As the South African Post Office circles the drain, millions of grant beneficiaries are terrified they may not receive their monthly stipends. If the postal service does collapse, as appears increasingly likely, how would the South African Social Security Agency (Sassa) deliver its grants?
Why not tap into South Africa’s rich vein of innovation in financial services and fintech start-ups?
If Bank Zero were asked to help with Sassa grants, chair Michael Jordaan tells the FM, “we would save the government a lot of money by bringing free and advanced mobile banking to all grant recipients. We would do so by simply using all the existing functionality that Bank Zero offers, from the functionality-rich smartphone app to the patented Mastercard debit card to the nationwide cash-in and cash-out network via ATMs and leading retailers.”
Recipients would receive their grants as a free electronic funds transfer and could then make further free payments and transfers to any other bank account, swipe the card for free or draw cash from any ATM or (at a lower cost) point of sale at Shoprite and Pick n Pay stores nationwide, he adds.
As its name implies, Bank Zero charges zero fees, except for a few limited transactions, demonstrating that sophisticated banking services can be offered for free. Because of the founders’ vast experience — Jordaan was CEO of FNB, while Bank Zero CEO Yatin Narsai was a senior executive — they are able to navigate the banking system adroitly. Jordaan has previously told the FM that the bank makes its money from a percentage of some transactions, which is possible because its systems are so efficient.
Asked what the benefits would be of using Bank Zero’s sophisticated cloud-based banking, Jordaan says the main upside would be “no more queues for grant recipients, and much lower costs for the government. Recipients would be in complete control of their finances based on a proper, modern bank account and immediate access to balances and statements.”
The bank says it has experienced zero fraud through its credit cards, which all feature a selfie of the account holder — another potential security boon for grant beneficiaries.
The “once-off downside” of converting grant beneficiaries would be the need to get a smartphone, “but these have become highly affordable”. There are also fees for the card personalisation and its delivery. “Thereafter, all electronic transactions and card swipes are free,” says Jordaan.
Poor cash management causes bottlenecks at a branch level, creating queues that last for days — a huge injustice those who are already vulnerable
— Nicholas Bednall
Delivering social grants is a mission-critical service for the government and the 17-million people who rely on them. Because the Post Office distributes most of these grants — an estimated 60% in 2021 — there is a “very high dependency on it making this work”, says Nicholas Bednall, MD of the locally created MoyaApp.
However, even though the government gives the Post Office “billions in fees” to distribute grants, “it cannot make it work”.
“The crux of the problem revolves around cash and the card management, which are core to how grants are distributed,” says Bednall, whose experience includes working for mobile payments firm wiGroup and as chief marketing officer of financial services group Lesaka.
“Poor cash management causes bottlenecks at a branch level, creating queues that last for days — a huge injustice to those who are already vulnerable,” he tells the FM. Horror stories of elderly people being scammed out of their whole month’s grant at ATMs abound. Trucking in so much cash will always attract criminals to grant payment points because of the easy pickings.
The “next wave of logistical nightmares” facing the Post Office, he warns, is the expiry of Sassa gold cards. This will create “a further crisis for grant recipients, who cannot now transact with their cards”.
Bednall says the obvious solution is to “widen the number of distributors, but that is easier said than done”.
Moya is the most downloaded South African Android app on the Google Play store, with more than 10-million installations. It offers data-free messaging, news and other content, and has launched its own payment app called MoyaPay. It is essentially a super-app such as WeChat, and is entirely home-grown.
“Globally, fintech has been the disrupter to the cosy position of banks, bringing product innovation and driving down the costs of payments,” says Bednall. “Maybe it’s time for Sassa to embrace fintech to help solve this crisis.”
As Jordaan rightly points out, “the future of nearly everything is mobile”.
Explaining the thinking behind setting up Bank Zero, he says: “If you start a new bank from first principles, you would not have expensive branches and head offices but only a smartphone app backed up by a card.”
Bank Zero “is mobile-centric, advanced and free. Just like Google, Facebook and TikTok are free, mobile banking can and should be free too.”
Hopefully Sassa is open to suggestions.
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