GSMA, the global industry body for telecommunications, says SA has a market of 6-million people who still do not have access to formal financial services, creating an opportunity for mobile money players to capitalise on.
As voice revenue and data margins fall, squeezed by public pressure and regulations, mobile operators have been looking at other ways to create revenue streams from their large customer bases.
For SA’s top two mobile providers — Vodacom and MTN, which have more than 100-million financial services customers between them — financial technology (fintech) has become the largest area of this new focus, driven by mobile payments.
“SA is a really interesting market for us. Two of the big [mobile money] players are headquartered in SA, and yet it is not one of the biggest markets for mobile money penetration,” said Ashley Olson Onyango, head of financial inclusion and agritech at GSMA.
The latest report of the industry body, published annually and funded by the Bill and Melinda Gates Foundation, shows that global rates of adoption are rising quicker than expected. The number of registered mobile money accounts grew 13% year on year, from 1.4-billion in 2021 to 1.6-billion in 2022. While it took the industry 17 years to reach the first 800-million customers, this is significant growth as the next 800-million needed just five years.
Of the total, the largest user base — almost half at 763-million — are in Sub-Saharan Africa, with SA making up a tiny piece of the pie.
“To the credit of SA, the financial inclusion rate is quite high, particularly in relation to other African countries, at 85%. Which means there are 6-million South Africans who don’t have access to formal financial accounts,” said Onyango.
While dominating in Africa, both operators have had to change tack in SA to make inroads. MTN first launched its mobile money platform locally in 2012 before pulling the plug in 2016 due to a lack of commercial viability because three-quarters of the population has bank accounts. Vodacom shut its M-Pesa mobile money service in SA in the same year, citing similar reasons.
One reason often cited for this dynamic is the higher rate of banking penetration in SA compared to the rest of the continent where this sits at closer to a third.
MTN crossed 6-million registered mobile money users in SA earlier in 2023, far outstripping its earlier attempts.
Vodacom has underpinned its latest venture in SA with insurance products, lending and a super app, VodaPay, which has clocked up almost 3-million downloads.
“So it’s certainly worth pursuing and worth figuring out a way to get those people onto a platform where they can access financial services,” said Onyango.
“When we looked at SA, the banking penetration was much more prevalent and pervasive, much earlier on. When M-Pesa was starting to take off and other mobile money services, SA’s banking sector was much more ubiquitous and much more ready to serve users.”
“That’s one of the key reasons why mobile did not achieve the aggressive growth pace it did in other countries. But, like I said, 6-million South Africans don’t have access to formal financial accounts, so there’s still a lot of innovation to be had there,” she said.
Vodacom, with Kenya’s Safaricom, operates the best-known mobile money platform in Africa, M-Pesa, which has 52-million subscribers and is available in six countries.
In the three months to end-December, revenue in financial services, the fastest-growing contributor to Vodacom’s suite of new services, rose 30.6% to R2.6bn, boosted mainly by demand for services on M-Pesa, as well as double-digit growth in insurance policy and airtime advance sales in SA.
Over the past 12 months, M-Pesa processed $366.7bn, an increase of 17%.
In March, MTN reported the number of customers in its fintech business was up 21.4% year on year to 69-million for the year to end-December, while fintech transaction volumes rose to 13.4-billion, up 33.9%. The unit increased its turnover 14.3% to R17.2bn.
Africa’s largest mobile operator recently said it had received a number of bids for investment in the unit, with negotiations continuing. The group has been working on a plan to unlock value from its various businesses, including a separation of the fintech unit, its fastest-growing new area of business.
MTN is looking for a strategic investor that has experience in the financial services sector and can assist with implementing plans to expand its suite of digital payments and lending products.
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