• Thursday, June 13, 2024
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MTN targets Nigeria microinsurance market with aYo platform

MTN’s FX-induced loss steals shine of record Q1 performance

MTN’s insurance technology unit aYo, which recently crossed the 15-million customer mark, is expanding to Nigeria and home South Africa as the group continues on its mission to bolster earnings from its financial services business.

MTN has been on a strong push in recent years to diversify its business, pursuing new revenue streams in mobile data, technology and related communications services to businesses, wholesale network services, fintech and digital services.

Microinsurance fintech operator aYo has operations in Ghana, Uganda and Zambia. The unit has added 5-million customers (50%) in the past year and aims to grow this customer base to 30-million by 2025.

AYo is now hoping to replicate its success in its two largest markets, tackling vastly different insurance industries.

“The dynamic between Nigeria and S. Africa is different. The behaviours are different. The penetration on mobile money is different,” aYo CEO Marius Botha told Business Day SA.

“In SA, we’re looking to disrupt where we believe people are getting poor value. We have a large population of irregular income earners and self-employed individuals. You can’t have a traditional insurance model where you aim to deduct monthly premiums by debit order. It doesn’t work for that population and segment.”

In recent years, insurance has proved lucrative for competitor Vodacom, which has seen insurance policies in the past year increasing 23.4% to 2-million, with revenue up 13.5%.

AYo generated $3.9m (R56.7m) in service revenue and $6.5m in premium income in the half-year to June 2021.

AYo started out as a 50-50 partnership between MTN and Momentum Metropolitan Holdings (MMH). Over the past two years, MMH took its stake down to 25% before completely exiting the venture, leaving MTN as the sole owner.

At its inception, the partnership had piggybacked on MTN’s mobile and distribution networks in its operating countries while using MMH’s insurance expertise.

MTN has indicated it will work with other insurers on the venture, with Sanlam being a potential partner.

In 2021, MTN and Sanlam, Africa’s largest non-bank financial services group, formed a $100m (R1.51bn) joint venture to roll out life insurance, phone insurance, car insurance and basic savings products to the continent’s rapidly expanding consumer market.

Botha says aYo is likely to target irregular income earners as it has done in other countries. At the same time, the company sees an opportunity to shake up funeral cover.

“Our assessment is there are still exorbitant profit margins being made out of funeral [cover] in SA. There is definitely room to offer value for money.”

Being a microinsurance player, premiums paid tend to be small and are funded through customer airtime and mobile wallets.

Read also: MTN rallies on Nigeria mobile money surge

The business is therefore chasing scale, signing up as many users as possible to become profitable. aYo offers three main insurance products — life, hospital and device cover — depending on the country.

“We have found from a tangible benefit perspective that our hospital cash product is the most attractive. That makes sense because it gives immediate benefit value to customers if they’re in an accident, or if they had a particular illness that requires an overnight stay in the hospital or for prolonged periods,” said Botha.

For Nigeria, the company is looking to take advantage of the higher penetration of its mobile money platform to offer insurance products.

Apart from competing against the likes of Vodacom and more traditional insurance players, when aYo officially comes to SA it will face a conflict of branding, being similarly named to Iqbal Survé’s Ayo Technology Solutions, listed on the JSE.

“We’ve got no association with them,” Botha said.

“The word or term Ayo comes from the West African region and it means to bring joy or happiness.”

He said MTN has a strong association with the term “ayoba”, with apps and marketing campaigns being named as such, and that “it’s unfortunate that we have this association”.

“We’ll follow a different strategy just to make sure that there isn’t any brand confusion … but we’re not going to shy away from using the term.”