Mobile banking hits a brick wall: outside Kenya, mobile money services have struggled to penetrate the market.

Author:Ford, Neil

East Africa is the home of mobile banking. The origins of the sector are usually traced to the launch of M-Pesa by Safaricom in Kenya in 2007 and more than half of the entire adult population of the country now actively uses mobile money accounts.

M-Pesa has now launched in India and 85% of all mobile money users worldwide live in Africa and South Asia. People use mobile money accounts to pay bills, send money home to their families when working away and to save money. The industry is often considered an offshoot of the banking sector but it is just as much part of the telecoms industry, as many services are owned by telcos.

Yet mobile money services have struggled to spread into the rest of the continent, particularly into South Africa. In May, Vodafone offshoot Vodacom closed its South African M-Pesa service. The product has huge brand awareness and a great reputation, yet the company still failed to become successful in South Africa after six years of trying, including a major relaunch in 2014.

Vodacom set a goal of securing 10m users in the country but reported last year that it had just 76,000 active users. "Based on our revised projections and high levels of financial inclusion in South Africa, there is little prospect of the M-Pesa product achieving this in its current format in the mid-term," said Vodacom CEO Shameel Joosub in a statement.

In September, another telecoms firm MTN announced that it was phasing out its mobile money service in the country. MTN South Africa's chief consumer officer, Larry Annetts, said that the decision had been taken because of the "lack of commercial viability" and added: "The operating costs of providing a mobile money platform have become prohibitive. The decision by MTN SA to shelve its mobile money service does not signify a complete exit from financial services."

It seems likely that the South African market is proving difficult to break into because it already has the strongest retail banking sector in sub-Saharan Africa. Just 23% of adult South Africans lack access to traditional bank accounts and the South African government and banking industry have put a great deal of effort into promoting banking inclusion. The country's big four banks offer simple bank accounts in rural areas and supermarkets have begun to enter the market. Despite the largely justified hype over its potential, it does seem that mobile banking has its limitations.

Despite its South African setback, MTN's Mobile Money...

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