Opinion: ‘Bank Of Facebook’ Would Be Huge In South Africa
In South Africa, mobile money service hasn’t enjoyed much success but Facebook’s alleged imminent foray into the industry in developing markets could change all that, according to a report in htxt.africa.
Facebook is weeks away from establishing a mobile money service in Europe with an eye to taking on the likes of M-PESA in the developing world, according to an htxt.africa opinion piece based partly on a Financial Times report.
The Bank of Facebook would be hugely popular in South Africa, according to opinion writer Adam Oxford.
Facebook is in talks with the Bank of Ireland for authorization to process transactions, Oxford said. “Facebook wants to become a utility in the developing world, and remittances are a gateway drug to financial inclusion,” according to an unnamed source.
In South Africa, Facebook bypassed Mxit — considered a local hero — as the most popular social network with 9.4 million active users in 2013, according to the South African Social Media Landscape Report 2014 by World Wide Worx.
Mobile money – paying for stuff with your phone – hasn’t taken off quite so well, Oxford said.
M-PESA, backed by Vodacom for transferring money from phone to phone, is hugely popular in Tanzania and Kenya but just closed down operations in South Africa. The appetite for mobile money in South Africa is relatively small — $950 million flowed through ABSA-linked smartphones since it launched service 10 months ago. The service was used mostly used by high-income earners.
Less than one in 10 South Africans have used a mobile phone to transfer money to someone else, according to the report. Oxford blames lack of trust and the high cost of transferring money from one bank account to another.
All South African banks have mobile money services but there’s no standardization, Oxford said. That’s where Facebook comes in.
Facebook would represent realistic competition from an outsider that could go a long way to breaking the banking cartel that keeps the cost of financial services ludicrously high, he said.
“Sending money via a banking app is tedious and long-winded even if you can remember what the name of the service is today (Geopayments? Seriously FNB?),” Oxford wrote. “But Facebooking 50 rand to a mate to pay for something just by tapping their name? It’s hard to see how that wouldn’t catch on.”
South Africans are routinely asked to pay monthly fees for a regular checking accounts, and are charged for things like SMS notifications and ATM withdrawals.
“So perhaps there is room, and arguably a need, for Facebook in South Africa,” Oxford said. “There’s certainly a huge PayPal-shaped hole it would fill for online purchases, at the very least.”
But if Facebook has aspirations for the developing world getting a service like this launched, it’ll first have to negotiate South Africa’s exchange controls and banking
regulations — not so easy, he said.