To be a viable competitor today,

a bank has to oer a robust

mobile banking service
MOST major banks are already
into their second or third itera-
tions of mobile banking. What
has been clear is that with the
rapid adoption of mobile devices
and smartphones customers
want to be able to do basic bank-
ing whenever they choose,
wherever they happen to be.
Providing a mobile banking
service is a given, even if its
not a big revenue generator. At
least not yet. As mobile banking
moves out of its infancy, banks
now need to develop their ser-
vice oerings to meet customer
expectations and accelerate
growth. Reaching maturity in
mobile banking will call for focus
across three dimensions:
Pleasing yet protecting
customers
Meeting business needs
Enhancing technology
Although interrelated, each of
these dimensions encompasses
its own set of complexities and
challenges.
Pleasing yet protecting
customers
Pleasing customers today is no
easy feat as the bar has been
set very, very high for nancial
services institutions. Custom-
ers have become accustomed to
the kind of experience they have
when they interact with Google
or Amazon, and thats what they
want from their bank.
Traditional bankers hours
dont make sense anymore. Peo-
ple are logging in and calling at 10
oclock at night, so banks always
have to be available. Not only
must banks constantly be ac-
cessible, they must also deliver
services that are faster and more
eective than before.
As a consequence, banks have
to balance the pace at which they
introduce new and innovative
features with the need to keep
the data safe from hackers. Tat
compels banks to employ the
same level of rigor and scrutiny
to mobile banking as they do to
ATMs, online banking, branches
and other traditional channels.
Pleasing yet protecting cus-
tomers will also require new
servicing procedures.
Bank personnel in call centers,
service centers and branches will
Mobile banking: make itcompelling,
competitive and cost-eective
have to understand mobile fea-
tures, functions and devices so
they can be explained eectively
to customers. Training employees
so they can encourage customers
to use the new, low cost mobile
services as well as helping
them to troubleshoot will be
essential to increasing adoption
rates.
Other key servicing procedures
relate to fraud and anti-money
laundering. How banks monitor
for fraud that could be generated
with mobile or person-to-person
payments may not be materially
dierent from how they police
other fraudulent behaviour, but
behaviour patterns have to be
watched.
Ensuring that consumers have
all the safeguards established
in traditional banking will be
one of the biggest concerns
about mobile banking from a
regulatory perspective
Consider, for instance, what
happens if a customers phone is
stolen. If a credit card is stolen,
the process of how it gets report-
ed is pretty clear, but how does a
call center representative react to
a lost or stolen phone?
If the bank has partnered with
a third party to create a mobile
application, the answer becomes
more complex.
Anticipating these kinds of
situations and preparing appro-
priate responses are critical for
banks that oer mobile services.
Meeting business needs
So far, mobile banking isnt even
close to rivalling online bank-
ing or ATM and branch use. Even
though the cost-benet cant
be calculated explicitly, the fu-
ture value of mobile banking is
widely recognized. Consider the
simple act of depositing a check.
Compared to an in-branch trans-
action or one at an ATM, where
the cost of the facility, salaries
and so forth is evident, the cost of
the same transaction via a mobile
platform is perceived to be less.
As the volume of mobile bank-
ing transactions escalates, the
nancial benets will become
more apparent, and the benet to
the bank can be calculated more
readily. Terefore, it behoves
banks to move customers from
traditional channels to mobile
ones. Tis can be done through
the customary promotional
channels that increase customer
awareness, as well as newer ap-
proaches, such as quick response
(QR) codes that lead to videos
demonstrating how to use a mo-
bile application.
Mobile is an eciency play.
It can drive down costs, mobile
can be used as a driver for why I
stay or go as a customer, so banks
must evolve it as part of their to-
tal proposition to any client. Tis
attitude will grow exponentially
as generational shifts increase
tech-savvy customer bases and
the overall adoption of everyday
smartphone use
Banks face straightforward
threats to revenue from
substitution of credit card
payments with funding of
mobile wallets direct
from bank accounts.
As digital wallets take o, they
will form the nucleus of new
forms of payment that threaten
the banks dominance in the
current account market and
eventually reduce banks rev-
enue from account balances.
Enhancing technology
Among the most immediate
challenges for banks to address
is how to integrate services and
systems so that the right infor-
mation gets to the right people at
the right time.
Mobile devices capture expo-
nentially more information than
a transaction in a branch does.
If users allow it, a mobile de-
vice can determine where they
are, what theyre doing and what
kind of device theyre using. It
can also reveal their online ac-
tivity.
However, because the data
doesnt reside in one place,
banks arent able to synthesize
it in ways that will give them
insight into, for instance, what
their customers next nancial
service or product might be. Te
ability to do that is complicated
by the need to ensure that the
security of the data isnt com-
promised and all the necessary
safeguards are in place to satisfy
regulators and give customers the
condence to use the new chan-
nels.
What banks need now is new
architecture to aggregate the data
and analyse it in real time so they
can anticipate their customers
next purchase and oer relevant,
desirable products and services
on the spot.
Tey also need the abil-
ity to make changes to their
applications quickly, easily and
cost-eectively.
Internet and mobile applica-
tion development companies
typically create and launch ser-
vices and upgrades every three
months. Quicker turnaround
times are driven by the neces-
sity for banks to compete in the
face of innovation. Te check-
deposit application whereby the
customer can take a picture of a
check via smartphone is one ex-
ample. When it was introduced,
all banks had to respond with
similar technology or risk falling
behind.
Te more defensive banks will
allow access to mobile payment
services provided by others or
white-labelled from others. Te
more ambitious may decide to
develop their own mobile pay-
ment solutions and may do this
in partnership with a technol-
ogy company to increase speed to
market.
Te most ambitious, howev-
er, will look to develop mobile
wallets with integrated loyalty,
promotions, vouchers and other
services to enhance the shop-
ping experience for customers
and merchants in ways we cant
even imagine yet. Te bottom line
at this juncture is that banks need
a mature, stable set of people,
processes and technology to op-
erate a mobile banking oering
that is compelling to consumers,
competitive in the market and
capable of delivering a return on
investment.
Banks have these two
wonderful things in front of
them, trust and data.
Tose that can bridge the
gap rst will be the winners.
To fnd out more about making efectve utlisaton of mobile banking, contact David Marange, EY Financial Services Leader on: Email: david.marange@zw.ey.com or eymarketng@zw.ey.com
Address: Angwa City Building, Corner Julius Nyerere Way/ Kwame Nkrumah Avenue. P O Box 62, Harare, Zimbabwe. Tel: +263 4 750905/ 750979
This document was compiled by EY as a source of general informaton and notfcaton and should not be construed as a formal professional/legal opinion. Although reasonable skill and care is taken when providing
informaton, EY ofer no warrantes or representatons as to the informatons accuracy. The informaton provided is not intended to replace the need for an expert/ legal opinion on interpretaton, applicaton and
consequences of the relevant legal, technical or regulatory provisions. E Y does not accept responsibility for any lose or damage you or any third party may sufer as a result of utlising the informaton provided.
ZIMBABWE INDEPENDENT XTRA AUGUST 1 TO 7, 2014 5
Social media networks add and link cus-
tomers, employees, investors and other
stakeholders to your business every second
of every day.
Most directors are concerned primar-
ily with the growing reputational risks that
such a ubiquitous channel can generate
for example, when an event or headline
goes viral on social media and
propagates, creating a disproportionate
impact.
Te best way to mitigate this type of repu-
tational risk is by monitoring social media
chatter and ensuring the company is well
placed to respond rapidly. Tis can pose a
challenge when companies have time-con-
suming approval processes.
Listen. Engage. Persuade.
As one former digital activist said:
Whether you like it or not, people out there
on social media are talking about you, read-
ing about you and making up their minds
about you . If you are not part of these con-
versations, guess who is in charge of public
perception and brand reputation? Te con-
sumers you have angered, your competitors
and the activists who hate you.
Tracking social media conversation al-
lows a company to understand which top-
ics are provoking discussion and intervene
when needed to sway the discourse in their
favour. Organizations should listen, engage
and persuade in that order, and quickly.
Opportunities often remain
underexploited
Companies active in social media conver-
sations often lead the way with customers
and employees. Tey dont only turn to so-
cial media when things go wrong. Tey en-
gage regularly and build loyalty. Tey may
generate revenue growth through better tar-
geting and reduce costs by eliminating less
eective advertising.
Although many audit committee chairs
remain skeptical of the benets of employ-
ees use of social media, research indicates
that employees trained about the proper use
of social media channels
actually become highly eective ambas-
sadors for their companies.
In addition, with investors and analysts
increasingly drawn to social media for both
communication and research purposes, in-
vestor relations departments have found so-
cial media an eective
communications channel. A 2012 survey
by the Bank of New York Mellon Corpora-
tion revealed that 32% of Western European
companies use at least one form of social
media to communicate with investment
professionals.
Boards should take an active over-
sight role
Forward-thinking audit committee chairs
and advisors suggest that, given the gravity
of the reputational risks involved, social me-
dia should be a full board issue, rather than
one limited to an audit or risk committee.
Some board directors receive updates
about policies regarding social media use
by employees and management. However,
they often remain unaware of how dierent
areas of the business actually use it. As part
of increasing awareness, boards may wish to
consider adding a director with digital ex-
pertise, though they may be tough to come
by.
Directors who use social media as a per-
sonal source of news and market intelli-
gence are often better equipped to ask man-
agement more pertinent questions.
Questions for audit committees
What are the most signifcant risks
our organization faces from social
media?
What is our strategy for mitigating
reputational risk?
How are we monitoring our organ
izations reputation in social
media and how quickly can we re
spond to issues?
Does the board receive the appro
priate briengs on social
media policies and issues as they
arise?
Does the board have digital
members or executives with the
necessary skills and experience to

coordinate social media programs?
For more information, and to read case
studies of how leading companies manage
social media risk, contact David Marange
for Insights 19: Ensuring social media is on
the boards agenda.
Email: david.marange@zw.ey.com or ey-
marketing@zw.ey.com
Address: Angwa City Building, Corner Ju-
lius Nyerere Way/ Kwame Nkrumah Av-
enue. P O Box 62, Harare, Zimbabwe. Tel:
+263 4 750905/ 750979
ZIMBABWE INDEPENDENT BUSINESS DIGEST AUGUST 29 TO SEPTEMBER 4, 2013 C37
COLUMN
Reputational threats drive audit
committee concerns about social media
TheEY
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Tracking social media conversation al-
lows a company to understand which
topics are provoking discussion and in-
tervene when needed to sway the dis-
course in their favour. Organizations
should listen, engage and persuade in
that order, and quickly.
Tis document was compiled by EY as a source of general information and notication and should not be construed as a formal professional/legal opinion. Although reasonable skill and care is taken when providing information, EY oer
no warranties or representations as to the informations accuracy. Te information provided is not intended to replace the need for an expert/ legal opinion on interpretation, application and consequences of the relevant legal, technical or
regulatory provisions. E Y does not accept responsibility for any loss or damage you or any third party may suer as a result of utilising the information provided.
Background
Te International Accounting Stand-
ards Board (IASB) and US Financial
Accounting Standards Board (FASB)
(collectively, the Boards) have issued
new requirements for recognising rev-
enue under both IFRS and US GAAP.
Te new standard is the nal product of
more than a decade of eorts and ex-
tensive deliberations by the Boards.
Te core principle of IFRS 15 is that
revenue is recognised to depict the
transfer of promised goods or services
to customers in an amount that reects
the consideration to which the entity
expects to be entitled in exchange for
those goods or services.
Scope
IFRS 15 establishes a ve-step model
that will apply to revenue earned from
a contract with a customer (with lim-
ited exceptions), regardless of the type
of revenue transaction or the industry.
Te standards requirements will also
apply to the recognition and measure-
ment of gains and losses on the sale of
some non-nancial assets that are not
an output of the entitys ordinary activ-
ities (e.g., sales of property, plant and
equipment).
Extensive disclosures will be re-
quired, including disaggregation of to-
tal revenue; information about perfor-
mance obligations; changes in contract
asset and liability account balances be-
tween periods and key judgements and
estimates.
Eective date
Te standard will apply to annual
periods beginning on or after 1 Janu-
ary 2017 and early adoption is per-
mitted. Entities can either adopt a full
retrospective approach or a modied
retrospective approach. Te modied
approach will allow the standard to be
applied to existing contracts beginning
with the current period. No restate-
ment of the comparative periods will
be required under this approach, as
long as comparative disclosures about
the current periods revenues under
existing IFRS are included.
Te ve-step model
Te principles in the standard will
be applied using a ve-step model.
Entities will need to exercise judge-
ment when considering the terms of
the contracts and all relevant facts and
circumstances.
Step 1: Identify the contract(s)
with a customer
Contracts may be written, verbal or
implied by customary business prac-
tices, but must be enforceable and have
commercial substance. Te model ap-
plies to each contract with a customer
once it is probable the entity will col-
lect the consideration to which it will
be entitled. In evaluating whether col-
lection is probable, the entity would
consider only the customers ability
and intention to pay the consideration
when due.
An entity may combine two or more
contracts that are entered into at or
near the same time with the same cus-
tomer, and account for them as a single
contract, provided they meet specied
criteria. Depending on the specic facts
and circumstances, a modication may
be accounted for as a separate con-
tract or a modication of the original
contract.
Step 2: Identify the separate
performance obligations in the
contract
Once the contract has been identi-
ed, an entity will need to evaluate the
terms and customary business practic-
es to identify which promised goods or
services, or a bundle of promised goods
or services, would be accounted for as
separate performance obligations.
Te key determinant for identifying
a separate performance obligation is
whether a good or service, or a bundle,
is distinct. A good or service is distinct
if the customer can benet from the
good or service on its own or together
with other readily available resources
and the good or service is separately
identiable from other promises in the
contract. Each distinct good or service
will be a separate performance obliga-
tion. A series of distinct goods or ser-
vices that are substantially the same
and have the same pattern of transfer to
the customer can be treated as a single
performance obligation provided spe-
cic criteria are met.
Step 3: Determine the transac-
tion price
Te transaction price is the amount
of consideration to which an entity ex-
pects to be entitled and includes:
An estimate of any varia
ble consideration (e.g., it may vary due
to rebates or bonuses), using either a
probability-weighted expected value
or the most likely amount, whichever
better predicts the amount of con-
sideration to which the entity will be
entitled
Te efect of the time value of
money, if there is a nancing compo-
nent that is signicant to the contract
Te fair value of any non-
cash consideration
Te transaction price is generally not
adjusted for credit risk. However, an
entity can include variable considera-
tion in the transaction price only to the
extent it is highly probable that a sub-
sequent change in estimated variable
consideration will not result in a sig-
nicant revenue reversal.
Step 4: Allocate the transaction
price to the separate perfor-
mance obligations
An entity must allocate the transac-
tion price to each separate performance
obligation on a relative stand-alone
selling price basis, with limited excep-
tions. One exception in the standard
permits an entity to allocate a vari-
able amount of consideration, together
with any subsequent changes in that
variable consideration, to one or more
(but not all) performance obligations, if
specied criteria are met.
When determining stand-alone sell-
ing prices, an entity must use observ-
able information, where available,
otherwise an entity will need to use es-
timates based on reasonably available
information.
Step 5: Recognise revenue when
(or as) the entity satises a per-
formance obligation
An entity satises a performance
obligation by transferring control of a
promised good or service to the cus-
tomer, which could occur over time
or at a point in time. A performance
obligation is satised at a point in time
unless it meets one of the following cri-
teria, in which case, it is satised over
time:
Te customer simultaneous
ly receives and consumes the benets
provided by the entitys performance
as the entity performs
Te entitys performance
creates or enhances an asset that the
customer controls as the asset is cre-
ated or enhanced
Te entitys performance
does not create an asset with an alter-
native use to the entity and the entity
has an enforceable right to payment for
performance completed to date
Revenue is recognised in line with
the pattern of transfer. Revenue that is
allocated to performance obligations
satised at a point in time will be rec-
ognised when control of the good or
service underlying the performance
obligation has transferred. If the per-
formance obligation is satised over
time, the revenue allocated will be
recognised over the period the perfor-
mance obligation is satised, using a
single method that best depicts the pat-
tern of the transfer of control over time.
Contract costs and other
application guidance
In addition to the ve-step model,
the standard species how to account
for the incremental costs of obtaining
a contract and the costs directly related
to fullling a contract. Provided those
costs are expected to be recovered, they
can be capitalised and subsequently
amortised and tested for impairment.
Application guidance is provided in
the standard to assist entities in ap-
plying its requirements to common
arrangements, including: licences;
warranties; rights of return; principal-
versus-agent considerations; options
for additional goods or services and
breakage.
Conclusion
IFRS 15 is a signicant change from
current IFRS. Although it provides
more detailed application guidance,
entities will need to use more judge-
ment in applying its requirements, in
part, because the use of estimates is
more extensive. Te potential changes
to revenue recognition for some enti-
ties may be signicant, so it is impor-
tant for entities to start assessing the
impact immediately.
Submitted by Tinei Muwandi
of EY. Tis is an extract of the
EY publication IFRS Develop-
ments Issue 80: IASB and FASB
issue new revenue recogni-
tion standard IFRS 15. Tis,
and other IFRS publications
are available in full on www.
ey.com/IFRS.
Or email: tinei.muwandi@
zw.ey.com, Address: Angwa
City Building, Corner Julius Ny-
erere Way/ Kwame Nkrumah
Avenue. P O Box 62, Harare,
Zimbabwe. Tel: +263 4 750905/
750979
ZIMBABWE INDEPENDENT SEPTEMBER 26 TO OCTOBER 2, 2014
COLUMN
IFRS 15- REVENUE FROM CONTRACTS WITH CUSTOMERS
Tis document was compiled by EY as a source of general information and notication and should not be construed as a formal professional/legal opinion. Although reasonable skill and care is taken when providing information,
EY oer no warranties or representations as to the informations accuracy. Te information provided is not intended to replace the need for an expert/ legal opinion on interpretation, application and consequences of the relevant
legal, technical or regulatory provisions. E Y does not accept responsibility for any loss or damage you or any third party may suer as a result of utilising the information provided