reachable thanks to cellphones, whose messaging functions can be used for basic banking transactions. Industry estimates say there are more than 3 billion handsets worldwide, three times the number of people with bank accounts.
In South Africa, the ratio is similar, with 30 million cellphones compared with about 13 million bank accounts. Even those with accounts frequently must travel a half-hour or more, Richardson said, to access their money at branches or ATMs that remain scarce where the poorest people live. The resulting cab fares and lost work time amount to hidden transaction costs.
After years of working as a banking industry consultant, Richardson revels in his role as an outsider. In a dig at the staid nature of the industry, he told of how, as a young employee of a Johannesburg bank, he asked an older, seasoned colleague why all the branches opened at 9 a.m. and closed at 3:30 p.m. -- hardly convenient hours for most customers.
"Because, laddie," the veteran bank officer told him, "we always have."
Wizzit has broken that tradition, doing away not only with bankers' hours but also with branches, which are a major operating expense for even the biggest banks.
Wizzit has about 60 full-time employees, all of whom were unemployed when they were hired by the company. Thousands of part-time workers, called Wizzkids, open the accounts with the help of a central call center. Once the decision is made, the process takes a mere 30 seconds, according to Richardson.
"If you want to open an account at 10:30 on a Saturday night, we will open an account at 10:30 on a Saturday night," he said. "And you don't have to go to a bank and stand in a line."
After an initial account fee of about $5.50, half of which goes to the Wizzkids as commission, customers pay only for the services they use. Buying groceries with Wizzit adds about 25 cents to the bill; withdrawing cash at another bank's ATM runs a dollar or two, depending on the amount. In both cases, the transactions are made using debit cards given to all new customers. Paying rent, sending money to relatives or making other electronic transfer payments are done through the cellphone itself.
The fees are so low that it's not yet clear if Wizzit can make enough money, although Richardson predicts a profit by the end of 2009. The number of new customers, which he said numbers in the hundreds of thousands, is growing rapidly. But many keep minimal balances and leave their accounts dormant for long stretches.
Wizzit doesn't yet make loans , a key source of a bank's revenue and a central component of most poverty-alleviation programs. Some type of lending program, as well as savings accounts, are in the works for Wizzit, Richardson said.
"We are in virgin territory. There are no models. There are no textbooks," he said. "We are at base camp at Mount Everest. It's a big mountain."