MTN’s mobile money service gets a new and improved second pass
MTN is targeting 1-million users with MoMo in SA initially, but what lessons has it learnt in gaining 30-million users across the continent?
As MTN officially launched its mobile money offering, MoMo, in SA for the second time on Thursday, the big question for the operator is if all the lessons learnt in gaining 30-million users across other African countries will be enough to tackle a highly competitive local market.
Godfrey Motsa, MTN SA’s CEO, is optimistic, saying if the operator can successfully do it in Swaziland, it can be replicated in SA. In that country, MTN has 1-million subscribers, nearly 40% of which are already using the operator’s platform to make and receive payments. This is despite the big banks also having an established presence in this market. Motsa also highlighted Ghana and Uganda as countries where MoMo has done well for MTN.
Felix Kamenga, MTN SA’s chief officer of mobile financial services, said the technology has matured since the first launch. In the past, the platform had challenges handling a larger number of transactions. He said the operator had processed more than 1-trillion transactions in the past year in the rest of Africa.
He said the timing is good, especially given the high mobile penetration in SA and that MTN's job is to make a product that is as good as using cash.
In the first phase of launch, MTN is targeting 1-million users in SA, which has been a crucial mass adoption point in other markets. The operator is chasing is about 15-million users, said Kamenga.
However, David Lerche, equity analyst at Sanlam, is not convinced. “MTN is unlikely to succeed to the extent that they have in other African markets, but there may well be a niche for mobile money in SA. The key reason that MoMo has been so successful in MTN’s other markets, such as Uganda and Ghana, is that these countries had very low banking penetration when the product was launched.”
MTN first launched its mobile money platform locally in 2012 before pulling the plug in 2016 because of a lack of commercial viability because three-quarters of the population has bank accounts. Vodacom shut down its M-Pesa mobile money service in SA in the same year, citing similar reasons.
This time the operator said it has partnered with financial services firm Ubank on the project. The agreement allows Ubank to facilitate participation in MoMo, enabling customers and consumers to transact and make payments using the service.
MTN’s share price was up only 0.66% in late afternoon trade on Thursday, indicating that the market is unmoved by the announcement.
“Investors are unlikely to pay too much attention to this. The scope of the investment, as well as the potential rewards, is small in the context of MTN’s large multinational business,” said Lerche.
Petri Redelinghuys, founder of Herenya Capital Advisors, said the market is likely waiting to see how this attempt at mobile money works out before reacting. When it comes to MTN, the market usually pays greater attention to the operator’s relationship with the government and regulators in its various markets, he said.
Redelinghuys said MTN’s efforts to diversify its business is a good thing. For services companies, the aim is to find ways to have customers use more of their services, which makes it harder to switch to a competitor. With banks suchas Standard Bank and FNB having launched mobile operations, it makes sense that mobile operators are also getting into financial services, he said.
MTN grew its fintech revenues by 30.7% in the first half of 2019 to R4.7bn, with 30-million MoMo users in about 15 countries, including Nigeria. The operator is hoping to achieve some of that revenue growth in the local market, having processed a total of $44.1bn (R669bn) in transactions on the platform in the six months to end-June. By the third quarter, users had grown by 2.2-million to 31.7-million.