MTN taps Mastercard to upstage Safaricom as Africa’s fintech giant

MTN’s ambition of building Africa’s largest fintech platform may be heading in the right direction after a partnership with Mastercard that was sealed on Tuesday. The partnership draws MTN closer to upstaging its closest rival, Safaricom, in Africa’s mobile banking market.

The Mastercard partnership will allow millions of MTN customers in 16 countries across Africa to pay on global online platforms with a Mastercard virtual payment solution linked to MTN MoMo wallet.

Safaricom’s M-Pesa remains the largest mobile banking platform in Africa. As of 2019, M-Pesa had 41.5 million active users in Africa, which carried out over 12 billion transactions, and also controls 98.8 percent of the mobile banking market in Kenya. MTN’s MoMo, however, added 12.4 million active customers from March 2018 to March 2020. As of March 2020, 35.1 million customers were using MoMo to make and receive mobile money payments.

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Experts say MTN would likely overtake Safaricom if it gets the Payment Service Bank (PSB) licence it has been pursuing in Nigeria, the country with the largest population of financially excluded people in Africa, since 2017. The South African operator is yet to get the Central Bank of Nigeria’s licence approval to operate as a PSB in Nigeria. Although it has a Super Agent licence, which does not give it the latitude it needs to deploy a full mobile banking service.

But the partnership aligns MTN with a payment provider that has deep ties in Nigeria’s financial service system.

A statement from Mastercard notes that users can also have access to new digital commerce opportunities for consumers and merchants with or without a bank account, through a simple and secure payment experience.

Importantly, the deal brings together two big corporations with huge ambitions for the mobile banking market in Africa. Mastercard wants to connect 1 billion people in the world to the digital economy by 2025, “bringing us to a world beyond cash,” according to Amnah Ajmal, executive vice president for Market Development, Mastercard Middle East and Africa.

For MTN, the ambition is to build Africa’s largest fintech platform, accelerating economic and social development through digital innovation to the benefit of citizens across the continent and beyond, says Serigne Dioum, MTN Group chief digital and fintech officer.

The two conglomerates are merely expanding the service to all their customers given they both launched the digital payment solution in 2018 for only MoMo customers. Any customer with a Mastercard linked to the MoMo service has access to the solution. This allows MTN to tap into the growing internet market on the continent that is powering rising adoption in online commerce.

A recent GSMA report projects that by 2025 there will be 300 million more people using their devices to access internet services. In light of this significant growth, mobile financial services have become the dominant form of digital payments, with twice as many mobile money accounts as bank accounts in the region.

Kenya leads the continent in mobile banking accounting for about 70 percent of the 102 million active users in East Africa. In West Africa where 56 million users are active, countries like Senegal, Ivory Coast and Ghana dominate. Nigeria with its about 2 percent mobile money population is considered the outlier in the market given the potential of the market.

But mobile payments have grown in Nigeria led by banks and financial technologies (fintech) companies like OPay, Paga, and many others. Experts say it is still not maximising the potentials of telcos like MTN.

It should also be noted that MTN may not merely be providing a payment service that could get millions of financially excluded Africans into the financial services sector with the latest partnership. The partnership with Mastercard also gives the largest telco in Africa a foothold in the burgeoning e-commerce market.

“This significant milestone will enable millions of MTN customers to benefit from global digital commerce and drive digital and financial inclusion across Africa through easy and secure access to financial services,” Ajmal states.

Statista estimates that the e-commerce market in Nigeria has grown by over 41.8 percent year-on-year in 2020 to reach $4.9 billion. User adoption is expected to grow from 52.4 percent in 2019 to 122.5 percent in 2025.

In recent times, the market has been attracting new players such as Flutterwave, Paystack, Facebook, and Interswitch the latest to launch.

The e-commerce market in Nigeria has however for years performed below expectations leading to the shutdown of operators like OLX, Gloo, OPay, Dealdey, among others. Konga struggled for years and had to sell to an investor, Zinox, for cheap.

Some of the challenges facing the sector include poor internet connectivity, expensive data, delivery, and logistics problems among others.

But experts say the Covid-19 pandemic may have turned things around and led to increased adoption. Many more people are buying things from online platforms and this trend is expected to grow. Hence, fintech platforms able to provide a seamless solution for merchants and customers would thrive in the market.

MTN seems to be positioning itself as the platform. Momo, which was initially designed to facilitate the transfer of cash between mobile users, can now offer loans, insurance, remittances, and payments services.