MTN Takes On Startups, Others With MoMo Reboot In South Africa

Mobile money—considered a game-changer in several sub-Saharan African countries as far as financial inclusion and digital payments are concerned—has proved a tough sell in South Africa for well over a decade, undermining the efforts of notable telecom giants, MTN and Vodacom.

But, having defied the sort of capital outlay and strategies that leading industry leaders—mostly prominent telcos—have deployed to great success elsewhere, South Africa remains an attractive opportunity for mobile money services, suggests Bradwin Roper, newly appointed CEO of MTN’s financial services unit in South Africa, which would be hoping the third time’s the charm as it makes its latest push.

Two of South Africa’s biggest telecommunications companies, MTN and its long-time rival, Vodacom, both had to shut down and scrap their mobile money offerings in 2016 after failing to cut it despite years of effort. MTN had launched its mobile money service two years after Vodacom did, in 2012, but ended the service four years later due to a lack of viability. Industry sentiments attributed the failure to a poor fit between the product and a market that had taken to legacy banks.

Across the continent, mobile money services have become a hit, after its first rollout in the East African sub-region where M-Pesa changed things. There are now 1.6 billion registered mobile money accounts globally, growing 13% year-over-year (YoY) in 2022, and 781 million of those are in Africa, with accounts on the continent spiking 17% YoY, according to the GSMA’s most recent report.

Much of those are in sub-Saharan Africa where mobile money has become a mainstay in many countries, albeit South Africa remains immune to the product. Attempts to push mobile money in South Africa flopped in the 2010s and a subsequent comeback attempted by MTN in 2020 also seemed to stall, but the top telco appears to be unfazed as it takes another shot.

MTN’s recently hired financial services boss has huge hopes for the company’s fintech service, Mobile Money (MoMo), and is looking to pull off some big plans, TechCentral reports following an interview with Roper. As part of this, an application programming interface, or API, is being rolled out so that outside developers can build on the platform. According to Roper, specifics on the API’s functionality will be revealed in the upcoming weeks.

This, the third version of MoMo South Africa, delivers additional capability to users while giving increased value through lower expenses, according to Roper, who previously served as CEO of FNB’s telecom division, FNB Connect.

“MoMo South Africa is in a rebirth. This is our third go at it. Previously, anyone who has tried to show up in the mobile money space has found it difficult because the banks here are sophisticated. But we are now embarking on a sophisticated play with MoMo,” Roper said.

A new play

MTN South Africa is putting more emphasis on MoMo, even introducing its own point-of-sale system for retailers that runs on Android. MTN won’t say how many of these customers are active, but across all of its African markets, the number of active users, calculated on a 30-day basis, is 69 million. This comes as the service hits its eight-millionth registered user.

According to Roper, the service is targeted primarily, though not completely, at the estimated 4.7 million South Africans working in the informal sector, who make up 5-6% of the country’s GDP. Informal traders make up almost a fifth of this market.

“If we can solve for trade workers, we can capture a big part of the informal market and solve for private household workers and nuances around agriculture as well,” said Roper.

MTN wants to lessen South Africans’ reliance on cash as part of its mission. According to data by BRM Statistics, card transactions have increased from 38% in 2017 to 56% in 2018, while cash transactions have decreased from 57% to 35% by value in South Africa. According to Roper, this is largely a result of the effort done by South Africa’s major banks, including the creation of e-wallets.

Delivering value to users who would otherwise pay for services like loading money, purchasing airtime, and electricity—all of which are free on MoMo—is a crucial component of MoMo’s business model. Although subscribers to other networks can still use MoMo, they must pay for the data they consume. Use of the service is also zero-rated, but only on the MTN network.

“Is MoMo a charity? No, we are a modernised fintech, developed with open APIs and partnering with a range of partners without legacy incumbent systems. MoMo has been built on fresh architecture in an ‘agile’ development manner. We vend prepaid electricity and Lotto and we get a commission on those,” said Roper on one of the ways MoMo makes money.

While using a MoMo wallet to withdraw money is charged, using MoMo credits to make purchases at Shoprite Group supermarkets (including Checkers), Pick n Pay, KFC, Nando’s, and Spur is free. Additional collaborations are in the works as well. MoMo also supports Zapper QR codes, enabling customers to scan a code to make a purchase at the point of sale.

Many petty traders run their companies out of remote locations or move frequently. Roper believes that increasing the number of retailers who accept MoMo will help to lower the hazards associated with carrying cash. However, taking electronic payments requires a strong internet connection. 

By providing a dual-Sim, Wi-Fi-enabled point-of-sale terminal for ZAR 200.00 per month on lease, MoMo aims to address this issue. While the additional Sim slot enables connectivity even if MTN is down, the service depends on MTN’s network to provide zero-rated connectivity. To keep track of their transactions, traders can also use real-time reporting features on the interface.

“If you want to be a fintech in South Africa, you cannot ignore the POS device. It’s a ticket to the game,” Roper said. “One of the things I am hoping to solve for is the residual 35% still using cash. It’s been quite sticky.”

Despite the allure of MoMo South Africa’s value offer, Roper and his team will have to stay on their toes due to fierce competition from the banking industry. Startups like Yoco and iKhokha, as well as competing telecommunications providers, are all making inroads into the sector.

Featured Image Credits: Regtech Africa