ONLINE BANKING
IS MALAWI READY FOR IT?

When Barclays Bank offered its customers online banking in the UK I signed up without a second thought. Goodbye to sticking cheques in the post, queuing up at the ATM just to check my balance and walking to the nearest high street branch in order to transfer money between accounts. I love ecommerce; I just can’t wait for ecommerce!

I quickly graduated into exclusively online banks (with no high street presence) a whole gamut of which sprang up with such exotic names as Egg, Smile, Cahoot, just to name a few. Without the overheads related to operating accessible branches and document handling these “virtual” banks could offer interest rates on current accounts that closely competed with those on savings accounts. Granted, many of these start-ups were backed by an established bank, for instance Cahoot is a division of Abbey National an established high street bank.

Thus, when my current account holders here in Malawi offered customers online banking, I readily joined. I now happily log-in several times a day (especially around the month-end). I pay my water bills online and even transfer money to other customers’ accounts with the same bank. Of course the Internet connection speed is not breathtaking – no-one will be writing home to grandma about that – but the job gets done (who wants to spend a good part of the morning in payday queues just to be told the pay cheque has not yet cleared?).

It is therefore possible to say that online banking has come to Malawi and is here to stay. What I’d like to explore in this short article is whether Malawi is ready for this technology.

Technology

The beauty of Internet technology and one of the fundamental reasons for its large uptake globally is that it rides on existing technology: computer, local-area network plus leased-line or phone. Contrast this with now-obsolete VHS technology. Sorry, but soon you will be chucking out your DVD player as well; for a PVR.

On the other hand, a customer does not need a specialised piece of equipment to use the Internet. Ok, she does, a computer; but she has that anyway: at work, home or even both and it wasn’t acquired especially for the Internet but for the other dozens of useful tasks that a computer is known for. Throw a telephone on top of that and the consumer has Internet in their home and thus, access to online banking.

Workplaces in Malawi are waking up to the fact that, in certain sectors email and Internet boost staff productivity, not just communication. Thus, the consumer has access to online banking at work, too.

Even when the next generation of computers comes along, the overwhelming chances are that the consumer will still be able to connect to the Internet using the existing connection.

The technological hurdle is the actual connection to the outside world. Whereas Malawians will quickly acquire the latest in software or hardware technology (e.g. Slackware Linux version 12 or Windows Vista or dual-processor CPUs) comparatively the network infrastructure belongs to the era of dinosaurs. This would be the topic of an entire separate study, but, safe to say, the technology for online banking is here although the connection could be much better.

Broadband exists, but it is priced out of the reach of most individuals and many companies. Wired broadband is provided by the fixed-line telephone provider and is based on X.21 not the cheaper ISDN technology. Wireless broadband also exists but is priced similarly.

If I was to predict whence mass broadband will spring then my bet would be from 3G mobile service providers. Fibre-optic, e.g. Escom’s, is viable as backbones but not as “final-mile” connections.

Customers

It is valid to question whether customers are actually interested in this new development. The IT field is awash with its own spectacularly- overblown and underrated technologies. The multi-billion pound sterling auction of swathes of the radio-frequency spectrum in the United Kingdom to mobile phone operators for 3G technology comes to mind, as does – on the opposite end of the scale – the statement a century ago of a famous leader of a prominent country to the effect that the telephone seems so useful that eventually there might even be one in every city.

Sometimes the market for new technologies is pushed by the consumer and at times new technology opens up demand for services. Malawi cannot be accused of being at the cutting edge of technology but we stand to benefit from this because we can watch new technologies battle it out and opt for the mature survivor without making expensive wrong choices. Similarly we can look at consumer trends elsewhere in order to decide on customer interest in online banking.

Consumer trends elsewhere do show a large market for online banking and here National Bank also boasts around 2000 online banking customers since inception over two years ago. The other bank offering online banking is NedBank. Other banks have online banking in the pipeline. Thus the interest is there from customers and banks.

Legal and Regulatory

The technology may already exist and the customers may already be demanding online banking, but are the legal and/ or regulatory frameworks in place for this fundamental change in banking practices? This would be the subject of a major treatise by a legal expert on a cross-section of the field including both banking and communication laws. In brief, the Communications Act of 1998 does not mention computer crimes per se. The following scenarios are presented for the sake of illustrating potential legal and regulatory gaps.

Online fraud: suppose someone’s legitimate username and passwords are used to make an unauthorised bank transfer; do banking laws protect the client in much the same way that the UK’s Consumer Credit Act 1974 protects users from fraud by limiting their liability to just £50.

Cracking: suppose a bank’s servers are compromised and an intruder uses the opportunity to defraud the bank; does the regulatory authority MACRA require ISPs to keep access logs for a specified period of time in order for computer forensics to be carried out in the event of a “computer crime”?

Personal data: western nations have personal data protection laws that can be quite stringent in some places, rightly so since knowledge about your bank balance, for instance, can be indirectly used against you.

The nightmare scenarios presented above are some of the reasons why customers may hesitate on the uptake of this new technology.

Conclusion

Online banking has hit the Malawian market. This article has explored whether the market is ready for the development. Although technological, consumer demand, and regulatory aspects have been discussed separately, in reality they overlap.

If there is no legal protection for the consumer faced with online fraud then customer interest will wane.

If the technology remains prohibitively expensive then only a small stratum of society will have access.

If there are no laws defining unlawful network access then new technologies will enable cyber-criminals commit offences for which there are no laws proscribing.

Thus, though technologically the country is ready (albeit with a lot of room for improvement) and customer interest exists, there is a legal vacuum waiting to implode not only relating to online banking but to the whole encompassing field of Information and Communication Technology.