In South Africa, banking convenience meets controversy

JOHANNESBURG -- The launch of a new online system meant to track South African users' spending habits has erupted in controversy.

JOHANNESBURG--The launch of a new online system meant to track South African users' spending habits has erupted in controversy here, calling into question the close-knit structure of South African banking and the power these banks wield over local startups.

Three weeks ago Christo Davel launched 22seven, an aggregated web-based financial management application meant to give users insight into their spending habits. While not a new idea -- similar tools like Mint have been available for years in the U.S. -- the continuously updated 22seven is the first of its kind in South Africa.

Allistar Fairweather at the Mail & Guardian describes how the app works

It collects data on your financial habits, slices and dices it, and reveals the hidden costs of those impulse buys and late-night ATM visits. Then, by prodding you gently, it shows you how to save and spend more wisely.

On its face, what 22seven is offering is pretty straightforward -- more information on a user's spending patterns. However, to get that information the company first needs banking log in details. Michael Jordaan, CEO of First National Bank, one of the "big four" of South African banks, summed up the feelings of the country's banking sector on twitter:

In the immediate aftermath of 22seven's launch, all the members of the big four cautioned against giving out account details, some going as far as trying to block the service and saying they were no longer responsible for any fraud on users' accounts if they disclosed banking details to 22seven, even if the fraud was unrelated to the Davel's application. People were understandably wary of giving their banking information to the site.

For its part, 22seven has assured the safety of its users' information. The site uses a U.S.-based company, Yodlee, to collect and store account information. It's all done automatically, and at no point does anyone from Yodlee or 22seven have access to any account details. Yodlee boasts a long track record of keeping its users' information safe.

Some within South Africa were disappointed in what they saw as an overreaction on the part of the country's banks. Simon Dingle at the local technology site Tech Crunch said:

What does surprise me is how SA banks, instead of partnering with Yodlee like their leading international counterparts have done, are advising customers not to use the system. It's just another example of how backward our banks are in their thinking about personal finances, even if they are improving on the service front.

Some argue that this whole dust up could have been avoided if 22seven had approached the local banks beforehand and arranged for a free application programming interface, or API, to be made available to third party sites. Even an official at local bank Absa, Christo Vrey, has singled a willingness to make an API available, although he remains ambiguous about a time frame for doing this. Absa is reportedly also working on its own financial management application that it wants to roll out to its customers soon.

Last week Jordaan's FNB became the first bank to break from the big four, indicating its desire to work with 22seven in an email sent to its customers. The bank decided to allow users to create a limited profile in order for the company to gain to access their accounts.

22seven will be free while it's in beta testing. The full version will cost users roughly $10 a month. While the site is being heralded by some as a "world-class" product, the current version runs on oft-maligned Flash, making its design outdated at launch. The company has said that it plans to develop apps for mobile devices like iPhones and iPads that aren't Flash-friendly.

This post was originally published on Smartplanet.com

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