Mobile money — a system allowing the efficient payment, receipt and storage of money via mobile phone — has been seen as versatile, quick, convenient, secure and low cost, and in many countries, those benefits have seen its rapid and enthusiastic uptake. 

Total registered users globally topped the 1-billion mark in 2019, according to GMSA, an organisation which represents the interests of mobile operators worldwide. It states that sub-Saharan Africa in 2019 had a total of 469 million registered users transacting 23.8 billion times at a value of $456.3-billion — 66% of the global total — making it the centre of mobile money.

M-Pesa is said to have the biggest reach of any financial services provider on the African continent, with 38 million active customers, processing more than 11 billion transactions annually.

But southern Africa accounts for only 2% of that $456.3-billion. The mobile operators — Vodacom, which saw such success with M-Pesa across East Africa, and MTN, through its MoMo mobile money offering — have repeatedly tried and failed, to gain traction in SA. 

Industry experts state that the early failures of mobile money in South Africa demonstrated the power that traditional banks have when it comes to retaining their customers, which shouldn’t be underestimated.

They are, to their credit, introducing new products to improve reach through technology. For example, Absa Bank was among the first banks in the world to enable chat banking services using social media platforms like Facebook Messenger and WhatsApp. Standard Bank partnered with Tencent’s WeChat to do the same, while FNB’s developed its own in-house feature called e-Wallet, which has been received with great success.

South Africa also has some of the toughest financial legislation in the world, which smaller and new players say makes it harder to survive.

Apart from stringent regulations and pre-existing advanced banking solutions, another reason mobile money failed in South Africa lies in the financial ecosystem. Before offering a product or service, any business will ask if there is enough value for the consumer to use these services and does capability allow for essential purchases like electricity and airtime?

Despite these challenges, MTN has decided to re-enter the mobile money market in SA.

It launched its mobile money app in South Africa at the beginning of 2020 and has developed the capacity to include online shopping and microloans in partnership with Ubank.

It has already onboarded 1.6 million users to the mobile platform, but with the biggest subscriber base in the country of 30 million, the scope almost seems endless. 

MTN’s chief officer of Mobile Financial Services, Felix Kamenga, says it has been carefully studying market developments.

“Since its introduction in 2007, mobile money has faced regulatory, technical and commercial challenges. Especially in the early days, mobile money struggled with the necessary regulation to facilitate its growth. At inception, the technology wasn’t scalable and took time to mature and stabilise. Finally, the commercial aspects such as costs and profitability have been difficult to manage, especially where critical mass wasn’t quickly achieved.

“These may have been areas where the previous deployment was lacking. The new MTN Mobile Money service comes with features that cater to the current economic landscape and consumer behaviour,” he says.

In 2010, Vodacom launched M-Pesa South Africa, with the intention of bringing financial inclusion to the nation’s rural communities. By 2015, only 75,000 users had signed up. 

The following year, Vodacom closed the service in South Africa, but that hasn’t halted the network operator’s local mobile money ambitions elsewhere on the continent.

Says Vodacom Financial Services’ chief officer Mariam Cassim:

“The traditional mobile money proposition faces intense competition from an increasingly competitive market for digital financial services. Identifying and solving relevant consumer and enterprise use cases is key to ensuring mass adoption of mobile money in South Africa.”

By 2025, the ultimate size of the market across Africa could be as high as 850 million customers, supporting about $2.5-trillion to $3-trillion in transaction volume and $25-billion to $30-billion in yearly revenue from the financial transactions alone, the consultancy reveals.

In July, Vodacom Financial Services announced a technology partnership with Alipay, which is owned by the Hong Kong-listed Alibaba group, the world’s leading digital lifestyle services platform, to bring inclusive mobile solutions to South African consumers and merchants through innovative digital technologies. Alipay serves more than 1.2 billion users worldwide, which Vodacom considers a significant growth opportunity.

In just four years, Vodacom Financial Services has grown from a loss-making entity into a business that has more than 12 million customers using its products and contributes R1-billion in profit to the Vodacom Group. With access to 43 million active Vodacom customers, Vodacom Financial Services is looking to take bespoke digital financial services in the country to an unparalleled level.

Telkom Mobile has now also branched out into the competitive space of financial services by launching a life insurance solution, which they say will initially sell funeral insurance which will be underwritten by Guardrisk Life, a division of MMI Holdings Limited.

Telkom states in a press release that it will also offer business loans and soon launch a digital wallet service for customers to buy products and pay for services via its Yep! app as well as other online transacting platforms.

In Africa, especially amid the Covid-19 crisis, business ecosystems are well positioned for growth.

“They will enable companies with limited resources to join together and offer innovations such as mobile payments, with comparatively little investment and risk, says Tijsbert Creemers, managing director at the Boston Consulting Group (BCG).

“The most successful of these groups will have a central ecosystem leader — a financial services, technology, or telecom company that organises activity, governs the platform, provides core skills and funding and attracts other businesses, “ he says.

BCG estimates that about 400 million consumers in sub-Saharan Africa use mobile payment banking systems to handle $300-billion worth of mobile money transactions. And these figures don’t even reflect the increase in mobile platforms during the Covid-19 lockdowns.

By 2025, the ultimate size of the market across Africa could be as high as 850 million customers, supporting about $2.5-trillion to $3-trillion in transaction volume and $25-billion to $30-billion in yearly revenue from the financial transactions alone, the consultancy reveals.

“If mobile operators step up to this opportunity, they will open significant new revenue streams, as traditional messaging and phone call income dwindle, and data income under regulatory pressure. Mobile transactions are unlikely to be a winner-take-all business, dominated by one or two companies with a digital firewall around their offerings because regulators in most African governments have mandated mobile wallet interoperability. More likely, telecoms, fintech companies, and banks,” Creemers concludes. DM/BM