Former Google exec Stafford Masie on the future of Banking, Michael Jordaan, mobile wallets and Mxit

It’s been my privilege to engage freely and often with Stafford Masie and the subject of much of this discussion, former FNB CEO Michael Jordaan. Stafford’s journey from modest surroundings in Eldorado Park near Johannesburg to rubbing shoulders with tech giants Steve Jobs, Jeff Bezos, Larry Page, Sergey Brin and, of course, his immediate boss Google chairman Eric Schmidt is worthy of a lengthy interview of his own. But we have used his punditry here. With some fascinating insights. Schmidt’s former PA returned home to run Google in South Africa and then branched out on his own, very successfully. When leaving the studio Masie mentioned he’d been in five countries in the last fortnight. His firm’s mobile card payment dongle Thumbzup is catching fire. A couple thousand have been installed in double quick time through the partnership with Absa. Tech Central’s Youtube video of Stafford demonstrating the device is embedded at the bottom of the transcript. – AH

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staffordALEC HOGG:  Joining us now to discuss developments in South Africa’s technology space is Stafford Masie, CEO and founder of Thumbzup.  I don’t think we need to go into more detail, do you Gugu.

GUGULETHU MFUPHI:  I think if he heard the beginning of the show, he would have been even better known by now.

ALEC HOGG:   He’s a bit embarrassed.  You can see he’s blushing.  Stafford is our go-to man when it comes to insights.  It was probably 18 months ago, we were having a conversation – you and I – with our friend, Michael Jordaan.  You said to Michael Jordaan at that time ‘banking’s in trouble’ and it didn’t take him long to resign (as CEO of FNB) and go and do something else.

STAFFORD MASIE:  I don’t think it’s about that.  I think Michael has branched into the technology space.  He is on the Board of Mxit – that’s my understanding – and he’s spending a lot of time in Silicon Valley if you look at his tweets where he is in front of the Facebook campus taking pictures.  It’s a natural extension for an executive at his age, having achieved what he’s achieved, to branch into that.  However, if you take a step back and look at the comment around banking, I think ‘yes, banks have an issue around death by one thousand wounds’.  Everyone out there is going for the store of value.  I think the notion of making money online as a business, and generally as businesses out there, marketing is not sustainable.  Everyone wants the store of value.  If I own the store of value, I control.  Banks have always had the store of value.  They have the bank account.  If you look at Apple – it’s emerging, and Apple has one of the largest stores of value.  The question on everyone’s mind is ‘will they extend that out?’  Today you can buy things very easily with your iTunes account as long as it exists in the Apple world.  Now we’re starting to see Apple branching it out, whereas if you’re on third party sites, you can buy off those third party sites utilising the store of value that exists in your iTunes account.  Now this feels very transactional-related and I think banks have these over-the-top players, which they call the Googles, the Facebooks, building wallets, and building transaction services.  Then you have people on the ground like telecommunications companies.  Telecommunications companies are going through a metamorphosis right now.

ALEC HOGG:   Like in Mpesa?

STAFFORD MASIE:  Mpesa is one derivative, but I think phones becoming transaction platforms, is an inevitability.  I think telecoms will be pressured around their business model because voice is dying – even data is collapsing.  The question is ‘what’s the next big thing?’ and I think the next big thing is owning the store of value and getting some transactional revenue.

ALEC HOGG:  Clearly, these are thoughts that you’ve shared with Michael Jordaan, because as you mentioned earlier: where he’s going with Mxit – they also have a store of value there.  It’s a play and I suppose there’s a lot of scepticism around it.  Before we move away from that, is Mxit a player?  Is it likely to be?

STAFFORD MASIE:  I think, from a South African context, their numbers are incredible in terms of adoption and the current market share.  However, they have huge challenges, because if you look at where the kids are moving, retention of those kids – when they’re on the Mxit platform – can you stay with them? They’re going to Facebook.  They’re going to BBM.  They’re going to WhatsApp and these are all the over-the-top players.  The problem that Mxit has, is that it doesn’t own the silo.  When you don’t own the silo, you have very little control, and intermediation is a very real thing.  Think about it.  Phones come bundled with things, because Google stuff is in there, so Mxit I think is as powerful as the ability for third parties to embed themselves natively, on the mobile operating system.  When I switch my phone on, what does it ask me?  If you switch an Android phone on today and it asks you for your Gmail address, it’s amazing what pops up.  You have Google.  You now have Google Chat.  You have Gmail, which automatically just uploads, so these over-the-top players are a threat to them.  The question is: how do you retain the user?  I think yes, transactional involvement in Mxit is one way that says ‘hey, if we own a store value, if we own Mxit Moola virtual currency, we can expand the average revenue per user.  The churn is also much lower because we think we can get people to stay on the platform, but it’s a challenge because payment has a virtual aspect to it.  However, it also has a very physical aspect to it.  How do you get money out with the Mxit platform?

ALEC HOGG:  So Michael has a lot on his hands.

STAFFORD MASIE:  Kudos to Mxit, a great coup.  I think Paul Harris…

ALEC HOGG:  Well, he is Paul Harris’ friend.

STAFFORD MASIE:  Yes, Paul Harris and Michael are close from the RNB days, etcetera.

ALEC HOGG:  And they both live in Stellenbosch.


ALEC HOGG:  And Mxit is in Stellenbosch.  Come on, connect the dots….it’s not really a coup….

STAFFORD MASIE:   I think it’s a great coup for Mxit.  It’s a great addition and if I were going to pick anyone out of the financial services space to partner with me in any of my technology initiatives, it would be Michael Jordaan.  That corporate knowledge that he has, the ability that he has, and his presence…he’s a very creative man and I know Michael personally.  He’s an incredible individual – very creative, he gets tech, and he’s very passionate about tech so with all that corporate knowledge, all that experience, and understanding banking to that depth: the question is can he translate that into value in Mxit.  I think Michael has huge assets, individually.  I approached him.  When I found out about him resigning, I immediately wanted to offer him Board positions on several of my technology start-ups.  His mere presence…

ALEC HOGG:  Did he accept?

STAFFORD MASIE:  There’s nothing to say.

GUGULETHU MFUPHI:  Coming back to Michael Jordaan coming from a financial institution: we always hear talk of convergence and where media houses will also come on board, assisting with Telcos.  Is that environment changing and is it changing fast enough to keep up with the demand?

STAFFORD MASIE:  I think it’s interesting.  If you take a look at banking financial services and you take a look at technology players in general, you’ll find that in Sub-Saharan Africa it’s the most advanced compared to what you’d find anywhere else in the world.  When you go to Australia…  Last week I was in Australia.  I was doing a deal with one of the biggest banks in Australia.

If you look at what banks do in Australia relative to what banks do and offer in South Africa, it’s incredible how far ahead we are.

FNB won the Most Innovative Bank in the world award, and if you look at FNB – and I’ll always say this – if you look, at FNB and you take Vodacom – let’s make an example – there are very few differences between the two companies.  You can get everything from FNB that you can get from Vodacom – pretty much.  One distributes SIMS and the other one has a banking license.  You can get an iPhone/iPad from FNB.  You can get a SIM inside it.  You can get a data package.  They’re taking all their assets and their network and saying ‘hey, we’re going to leverage our ECNS license’, so here’s a bank that has a Telco license.

They’re provisioning data packages with their banking services.  The obvious consequence to that are people staying out of branches: yes – retaining users.  However, it’s interesting to see banking transforming itself and spilling into the telecommunications world where you can literally get everything that  you want from a bank that you can get at Telco.  Now Telcos are looking at this and saying ‘wait a minute.  It’s inevitable that the phone will become the credit card that can make voice calls and do data’.  The phone is the transaction platform.

We have a clash of civilisations on that device because Google builds their operating system, Samsung builds the phone physically, and we all hear about NFC that we’ll pay with our phones, we’ll tap our phones etcetera, where the phone will store the store of value, and where we’ll SMS currency.  Eventually you’ll see, within the next five years, how these two worlds converge.  I think in the next five years, when you look at the South African banking and Telco industry, I think you will see some merges.  I think you will see some acquisitions and you’ll see some big surprises.  How could this happen?  This doesn’t make sense that a bank and Telcos are merging.  I think it’s so congruent.  It makes so much sense.

ALEC HOGG:   So if you ran FNB, would you be buying Telkom?

STAFFORD MASIE:  I wouldn’t be buying Telkom, but what I would be doing is looking actively at a Telco license where I could provision out fully on not just an ECNS license, but having a full Telco license.  Why not?  These devices are simply mechanisms.  You should look at a phone as a mobile bank branch.  That’s how Michael did it; he was at the forefront of that, he kept people out of the branches by putting his branch, his presence, and his business in a virtual state in your hands.

ALEC HOGG:   So banking as it used to be is in trouble.  Banking, as it is going to be in the future perhaps not Stafford…

STAFFORD MASIE:  Not at all.

ALEC HOGG:   As always, it’s fantastic having you here and we look forward to seeing you more regularly in the future.

STAFFORD MASIE:  Thanks, Alec.

ALEC HOGG:  He stretches our minds, doesn’t he?

GUGULETHU MFUPHI:  Yes, he does – natural thinking.  Now we know why he and MJ are friends

ALEC HOGG:   He and MJ: is that what you call him?

GUGULETHU MFUPHI:  Of course, that’s what we call him.  Alec, look at the time.  You’re still in a bank branch.

ALEC HOGG:   That was Stafford Masie, the Chief Executive and founder of Thumbzup.

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