Card swipes exceed cash, app uptake grows at FNB

Irlon Terblanche, CEO for FNB Core Banking Solutions

Generation Z loves apps

Its latest banking app statistics reveal that the youth market has shown the highest growth in app uptake and usage with an 8% increase from 6% in 2011 when it launched, to 14% this year - the highest growth across all age demographics.

As of 31 December 2013, it has seen growth of over 100%, according to FirstRand's interim results. The banking app reached the 750 000 active user mark early in 2014 and is still showing a month-on-month increase in number of transactions and active app users. Although cheque account users, aged 18-25, is small in comparison to other customer groups, the portion of this market has also doubled since 2011. Their behaviour revolves around day-to-day transactions such as balances, payments, transfers, prepaid airtime, data and SMS purchases.

According to Giuseppe Virgillito, head of channel, banking app, FNB mobile and connect, "The youth group now account for 14% of active users on the platform, which correlates with the growth in cheque accounts for this age group.

"We think that the growth in this market is down to the characteristics and trends shown by the two different generations that overlap within this age group. Generation Z, also known as digital natives, were practically born with smartphones in their hands and will naturally adopt digital banking trends, once they open their own bank account. On the upper end of the age group are the Generation Y group or "Millennials", who are young, working and have adopted digital channels with ease and for on-the-go banking."

80% of all transactions on the app take place between 7am and 7pm daily, unlike cellphone banking that is mostly used for prepaid transactions such as prepaid airtime and electricity purchases, the most popular transaction on the app are payments, which make up 50% of the transactions made via the app.

"As the increase in banking app users from generation Z and beyond gives birth to a new type of banking customer, we are expecting to see new banking needs and trends emerging, expectations that are changing and a customer that overall, interacts with their bank on digital channels," concludes Virgillito.

Card swipes could exceed cash by R2 billion per month

After noting that cheque card swipes exceeded cash withdrawals at ATMs for the first time in 2013, the bank now notes that this trend will accelerate rapidly through 2014.

"For customers earning between R100 000 and R1.1 million per annum, we are seeing a rapid movement away from cash," says CEO for FNB Core Banking Solutions, Irlon Terblanche. "In December last year, cheque card purchases were R3 billion higher than cash withdrawals. The gap between purchases made with banknotes compared to cheque cards dropped back to R1 billion in January this year, as consumer spending declined after the festive season.

"However, by the end of 2014 we predict that the monthly average difference will be R2 billion. ATM cash withdrawals have been flat for the past three years, even though the FNB customer base in this segment has increased significantly. To encourage this change in banking patterns we paid out more than R43 million worth of eBucks for cheque card swipes in December 2013."

For the bank, the benefit lies in reducing the costs of transporting cash to ATMs. The bank plans to increase its eBucks rewards to customers for using their cheque cards for purchases or Cash@Till for withdrawals. This will come into effect when the bank revises its pricing at the end of June.

"While we do not foresee the demise of banknotes, the costs of handling physical cash are very high; both for banks and retailers. By removing cash we are creating greater efficiencies in the payment system where all parties benefit," concludes Terblanche.