MTN takes on cross border remittances with mobile money platform

MTN has armed itself with the ability to send money across borders using its mobile payments platform, MoMo, taking the fight for market share to traditional banking groups.

The movement of people and goods on the African continent, as well as a push for greater regional trade, is creating the need for simpler and more affordable forms of payment.

On Thursday, Africa’s largest mobile operator said it now allows for the movement of money in 10 countries. 

“The person on the other side will receive the money in real time,” said Bradwin Roper, CEO of MTN SA’s financial services business.

The company first launched its mobile money platform locally in 2012 before pulling the plug in 2016 due to a lack of commercial viability because three-quarters of the population had bank accounts. Vodacom shut its M-Pesa mobile money service in SA in the same year, citing similar reasons.

Having taken a second swing from the start of 2020, the operator now has a base of 9-million registered users. The unit’s services include in-store payments, prepaid services, mobile wallets, micro-loans, microinsurance, and a point of sale solution.

Vodacom has taken a similar approach, offering various financial services such as loans for airtime and an e-commerce offering through its VodaPay app. 

In changing its approach, MTN has taken a swipe at the traditional financial services sector, looking to entice more users to its mobile-money platform by cutting out fees on the sale of digital goods such as airtime and electricity. 

On the new remittance offering, the operator is charging a 4% fee for such transactions, where the industry average sits at about 10%. 

At the moment, a person in SA looking to send R10,000 in cash to Malawi may pay a bus driver making the trip R500 to physically transport the money. For many the risk is justified by the fact that formal channels can charge as much as 15% for such a transaction.

For now the service is only for outgoing payments from SA. Ultimately, MTN is hoping to capture the billions that leave SA’s shores each year, together with the cash entering Nigeria’s market. Capturing those flows for those two countries specifically would help MTN gain a strong position in the continent’s remittance market, said Roper. 

SA has an estimated $1.2bn leaving its shores each year in remittances, while Nigeria is thought to have $18.6bn coming into its economy from the diaspora. 

Roper says “it’s just a matter of time” before payments into SA become a reality. The cellphone provider is still working through the regulations that allow for full movement of money between the different countries.  

MTN is less concerned with competition from platforms operated by other telecom operators like VodaPay. “The industry that we look at is financial services and where we can disrupt,” said Roper. 

This latest offering probably benefits from work done by BankservAfrica, the company responsible for clearing payments between SA’s largest banks. In 2021, it came up with a system for reducing the time and cost associated with cross-border transactions.

BankservAfrica is the largest automated payments clearing house in Africa and processes bank card, ATM and EFT transactions between the countries’ banks as part of the SA National Payments System.

MTN is working with Cape Town based fintech operator, ClickSendNow, to enable the remittances. Outside remittances, the mobile operator has a partnership with Sanlam for its insurance offering called Ayo and works with African Bank for its digital wallet. 

The development comes a few months after MasterCard moved to take up a stake in MTN’s fintech business. The deal is seen as a nod to the growth and prominence of the broader financial technology landscape in SA and the rest of the continent. 

The deal, the financial details of which have not been disclosed except that it values the business at $5.2bn (nearly R100bn), slots MTN’s take on mobile payments as one of the most valuable fintech businesses in Africa.

Mastercard’s financial backing could be seen as a sign of confidence in MTN’s strategy to look for growth in financial services. At the same time, it shows that Africa’s fintech industry continues to attract deep-pocketed international backers looking for growth opportunities in this largely untapped market. 

gavazam@businesslive.co.za