In a country where more than 75 percent of people have bank accounts, South Africa-based mobile phone operator MTN Group has pulled the plug on its mobile money service there, saying it’s not viable.
In a similar move, Vodacom stopped offering mobile money service M-Pesa in South Africa in May, citing lack of demand and South Africa’s advanced banking sector, My Broadband reported.
MTN’s announcement illustrates how difficult it is to crack mobile payments in South Africa’s financial services market, according to Quartz.
MTN’s mobile money subscribers grew by 23.3 percent to 7 million continent wide in 2015, according to the company’s interim results. MTN Group has allotted more funds to market mobile money in Cameroon and Ivory Coast.
Mobile money allows mobile customers to transfer funds using their phones, and it has been successful in parts of Africa where people have low access to traditional bank accounts, Reuters reported.
Safaricom pioneered the groundbreaking M-Pesa mobile money service in Kenya. MTN started offering mobile money service in 2012, certain this was the industry’s next growth area.
With one door closing, MTN said it is entering the micro insurance business with MMI Holdings in a joint venture, branded aYo, IT News Africa reported.
The mobile financial services industry is changing, and the joint venture will allow aYo to compete thanks to the combined expertise, scale and market access of both companies.
Insurance penetration is low in many African countries and MTN will be able to offer relevant, accessible and easy insurance solutions to consumers, the company said.
“As MTN, we are excited about this partnership as it gives us an opportunity to further expand our bouquet of mobile financial services offerings across our footprint,” said Herman Singh, chief digital officer of MTN.
The partnership with MTN will capitalize on the growth of micro insurance on the continent, said Danie Botes, COO of MMI.
aYo will be rolled out in a number of African countries from the end of 2016.
MTN made regular upgrades to its mobile money platform since its 2012 launch, including partnering with Pick ‘n Pay and Boxer to offer remittances. The mobile money platform attracted 2 million-plus registered customers in South Africa, BizTechAfrica reported.
“The operating costs of providing a mobile money platform has become prohibitive,” said Larry Annetts, chief consumer officer of MTN South Africa. “The decision by MTN SA to shelve its mobile money service does not signify a complete exit from financial services. MTN is still committed to remaining a significant player in the financial services space and we are exploring opportunities in financial services space and other adjacent sectors.”