Rwanda: Will Growth of Mobile Money Disrupt ATM Technology?

Automated Teller Machines (ATMs) have for ages offered debit and credit card holders a convenient way of accessing funds anytime and from any place where there is an ATM.

From a village farmer to traders, academicians and foreign visitors, the cards have always come in handy, offering remarkable convenience to cardholders whenever they run out of cash.

In fact, credit and debit cards are a must-have for travellers basing on how they depend on their Visa, MasterCard or China Union pay cards while in the country. Merchants too have found them useful when clients use them to pay for goods and services.

This is besides the fact that financial institutions earn handsomely from cardholders in terms of levied fees.

However, over the past few years Rwanda has witnessed a remarkable growth in mobile financial services, notably those offered by the three local telecom firms - MTN, Airtel and Tigo. This growth, pundits say, does not portend well for banks that offer credit and debit card services as it has started to erode the market that was previously a preserve of financial institutions.

The threat is real. Already Airtel and Tigo Rwanda are now working with microfinance institutions to enable clients save and access credit, a product which with growth would see no reason for a mobile money customer to require a credit card.

However, the popularity of mobile money services may not spell doom for the other banking services as financial institutions have started linking their mobile banking platforms with the telecoms' mobile money services.

So far, five banks - Bank of Kigali, KCB Bank Rwanda, Zigama CSS, I&M Bank and GT Bank have integrated their mobile banking platforms with the telecoms' mobile money platforms, a move seen by sector experts as fight by banks to remain relevant and competitive in the market.

With the integration, mobile money subscribers who have accounts with the banks, can now transfer funds from their bank accounts to their mobile money wallets easily and vice-versa, which eliminates the need for one to acquire a debit card.

Maurice Toroitich, the KCB Bank Rwanda managing director, foresees a future where most transactions will be done using mobile phones, a situation that will reduce the use of electronic cards.

"The ideal situation is that you don't need your debit card... Although the use of a debit card is more than withdrawing money from an ATM because with it you can make online purchases and payments on Points of Sale (POS) devices," Toroitich notes.

"However, in the long-run, the only place a card will be useful will be at an ATM because even the online purchases in the future could start using mobile payment systems," he argues.

Is this the beginning of the end of ATM card use?

If the recent statistics by central bank are to go by, integration between the players could signify the beginning of the decline of using electronic cards in Rwanda.

The statistics showed that during the first three months of this year, the number of transactions carried out from ATMs declined by five per cent compared to the same period last year, from over 1.85 million transactions at the end of March 2014 to 1.77 million transactions in March this year. This translated into a growth in the value of transactions from Rwf72.2 million in 2015 to Rwf77.5 million this year.

Mobile money platforms on the other hand, continued showing strong growth trends during the period, with the volume of transactions growing from close to 20 million in March last year to 35.1 million this year. This was a 122 per cent growth in value, from Rwf115.7 million to Rwf257.4 million over the same period.

While the figures may not specifically indicate how the integration between the banks and telecoms' mobile money platforms contributed to that growth in the short-time the integration has been working, it is clear that the use of mobile money is growing faster compared to the use of the cards.

Over 6.4 million Rwandans now have a mobile money account, way higher than the banked population.

Experts have on numerous occasions commended mobile financial services for bringing more people into the banking loop.

Therefore, with the fast integration now happening between telecoms and banks, Rwanda's new bank clients may not find it necessary to visit their nearest ATM, unless they are using the ATM as a mobile money agent.

ATMs here for the long haul

Despite the significant growth of mobile money services and products offered on the platform, experts argue that the 'extinction' of debit and credit cards is not yet in sight.

KCB Rwanda's Toroitich points out that the use of cards will not die-out completely "as not everybody is going to migrate from cash to non-cash facilities".

This means that some people will still be going to ATMs to withdraw cash for many more decades to come, he says.

Sanjeev Anand, the managing director of I&M Bank Rwanda, on the other hand, believes the use of cards and mobile money will start converging overtime.

"Both mobile money and cards have their own spaces. One is a good collection; savings, and payments mechanism, while the card is mainly a payment mechanism.

"It can be used for payments of large amounts, while mobile money can be used for comparatively lower amounts. I would say, overtime, the two will converge," Anand said in an interview with Business Times yesterday.

He however, just as Toroitich said, noted that since Rwanda is moving toward a cash-less economy, the use of both cards and mobile money will grow, noting however that mobile money will continue growing at a faster rate.

ATM or mobile money?

Many Rwandans find mobile money convenient, but what also stands out is the fact that they don't know what else they can use the platform for.

In fact the majority of mobile money subscribers use it to send and receive money, buy airtime or pay utility bills.

"I think I need to learn how to use all the facilities on mobile money. If I can transfer money from my bank account to my mobile money and vice-versa or withdraw from an ATM using mobile money, then that's awesome," said Flavia Uwase, a Kigali resident.

"Otherwise, for now I use my ATM card and mobile money to send and receive money once in a while."

SOURCE:THE NEW TIMES