Mobile network operator MTN may not have a Payment Service Bank (PSB) licence in Nigeria just yet, but in South Africa, it can test its ability on a market with a similar model to the most populated country in Africa.
Since 2018, the South African-based telco has been waiting for the Central Bank of Nigeria (CBN) to sign the dotted lines on its application to operate as a PSB and issue the licence. But while it waits, opportunities in its home country, South Africa beckons. An estimated 11 million people in the country are unbanked and banks’ resources are overstretched.
To bridge the gap, South Africa – like Nigeria- is turning to digital banking. However, unlike in Kenya where telcos have the front seat in digital banking drive, South African banks dominate the market.
The retail banking sector in South Africa is dominated by five large banks, namely Standard Bank, First National Bank (FNB), Capitec, Absa, and Nedbank. Together, they control approximately 90 percent of total banking sector assets.
The dominance of banks in mobile banking has meant that channels like mobile money have not fared very well, like in other countries. Mobile money penetration is at 2 percent of the population, whereas the population of people with bank accounts is at 75 percent.
However, access to and inclusivity of financial services is far from comprehensive. A report by Accenture notes that banking penetration is
deceptively high at 80 percent within South Africa, with deeper assessment revealing a significantly lower rate of inclusion.
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This is the opportunity fintech companies like TymeBank and others are tapping into. Investors are also increasingly attracted to these startups. TymeBank secured $103 million in 2021 to become a major digital banking competitor.
In 2012, MTN made a play for mobile money partnering with the South African Bank of Athens, Pick n Pay, and Boxer Stores. That venture lasted only 4 years. The telco decommissioned the MoMo service in September 2016 citing lack of commercial viability.
MTN wasn’t the only telco to pack its bag. Its biggest mobile money contender, Vodacom also failed to replicate MPesa’s success in South Africa and called it quits.
MTN relaunched the service in January 2020 and so far has 3.1 million registered users as of March 31, 2021.
The difference in the second coming of the telco is tapping into the agent banking system already established by South African banks rather than solely relying on the USSD model that is popular with MPesa in Kenya. The agent banking model required users to utilise a bank account to access payment. MTN is working with UBank, a banking service provider.
MoMo customers can cash in funds at MTN-branded stores, at UBank branches, or through their own banks via electronic funds transfers (EFTs). Similarly, they can use these options to cash out funds.
MTN is scaling the business and adding services like microloans and the ability to pay for groceries using mobile money. When it gets the licence in Nigeria, it would not be able to offer loans or sell insurance in Nigeria as those services are excluded from the PSB licence.
Last week, MTN said it has entered into a $2 million partnership with the World Bank’s International Finance Corporation (IFC) to expand its mobile money business, particularly its MoMo agents unit.
MTN South Africa and IFC will recruit 10,000 MoMo agents in 2021 and a team of trade development representatives will be created and trained to manage a portfolio of agents, support them and manage compliance regulations.
“This partnership provides the opportunity to bridge the digital divide and broaden financial inclusion in South Africa,” Felix Kamenga, Chief Officer for Mobile Financial Services at MTN South Africa, said.
In Nigeria where it has a Super Agent licence, MTN boasts of the largest mobile banking agency network of over 200,000 people.
“Mobile money… is needed now, more than ever, to help small businesses to grow and to reach communities where access to financial services is low,” Adamou Labara, IFC’s Country Manager for South Africa, said.
Last year, MTN’s mobile money arm added almost 12 million new users to a total of more than 46 million customers.
