Online prepaid service transactions a winning recipe for retailers A combination of sophisticated server-based transaction switches and cheap, reliable wireless communication is creating lucrative new opportunities for South African retailers to sell prepaid airtime and electricity through vouchers generated at till points rather than traditional scratch cards. “The benefits of offering online prepaid products are huge” says Charles Smithers of Kwikpay, South Africa’s leading provider of prepaid and value-added services to national chains and convenience stores. “Eliminating physical cards means retailers don’t carry stock – which means more floor space, no ordering, no stocktaking, no shrinkage and most importantly no security problems. We know of at least one case where someone has been killed for the value of their physical phone cards.” Kwikpay currently serves around 5,500 retail outlets across South Africa, from mom and pop convenience stores to the largest branches of national chains like Clicks and Spar. As well as prepaid airtime and electricity, Kwikpay also enables retailers to offer services like online payments of utility bills, traffic fines and TV licence fees. “The whole system relies on fast, reliable communication,” says Smithers. “The transactions have to be completed in a few seconds, and because the margins on prepaid sales are low retailers have to be very careful to use the most cost-effective communications. We use the GPRS-based CellPAD communications device from Datalinx Technologies, which is the most cost effective solution – and because they use two SIM cards there’s always an alternative if one of the networks is congested.” Wayne Berkinshaw of Datalinx, which is a major supplier of such GPRS devices to Kwikpay, confirms the advantages of GPRS: “In a traditional fixed-line environment people are paying for the time they spend online. That can very quickly add up to a lot of money. With GPRS you’re only paying for the data you send, and a typical debit or credit card transaction involves very tiny amounts of data. Retailers doing up to 3,000 transactions a month will pay less than R150, or about 5c per transaction, and the cost per transaction decreases from there.” Kwikpay currently supports 2,000 outlets with stand-alone devices or kiosks, as well as around 3,500 outlets with an integrated system, where prepaid products are available at every till point. “Retail customers love it because they can do all their transactions at a single till,” says Smithers. Smithers adds that prepaid sales can be a significant revenue source for retailers. “A small convenience store can very quickly average R15,000 a month and we have some large stores turning over R250,000 a month on prepaid airtime alone. A moderate store can easily pay its rent with the revenue”. Because prepaid voucher sales don’t need any additional infrastructure or stock, Smithers says they are not limited to traditional retailers. “We have pharmacies, video shops, coffee shops and restaurants,” he says. “It’s now possible to offer prepaid vouchers anywhere where there is a point of sale.”
Spark ATM Systems enters dynamic ATM market Spark ATM Systems has begun the rollout of a new network of convenience ATMs to satisfy South Africa’s ever-growing demand for cash. The new-look ATMs, which use the cellular GPRS network to slash communication costs, are aimed at sites overlooked by the traditional banks. “People have an endless need for convenient cash,” says Spark ATM Systems founder Marc Sternberg, “but in South Africa banks will usually only install ATMs in locations with very high transaction volumes. In other countries consumers are used to seeing ATMs in every possible location; we aim to create the same convenience here.” Sternberg says many site owners are already experiencing the benefits of hosting their own machines. “In-store ATMs attract people because they’re convenient and secure,” he says. “Then once people have withdrawn cash they tend to spend more of it in the store. It’s also a revenue-generating opportunity for the merchant who is paid a rebate per withdrawal.” What has really unlocked the market, adds Sternberg, is that ATMs are now cost-effective to install in most places. “We owe a lot to South Africa’s world-class high-speed wireless infrastructure,” he says. “If our only option was landline communications, many of the sites we’re going into wouldn’t make practical or financial sense. The national GPRS network makes it easy to put an ATM anywhere there’s an electrical power point.” Spark ATM Systems is using the CellPAD communications device from Datalinx Technologies in all its ATMs, which are imported from a major overseas manufacturer. The CellPAD, a GPRS-based point-of-sale and transaction processing device, has two SIM cards to ensure maximum uptime by automatically switching to whichever network has the best coverage. “We worked closely with Datalinx to integrate the CellPAD with our ATMs,” says Sternberg. “The technology is robust, reliable and affordable; it’s been an excellent decision.” Sternberg says the timing for Spark ATM’s entry into the market couldn’t be better. “There’s more cash in circulation in South Africa than ever before. Our ATMs look great and their unique user interface allows for more pleasant transacting. Combine this with our great team and dedication to the best possible customer service and we believe we’ve got a winning formula”
The new dual SIM CellPAD and EtherPAD products contain SIM cards for two cellular networks, enabling the devices to connect automatically to the network offering the best signal at any time. “This guarantees more than 99% uptime for ATMs and retail credit card machines,” says Datalinx MD Rean van Niekerk. Dual SIMs are now standard in all new devices, and existing CellPAD devices can be upgraded at minimal cost, says van Niekerk. The paperback-sized CellPAD device can be installed with any bank-supplied credit and debit card machine to enable wireless communications. It is ideally suited for retailers in remote areas with poor landline infrastructure, or those who rely on slow dial-up connections. “A typical dial-up transaction can take around a minute to complete,” says van Niekerk; “that’s a long time when you have a customer in a hurry. With GPRS the same transaction takes around ten seconds – and it costs less”. The entire package, which can be installed at a day’s notice, is available for a fixed monthly fee starting at under R150, which includes both transaction and communication costs. The EtherPAD, designed specifically for ATMs and other Ethernet devices, enables cash dispensers to be set up anywhere there is a power supply. Datalinx has grown rapidly since its launch in mid-2004; from a zero base it is now the biggest supplier of GPRS-based point of sales devices in South Africa. The company’s strong research and development programme will continue delivering innovative products, says Van Niekerk, and this growth looks set to continue unchecked. “We have a superb technical and design team and we’re confident that in future we will not just stay at the forefront of wireless transaction processing technology in South Africa, but also break new ground globally.”’
“We’d outgrown the previous structure,” says MD Réan van Niekerk, who has bought out two of his fellow founders to take control of the company. “We’ve reached the point where we need institutional or BEE investors who can help to take the company forward, and we’re now perfectly positioned to do that.” Datalinx produces the CellPAD, a retail point of sale communications device that uses the country-wide GPRS cellular network and can thus be easily deployed in rural areas and small towns where existing landline links are absent or unreliable. Datalinx has so far installed over 4,000 CellPADs, with another 4,000 expected during 2006. “CellPAD is completely network-independent and it’s been approved for use by all the major banks,” says Van Niekerk. “That gives us a very strong base for future growth and we’re currently developing two new products that will increase the applicability and usefulness of the CellPAD range, particularly for larger companies. “ Datalinx has grown rapidly since its launch in mid-2004; from a zero base it is now the biggest supplier of GPRS-based point of sales devices in South Africa. The company’s strong research and development programme will continue delivering innovative products, says Van Niekerk, and this growth looks set to continue unchecked. “We have a superb technical and design team and we’re confident that we’ll stay at the forefront of wireless transaction processing technology, not just in South Africa but globally.”’
As wireless technology spreads over the next few years, we’re likely to see a proliferation of new devices that will communicate over the web and its secure wireless extensions in ways that we cannot imagine today. One of the most important ways to accelerate this process is to draw on the expertise of many different people: not just technologists, but the people who will use these devices in their everyday lives at work, at home, on the road and at play. As our skills become increasingly specialised, it becomes even more important to do effective “human networking” to create a virtual neural network with enormous inventive capacity. The biggest barrier to these fantastic new ideas is the limiting factor of our past experience and concepts of how things ‘should’ be done. We need to communicate across disciplines and apply creative and lateral thinking to create new and innovative devices. It is easy to say “I knew that!”, but do you really apply this process to produce innovative solutions to everyday problems? It is imperative for non-technical people to brainstorm their ideas, no matter how seemingly trivial, with specialists who can develop the concepts, assess their merits and develop solutions. Communication technology has developed to the point where any person or device can connect to anything, anytime and anywhere, using standard communication protocols. There’s a dizzying range of technologies available for achieving this, from the good old local area network (LAN) through Bluetooth, ZigBee, Wi-Fi and a host of others. In fact, I see wireless technologies like GPRS, EDGE and 3G increasingly taking over existing metropolitan area networks (MANs) and wide area networks (WANs). This is going to create massive opportunities for countries, like South Africa, that have large geographical areas with widely separated pockets of high development. In these conditions cable infrastructure is a poor option: it’s not only expensive to install and to maintain, the problem of cable theft has made it increasingly expensive to protect and unreliable. The cellphone companies have done us an enormous service in providing data communication capabilities over the GSM infrastructure. This provides vast coverage making it relatively easy to monitor, control and communicate with devices in some of the most remote and inaccessible areas. I am passionate about integrating technology into our everyday lives with such perfection that it becomes almost invisible. The ultimate aim is to create an environment that intelligently responds to you and your needs, be they work or play. We already have the capability to gather vast amounts of data from around the world in an instant with search engines such as Google on a host of different devices. We also have the technology to monitor and control computers, machines and devices in remote locations. This will ultimately lead to a better quality of life with more information and control at our disposal. The possibilities are limited only by our own imaginations and inventiveness: we are a civilization in our technological infancy and our capabilities will continue to grow exponentially for a long, long time.
“We chose the CellPAD because it was more efficient and more cost effective than the previous radio setup we had,” says the group’s operations director Stan Schneider. “It’s particularly useful in the smaller towns where the landline service is not always reliable – and sometimes doesn’t exist at all. Anything that eliminates the Telkom factor is going to be useful.” “GPRS is much cheaper that using a landline,” notes Wayne Berkinshaw of Datalinx, which manufactures the CellPAD, “and it’s also more widely available. This is a major opportunity for businesses in small towns and rural areas to increase their sales by giving customers the option of card payments.” Schneider says that so long as the cellular networks can provide reliable service, CellPAD can offer large savings. “We’ve had teething problems when the networks go down, which means the cost reduction is not always as drastic as we expected. But we expect that to change once we look at it over a longer period.” Aroma has had 39 CellPAD devices in use since May 2005. Berkinshaw notes, however, that landline services are themselves often unreliable, especially in rural areas. “We’ve had customers who were making up to five attempts to get through on old landlines, while keeping their own customers waiting. The GPRS network is much more efficient and reliable; CellPAD has made a huge difference to those businesses.” He adds that mobile services are also sometimes the only option. “The cellular networks have a much broader reach than the traditional telephone infrastructure,” he says. “Over 90% of the population can now get a cellphone signal – and wherever you can get a cellphone signal, it’s possible to use CellPAD.”
Some early cellphone banking applications have already hit the market, but they are just a taste of what is to come. I expect that very soon cellphones will incorporate smart card features that will enable them to be used to pay for anything, anywhere and at any time – from petrol to restaurant bills to utility accounts to handing out children’s pocket money. To people without the benefits of access to PCs and the Internet – which have saved untold hours for Internet banking customers – this will offer a previously undreamed-of flexibility and freedom. One development driving this is the rapid rollout of banking facilities over the past couple of years, due partly to the introduction of the Msanzi account and partly to developments in the use of debit cards. The major banks have become huge issuers of cards, with the result that a massive 87% of all households in the country now have one or more bank cards, compared to just 15% in 1980. The increase in the number of bank accounts is one part of the story; the other is the amazing success of our cellphone industry in enabling South Africa’s communications infrastructure to leapfrog several decades of fixed-line development in just ten years. There are now 21 million cellphones in the country, nearly one for every two people including children. South Africans, ever resourceful, have not been slow to take advantage of the implications, as recent initiatives by MTN Banking and cellphone bank Wizzit confirm. A huge shift is under way in South African consumer habits, which will see voice becoming a secondary feature of cellphones compared to their transaction capabilities. The key to realising this potential is the creation of a country-wide cloud of wireless, secure communications, which is already well under way. This communications cloud will include GSM, satellite and other wireless technologies, all co-operating smoothly to give users ubiquitous communications at the lowest possible cost. By 2007 we expect the convergence of communications technologies to have reached the point where your cellphone will double as a cordless home phone: you’ll be able to pick up a landline call on your handset, continue talking all the way into your car and onto the highway, and all the way to your weekend bushveld hideaway if necessary, all without noticing the handovers between different technologies and networks. Security will be provided by point-to-point AES encryption, the symmetric cryptosystem recommended by the US National Institute of Standards and Technology as a successor to the DES and triple-DES standards currently used by the banking industry. This security is the key to future banking applications, providing the safety assurances that will encourage consumers – and, crucially, small and informal retailers – to adopt mobile banking technology. The next couple of years should see a slow but steady increase in the number of merchants able and willing to accept cellphone payments, although much of this may be invisible to relatively wealthy urban dwellers who already have access to most of the banking they need. Canny service providers will get into the market early – and when the trend reaches the mainstream, expect it to be huge.
Lack of communications infrastructure, which previously restricted electronic payment processing to business with reliable landline connections, is no longer an issue. “The GPRS networks of the major cellphone companies now cover over 90% of the population,” says Wayne Berkinshaw of Datalinx. “That means 90% of the population potentially has access to low-cost electronic transactions, including people in rural areas that other technologies don’t reach”. CellPAD, Datalinx’s flagship product, provides full point of sale and transaction processing capability to any business with GPRS network coverage – often at a fraction of the cost of traditional fixed-line solutions. Berkinshaw says its low cost and broad availability make CellPAD particularly suitable for small businesses in rural areas. At Fraai Uitzicht, a top fine dining restaurant and guesthouse on a Cape wine estate, managers say using CellPAD for their credit card machines has had a “huge” impact. “We do a lot of credit card transactions and we used to depend on a very unreliable dial-up landline,” says assistant manager Jonine Stokes. “It could take up to five attempts to get through, at great cost as well as inconvenience to customers who were kept waiting. Now we get instant access and our costs have dropped by about 80% -- there really is no comparison.” CellPAD is also fuelling the rapid deployment of independent ATMs in convenience stores, restaurants and forecourts across South Africa. “We’ve based our business on GPRS communications”, says Ray Brederode of Cash Axcess, a subsidiary of top US ATM company Global Axcess. “It’s very reliable, much cheaper than any of the alternatives and it makes ATMs very easy to deploy almost anywhere. We deliver the machine, plug it in to a power outlet and they’re online – there’s no need to install any extra equipment.” CellPAD has been developed and manufactured entirely in South Africa and is a world leader in GPRS-based transaction processing technology. “South Africa as a whole is really pushing the boundaries of what can be done with GPRS,” says Berkinshaw. “Our networks are right at the forefront of global developments”.
ATM Solutions is the country’s leading provider of independent ATMs, with machines installed in retail outlets, forecourts, hospitals and other non-traditional locations around the country. The company decided at the end of 2005 to base all its new installations on a locally developed technology known as CellPAD. CellPAD, produced by Cape Town-based Datalinx, is a point of sale and transaction processing device that uses the cellphone companies’ GPRS network for all communications. “GPRS is much cheaper than using a landline,” says Gavin Reubenson, Technical Director of ATM Solutions, “and it’s also more widely available. There is network coverage in 80-90% of the sites we’ve tested.” Reubenson says the company has rolled out about 600 CellPAD ATMs since the wireless option was piloted in December last year, and is averaging around 80 new installations a month. “It takes about ten days from identifying a site to having an ATM installed,” he says. “Wireless gives us great flexibility and ease of installation.” As a result, he says, many rural towns in areas like the former Transkei and the KwaZulu-Natal south coast now have ATMs for the first time. “It’s not feasible in many of those towns for the banks to have their own branded ATMs because they need a lot of transactions to break even,” he says. “Our cost base is a lot lower.” The CellPAD technology is robust and reliable, he says, and most problems that do arise can be solved remotely. “We asked Datalinx to develop a CellPAD Manager that would let us troubleshoot and diagnose problems remotely from our call centre,” he says. “We can fix most things without ever visiting the site.” Challenger To Telkom's Fastnet Service Since the last quarter of 2004, DataLinx has installed its Cellpad electronic funds transfer product at Ackermans stores across the country. This allows the chain to process credit card and smart card transactions using the cellular GPRS data system rather than the X.25 system used with FastNet's Radiopad product. "GPRS is far more pervasive than X.25. We have Cellpad installed in many remote places where Telkom's coverage does not extend to," says DataLinx MD Rean van Niekerk. Van Niekerk's other company, Metacom, developed Cellpad – a black box that connects with either an ATM, an electronic funds transfer card reader or a PC that is used in a point-of-sale application. It then connects with the relevant bank through the GPRS system and a virtual network, or access point name, which is owned by DataLinx, but is situated within the MTN and Vodacom infrastructure. Ackermans is the first retailer to have the Cellpad and to use GPRS throughout its 300 stores. During the busy Christmas shopping season, an average of 200 000 transactions were handled per day. "We rolled out over 1 000 devices across 300 stores and will save around R2.5 million per annum in the process," says George Zaverdinos, Ackermans' IT director. Van Niekerk says the potential market for Cellpad-like devices in the country is about 140 000 units. His company has an installed base of about 2 000 units and is rolling out about 500 per month. "It is a market with a lot of potential, but there is strong competition out there," he says. Van Niekerk says migration from GPRS technology to more data-capable services such as EDGE and 3G will depend on demand and how extensive the coverage is for these services.
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