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The Potential Of Mobile Money in South Africa

August 5, 2022

Across the continent of Africa, mobile money has experienced a massive rise in popularity. Large populations of people across developing markets who have limited access to formal banking systems or the documentation required to open a bank account are drawn to the easy availability of mobile banking and the minimal processes required to obtain mobile money.

 

Mobile money enables people who live in even the most remote, rural areas to make payments, purchases and send and receive money instantly. However, despite its surge in uptake across Africa, mobile money’s rollout in South Africa has remained slow and staggered due to existing barriers and attitudes to mobile banking.

 

Despite these challenges, mobile money still has massive potential in South Africa, where it’s estimated that, while 90% of people have existing bank accounts, around 40% of them are dormant and unused, according to Finmark. On top of this, it’s been found that 90% of informal enterprises only use cash.

 

While fintechs have been quick to capitalise on this opportunity, mobile network operators have the resources and capability of delivering mobile banking services to their extended customer network.

 

Read on to learn about mobile money in South Africa and how MNOs can use it to their advantage.

The Current State of Mobile Money in South Africa

 

Mobile money allows subscribers to access banking services such as transacting, storing and transferring money without interacting with an actual bank. Across Africa and in developing markets around the world there are hundreds of mobile banking service applications available that are changing the way consumers spend their money.

 

Mobile money and financial services are bridging the gap of financial inclusion between the banked and the unbanked, which has long been a challenge in many developing nations.

 

Mobile money replaces the need for physical cash and traditional, centralised banking services, which is advantageous in many African countries where banking systems are limited in their development and exposure.

 

In South Africa, banking systems are highly developed and on par with banking establishments in Europe and North America. This state of development has, ironically, come with more limitations in the form of guidelines, compliance regulations and more.

 

These structures are essential for preventing crimes like money laundering as well as financial and cybercrimes, they also create more obstacles that make mobile banking and financial inclusion more difficult in South Africa.

 

Mobile money, however, is still a viable alternative banking solution with extensive potential in South Africa.

The Barriers Preventing Widespread Adoption of Mobile Money

 

South African legislation makes it more difficult to successfully launch mobile banking. South African banking regulations state that any establishment taking money deposits is defined as a bank and must possess a licence and abide by the Banking Act laws.

 

Because mobile money wallets store and transfer money, they are categorised as banking services and are weighed down by protocol and red tape. Companies looking to launch mobile money services are required to partner with a licensed bank or financial services institution that acts as a sponsor.

 

To work around this legacy roadblock and keep up with the times, many banks have partnered with fintech companies that have the software necessary to offer mobile money services. But as the fintech industry continues to expand, their presence has become a threat to MNOs’ long-term security.

How MNOs can Capitalise on Mobile Money Ahead of Fintechs

 

Fintechs, powered by agility and easy access to mobile money and digital services, are drawing in crowds of customers looking to join the mobile banking movement. This wouldn’t be a threat to MNOs if they weren’t losing their existing customers to fintech competitors - but unfortunately, they are.

 

Demand for voice services has been dropping for several years and MNO shave been at odds about what to do to recover lost revenue. The pressure to evolve is on once again as consumer preferences are pivoting yet again, this time to the digital sphere.

 

The appeal of mobile banking services isn’t hard to understand -they’re convenient and empower consumers to transact and purchase wherever they might be, all they need is a cell phone.

 

As more fintech companies offer mobile financial services, MNO customers are making the switch to fintechs which provide the mobile money and digital banking services they want at a faster time to market.

 

MNOs have to act quickly if they don’t want to lose their existing customer base. They can do this by joining the mobile money space themselves. By leveraging their extensive network services and customer database, MNOs can add value to their services by offering mobile money wallets to their customers and other mobile financial services like advanced airtime and data lending.

 

By tapping into the demand for mobile money MNOs, particularly ones within the South African market, will diversify their services, align their value proposition with the evolving needs of their customers, and thicken their revenue streams, all while improving their customer loyalty and retention.

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