SA mobile money flop prompts new models
Local industry players are looking to other models formobile money transfer solutions, amid the failure of these to take off in SA - in stark contrast to otherAfrican countries where the same services have thrived.
Most notably, M-Pesa - launched as a partnership between SA’s first mobile operator Vodacom and then big four bank Nedbank, in August 2010, has struggled to gain traction and currently has only a few hundred-thousand users in SA. The service has been held back by legislation and the integration needed to move money from a bank account to an electronic wallet.
On the contrary, Tanzania and Kenya - as well as the Middle East’s Afghanistan - have seen massive uptake of the same service, gaining more than 10 million customers, while SA is still sitting on a few hundred-thousand, three years down the line.
On launch, Vodacom and Nedbank estimated there were over 13 million “economically active” people without a bank account, while Vodacom projected it would sign up 10 million users in the first three years.
Nnamdi Oranye, business development manager at telecoms consultancy Indian Atlantic, says service providers need to stop charging for mobile money transactions if they want to see profits coming from the service.
“A money transfer revolution is happening in Africa, but short-sightedness is scuppering what could be a trans-continental economic success story. Traditional ways of thinking about how to generate profit are blinding financial institutions to the vast possibilities that mobile money transfers offer across Africa and the developing world.”
He says charging transaction fees for mobile money transfer is self-defeating, and labels this the number one reason for the failure of “M-Pesa-type mobile money” outside of certain African countries. “The amounts being transferred are often relatively small, so that the transaction charge can be quite large in comparison.”
He tags Africa’s largest operator, MTN’s, mobile money service - as well as rival Vodacom’s M-Pesa service - as “unmitigated commercial failures” on a continent that has overwhelmingly adopted the mobile phone as its primary interface for connection and commerce, with phone subscriptions equalling 80% of the continent’s population in early 2013.