New legislation, separate from local banking regulations, should be introduced to allow for the introduction of new, low-cost electronic banking and financial services, while retaining the resilience of the banking sector, says digital systems firm Hello Group founder and chairperson Nadir Khamissa.

The existing requirements to establish an electronic-money service requires R250-million and a multiyear application process, as a full banking licence is required. Hello Group argued that such low-cost, electronic-money services should have much lower barriers to entry since they put banking in reach of all citizens.

South Africa’s banking regulations are robust and helped the sector to weather the global financial crisis better than most countries. However, these same regulations stifle innovation in providing new electronic financial and banking transaction services, as any new entrant must partner with a banking licence holder, or pay the full licence fee. This results in the prices that new entrants can offer conforming with existing pricing structures of banks and the benefit of their innovations being eliminated, he explains.

“At Hello Group, we aim to ultimately provide zero transaction fees for customers on their mobile devices. Our remittance system – Hello Paisa – is used to send money across borders, which is common practice in Africa, has saved our customers R250 -million in transfer fees over the past 18 months. This money is typically used for essentials, such as food and school fees, and this saving makes a material difference to people’s lives,” he explains.

Further, the introduction and adoption of broadly used, low-cost electronic banking transfer systems will allow for more, typically small businesses to develop a credit history and thereby access credit and financial instruments, including incentives and rebates.

Growth in the use of such electronic and mobile banking systems will result in more money being introduced into the formal banking system, which will help to improve its ability to lend money, enable more people to protect their money in formal banking systems and access savings products such as retirement and investment products.

A widely used mobile and electronic banking transaction system will also provide detailed information on this often opaque and underserved segment of the market, which can then inform policymaking and subsequent regulations, adds Khamissa.

“Free banking might sound like a death sentence for banks, but the volume growth that can be achieved by providing a safe, affordable way for consumers to manage their money through electronic transactions will bolster banks and enable them to focus on providing higher value-added services and products to more people.”

The adoption of such systems is also typically very rapid, and providing a low-cost or no-cost option for consumers and small businesses to manage banking transactions will increase the use of secure electronic money transfer systems, lowering costs and risks for them and businesses.

Hello Group won professional services multinational EY’s World Entrepreneur Award Exceptional Category last year, and has a presence in five countries, namely the UK, South Africa, Zimbabwe, Kenya and India. Its systems are approved for use by the central banks and regulatory authorities of another 30 countries around the world. It aims to grow its international money transfer business.