Analysts believe MTN’s Mobile Money (MoMo) platform will be a success this time as the telco has learnt from its past mistakes.
However, they say the advancement in mobile banking applications and eWallet services has gained traction in recent years and this will create a significant challenge for mobile money services in SA.
Last week, MTN relaunched is MoMo platform in Johannesburg, about four years after the service failed to take off in SA.
The telco this time launched the service in partnership with Ubank, a financial service provider with a strong presence in rural areas as well as mining communities in SA.
During the launch event, MTN SA CEO Godfrey Motsa said he is “stubbornly optimistic” the mobile operator’s mobile money service will be a success in its second attempt.
In September 2016, MTN SA announced it was decommissioning the MoMo offering in the country due to lack of commercial viability.
The service was originally launched in 2012 when MTN partnered with the South African Bank of Athens, Pick n Pay and Boxer stores to offer a mobile money solution enabling the opening of simple bank accounts via phones.
Mobile money offerings have been successful all over the continent but do not have a strong track record locally.
In May 2016, Vodacom also pulled the plug on its offering, M-Pesa, in South Africa.
Country dynamics
World Wide Worx MD Arthur Goldstuck says: “The MoMo platform is likely to be a bigger success than the last time round, as MTN has learned harsh lessons of what does not work in South Africa; in particular, the fact that the dynamics in one African country are not the same as another for this kind of service.
“In the same way that M-Pesa took off in East Africa but failed in South Africa, there are specific reasons for uptake, growth and ‘virality’ of each of these services in every territory where they launch.”
He points out that South African consumers are even more cash-strapped today than they were four years ago, and any opportunity to save money on their everyday transactions will be appealing.
According to Goldstuck, the primary environmental difference this time around is that MTN is working with a banking service provider (Ubank) that has a strong presence in rural areas.
However, he notes there is also a cultural difference, with MTN more willing to listen to its market than before.
“The original MTN Money and M-Pesa services were foisted on the market as a ‘we-know-best’ solution. The new MoMo service seems to have taken into account complaints about both accessibility and complexity. FNB has also proven the workability of mobile money through its eWallet service, and other providers have probably learnt a lot from the example.”
Goldstuck explains that M-Pesa failed in SA because of the way it was launched in partnership with an elite bank, Nedbank, then with an almost unknown bank, and finally hidden away in USSD menus.
“They did everything wrong. The fundamental difference between these markets, in the context of mobile money, is that SA already had an extensive and highly-efficient money transfer system through retail outlets, and people both trusted it and understood it.
“Further, SA has a high banked population, with more than 70% of adults having a bank account. In East Africa, fewer than 10% had a financial instrument before M-Pesa came along. And M-Pesa arrived at a time of great need in Kenya, when election violence had caused massive human displacement. In other words, it met a desperate need, and one that did not exist in South Africa. To make it work in SA, it had to become something fundamentally different, at a fundamentally lower price than what existed.”
For MoMo success, Goldstuck urges MTN to be keenly aware of pricing.
“If people perceive the cost of using the service as another attempt by an operator to extract more of their hard-earned income, they will abandon or avoid the service.”
He also notes MTN must ensure the service is as simple to use as, or simpler than, a basic USSD transaction.
“At the same time though, it must not be hidden under a USSD mountain the way M-Pesa was. Next, it must be interchangeable with other wallets and money transfer services. That may not be feasible yet, but needs to be part of the roadmap. Finally, MTN must listen to criticism, advice and suggestions. If the mobile money market has proven one thing, it is that no one has all the answers.”
Perfect price point
Derrick Chikanga, senior analyst of IT services at research firm Africa Analysis, believes MTN’s MoMo platform will likely gain traction among the country’s unbanked population.
He says mobile money services have enjoyed significant success in East Africa, and notably Kenya through its M-Pesa platform, and this has been mainly due to large a population of unbanked individuals.
Chikanga says SA’s unbanked population remains significantly high with approximately 11 million unbanked citizens.
“However, the advancement in mobile banking applications and eWallet services has gained traction in recent years and this will create a significant challenge for mobile money services in SA. As such, the success of the MoMo platform will depend on how the service addresses the shortcomings of the current online banking services in the market that include eWallet services.”
Chikanga observes that the market has become more competitive from a banking application perspective.
“Banks such as FNB and Standard Bank have been investing extensively in their mobile banking applications and eWallet services, and this will present significant competition to MTN’s MoMo platform.”
He comments that other African countries have large unbanked populations and limited options with regards to mobile banking applications.
Furthermore, says Chikanga, the adoption of smart devices that are necessary for the use of mobile banking services remains low across most African countries. As such, mobile money has been a huge success in these markets, he notes.
“MTN should ensure the product offers convenient features that are appealing to customers, such as ease of use and efficient transacting with minimum disruptions. Furthermore, the product should be compatible with most devices to ensure broader service coverage.
“In addition, mobile banking applications are data-reliant, another key advantage of mobile money applications that usually charge a small fee per transaction. As such, MTN should also ensure this product is cost-effective to the ordinary consumer to increase its appeal to its key target market.”
Visible presence
Thecla Mbongue, senior research analyst for Middle East and Africa at Ovum, is of the view that MoMo can be a success as long as it has a strong marketing campaign (including creating customer awareness) and a strong distribution channel (either operator-owned or through partnerships).
She notes: “In the first attempts, mobile network operators seemed to have just launched the products and vanished without accompanying the customer throughout all the steps and remaining visible over a long period. The products seemed to have been launched just to copy and paste what was done in other markets but without adapting it to the South African context.
“Mobile money is also successful in South Africa in its way. The difference is that the service is essentially bank-led (FNB eWallet) and not driven by mobile operators. However, the need was higher in other African markets where banking penetration was and is still very low.
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