Mobile money: Why SA isn’t Kenya

Farzana Rasool —  August 15, 2013 — Leave a comment

South Africa has over 10 million unbanked citizens, a mobile penetration rate per unique subscriber of more than 66% and a total mobile connections rate of 138% [GSMA: October 2012].

The perfect landscape for mobile money solutions, right?

Then why have we not seen the success with mobile money transfers that other African countries have? A few attempts have been made at models that worked exceptionally in other markets on the continent, but not nearly with the same degree of success.

M-Pesa Kenya versus M-Pesa South Africa is a clear enough indication.

Safaricom launched M-Pesa in Kenya in 2007 and the service is now being used by over 17 million Kenyans. Apart from Kenya, M-Pesa is starting to do well in other countries, including Tanzania and Afghanistan.

The Economist previously cited several reasons why Kenya has been so successful in this venture.

  • The high cost of sending money via other methods
  • The dominant market position of Safaricom
  • Allowance by the regulator for the scheme to initially proceed on an experimental basis without formal approval
  • A clear and effective marketing campaign
  • An efficient system to move cash around behind the scenes
  • The post-election violence in the country in 2008- M-Pesa was used to transfer money to people trapped in Nairobi’s slums at the time
  • Network effects- as more people used it, it made sense for others to sign up

SA could conceivably emulate some of these characteristics (I’d rather we skip the violence thanks). So why hasn’t it been as successful here? Well, simply because SA isn’t Kenya.

This imperative point was seemingly overlooked with implementation in SA. What works for one country doesn’t necessarily work for the other, especially when a carbon copy type approach is adopted.

It’s like saying that just because two girls are from the same family, one dress will suit them both perfectly- not taking into account their different shapes, colouring and sizes. While there might be some similarities between them, the dress would no doubt have to be tailored to suit the specific physique of each girl.

The same goes for any innovation or development in a country. It must be moulded to suit the needs, environment and demographics of that specific country.

Delete customer costs

This blanket view of African nations is, however, not the sole point that can be held accountable for SA’s slow uptake in this ripe area.

There are several of these and one of the most glaring ones is the high cost of transaction fees. This is especially problematic when considering the economic level of the target market and the amount of money they would need to transfer at a time.

The small amounts of money they want to transfer can’t justify the large fees they must pay to do so.

In an interview with ITWeb, Nnamdi Oranye, business development manager at telecoms consultancy Indian Atlantic, said transaction fees should be waived completely.

“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 instead suggests linking the free service to paid adverts, offering attractive paid products in conjunction to the free service, or allowing the basic transaction service for free but implementing a payment structure when frequent use by that subscriber is detected or when they want to use it for business purposes.

Other issues standing in the way of a South African mobile money transfer success story are the integration required on the banking side to connect to the digital wallet, money-laundering concerns and legislation.

With the need for financial inclusion in SA, mobile money solutions have a huge role to play in bringing the formal economy to the unbanked. So let’s try it again.


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