Financial technology or fintech appears to be the new airtime driving the telecoms industry’s upward trajectory.
Fintech is the delivery of financial services using technology that applies to a broad spectrum of activities including commerce, insurance, investments, micro loans, payments and savings. Fintech aims to democratise access to finance, and hopefully the world can move closer to financial inclusion.
While Covid-19 devastated many businesses over the past two years, fintech has bucked the trend and has instead experienced growth.
The pandemic drove consumers’ exposure to digitised services and changed their shopping behaviour, perhaps for good.
Fintech has made transacting easy for many, but not all communities in Africa can access financial services conveniently, quickly and simply.
That said, the fear of Covid-19 has been a catalyst for fintech to flourish on the continent.
A report by FSD Africa in 2019 said mobile money (MoMo) is driving a potential $5.1-trillion worth of fintech opportunity in Africa.
It is no wonder then that Vodacom and MTN are in a race to build Africa’s largest fintech platform.
For now, Vodacom is accelerating and scaling up its MoMo platform through M-Pesa Africa. In March 2020, Vodacom and Safaricom acquired Vodafone’s M-Pesa brand, product development and support services through a newly formed joint venture known as M-Pesa Africa.
It was to prove a prodigious move which has begun to pay dividends.
The Vodafone-owned group is now getting the benefits of M-Pesa Africa as it pursues its M-Pesa 2025 Vision which aims to build Africa’s largest fintech platform.
M-Pesa Africa drives the next generation of the M-Pesa platform — an intelligent, cloud-based platform for the fourth industrial revolution.
Vodacom says the platform will enable it to promote greater financial inclusion and bridge the digital divide in the communities where it operates.
For now, Vodacom seems to have the upper hand in the MoMo space.
On Tuesday, Vodacom revealed that its MoMo platform, M-Pesa, which includes Safaricom, continues to scale at an impressive rate, with transaction values exceeding R430bn a month. These remarkable figures translate into R5.2-trillion in transaction values per year.
It is so massive that M-Pesa is already morphing into Africa’s biggest MoMo platform.
Given the vast size of the platform, floating it on the stock exchange should be something Vodacom and Safaricom will surely consider.
In another positive development, Vodacom has seen its recently launched super app, VodaPay, reach 1.4-million downloads. By 31 December last year one million users had registered on the super app.
“We see VodaPay as a precursor to M-Pesa’s evolution and further strengthening our fintech position across our footprint,” Vodacom CEO Shameel Joosub said.
Vodacom is on the verge of extending its fintech footprint with the completion of the acquisition of Vodacom Egypt.
Joosub said the Vodafone Egypt deal presents significant diversification and growth opportunities for shareholders in a substantial and largely unbanked market and can be transformational of the company’s evolution from a “telco to a techco”.
In addition, Vodacom has an opportunity to grow its MoMo business in the Ethiopian market through the Safaricom-led consortium that was recently granted a licence.
Vodacom is pushing ahead to realise its vision to develop Africa’s largest fintech platform powered by AI, big data, open API and cloud-enabled technology.
Rival operator MTN is also marching ahead with its plans to float its fintech business.
MTN values its MoMo business at R75bn and is planning to complete the spin-off of its fintech business before the end of the first quarter this year.
The value of MTN’s MoMo transactions sits at R1.8-trillion.
MTN is also making huge inroads into fintech in Nigeria, Africa’s most crowded market.
On Monday, MTN reported that it had added 4.8-million active new fintech subscribers, pushing its total to 9.4-million.
It is driven by more than 770,000 registered MoMo agents.
“This provides a solid foundation on which to launch the MoMo Payment Service Bank (PSB), for which we have received approval in principle,” said MTN Nigeria CEO Karl Toriola. “MoMo PSB will provide a powerful platform to drive digital and financial inclusion in Nigeria.”
It seems both Vodacom and MTN are making the right noises and moves to position themselves for a first-mover advantage in the fintech space.
One wonders whether it would be prudent for Vodacom and MTN to pursue the acquisition of fintech players such as the privately held Channel VAS and JSE-listed Pepkor’s Flash.
Both Channel VAS and Flash have a significant African footprint to enable Vodacom and MTN to deliver their fintech solutions much faster and more conveniently.
It is reasonable to expect that the pursuit of MoMo and other financial services opportunities by Vodacom and MTN will become an everyday enabler for African customers.
Let’s hope MoMo brings more digitisation to African markets.
The surest way to judge the growth of MoMo and other financial services solutions is to see people’s lives enhanced and their countries’ economies improved.
For now, fintech seems a boon for Vodacom and MTN. With the right policies and solutions deployed by a committed workforce, SA’s telcos may enable tremendous socioeconomic benefits for the rest of Africa.
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