The next financial crisis may not begin on the trading floor but in a cell tower. A large, mobile wallet outage, a rushed credit product from a telecom, or a cross-border settlement hiccup can stop payrolls, freeze remittances and force small businesses to close for a day. That looks less like a software bug and more like a run on a bank.
Investors value telecoms as growth and distribution plays. They price subscriber numbers; average revenue per user (ARPU) and 5G rollouts dominate analysts’ decks. They rarely price the implicit backstops that come when a nonbank becomes system critical.
For instance, MTN’s fintech business leverages its parent’s extensive operations across the continent and grinds out more than R4bn in core profit, or earnings before interest, tax, depreciation and amortisation (ebitda), on revenue of about R10bn.
This potential has attracted the financial backing of Mastercard, a global payment processing behemoth. In 2023, MTN announced that Mastercard agreed to take an unspecified minority stake in the business, which values the division at $5.2bn (nearly R100bn).
We do not know the size of the stake or how much Mastercard is paying for it, but that valuation propels MTN’s fintech business into the upper echelons of the SA financial services industry, dominated by the likes of Standard Bank, FirstRand and Nedbank.
Game-changer
Scale changes the game. When millions park balances in wallets, when platforms mediate payrolls and small loans, those platforms create the same ingredients that make banks systemic. This corporate wrapper is irrelevant. What matters is what they do. Function, not form, should determine supervision.
The reflexive defence for some corners is that stricter rules will snuff out innovation. That argument is persuasive only if the conversation is about early-stage experiments. It’s meaningless in discussing firms that already bundle payment provisions with voice, data and credit. Smart rules do not ban wallets or cap creativity. They set guardrails. Picture a conditional access in which you run a big payments service and must prove you can service a 30-day outflow and clear insolvency playbooks.
Let firms scale, but make scale pay for stability. Better awkward rules than ugly rescues.
The Prudential Authority and central banks face two choices. The first operation is to expand the regulatory parameter, forcing new reporting, stress tests and recovery for activities. The second option is to wait for a crisis, then design emergency measures under duress. For the record, we despise retroactive taxation in the form of bailouts.
“As policymakers, we have no choice but to understand the challenges and to act decisively. At a high level, this requires strengthening regional co-operation, modernising and aligning regulatory frameworks, and investing in interoperable infrastructure. We also need reliable and accessible data to guide our decisions and measure our progress. And we must ensure that our efforts are inclusive, serving the needs of all users — especially those who rely on remittances and small-value transfers as economic lifelines," Lesetja Kganyago said in a speech at the Advancing Cross-Border Payments conference in Pretoria.
Politics will complicate the technical fixes. Telcos and platforms are powerful lobbyists. Rules that bite will meet litigation and fire. That argues for a phased, credible measure to tackle the biggest vectors of risk first.
Markets will reason. Some valuations will compress. Others will rate higher. Firms that demonstrate credible contingency plans will trade at a premium. Properly priced stability is a signal that separates stable platforms from fragile ones. It’s far from being a tax on innovation.
Let firms scale, but make scale pay for stability. Better awkward rules than ugly rescues. If regulators wait for a run to teach prudence, markets and ordinary people will pick up the bill.
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