'Flawed' Mzansi loses its appeal

The Mzansi account, which was designed by South African banks specially for lower-income groups, still needs further tweaking to properly serve those who have not banked before.

Established through the financial sector charter that came into effect in 2004, the Mzansi account has been a major contributor to an increase in the percentage of adults banking in South Africa - from 46% in 2004 to 63% in 2008.

It now has 3.7million accounts, dropping from 4.5million in December. About 12% of the 3.7 million accounts are inactive, according to Cas Coovadia, managing director of the Banking Association of South Africa.

There has been a 19% decline in the total number of Mzansi accounts during the first half of this year.

Although the Mzansi account initially reduced the number of South Africans without bank accounts, clients have left or accounts have become dormant because of expensive fees.

It has also lost out to competition from banks that now have their own low-cost entry-level products.

Standard Bank started bank shops and Absa introduced 1234 branches for this market. FNB introduced EasyPlan branches, mirroring Capitec Bank's strategy.

Nedbank holds the second-largest Mzansi account client base. Under Ingrid Johnson, its retail and business banking managing executive, the group will relaunch its marketing campaign next Sunday, with the aim of turning Mzansi clients into Nedbank Ke Yona account holders.

The Ke Yona offering is available through more than 1000 staffed outlets as Nedbank continues to grow its footprint across South Africa with accessibility in communities that were previously not served. These include far-flung corners such as Ngqeleni, Idutywa and Centane in the Eastern Cape, Acornhoek in Mpumalanga and Thohoyandou in Limpopo.

Banks have had to make the proposition appealing without letting their clients feel as if they are in the low-income segment, or poor.

Gerhard Coetzee, a specialist adviser on inclusive banking at Absa, said the Mzansi account was still relevant because South Africa still had a substantial number of people who did not use banks.

But Nesbert Ruwo, senior analyst at research firm Intellidex, said the product had missed out on opportunities as the banking sector had changed.

Capitec's CEO, Riaan Stassen, said Mzansi was "fundamentally flawed".

He said the product labelled low-income people as "poor", a segment to which no person wanted to belong.

Coetzee said the Mzansi account needed to focus on agency and mobile phone-based banking, which eliminated the need for branches.

Coovadia said he was not surprised that the number of people using the Mzansi account had dropped.

But he believed that the Mzansi account had brought positive change to the South African banking landscape because it motivated banks to develop a variety of products to service the emerging banking market off the back of the experience and lessons gained from developing the account.