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Will mobile money 2.0 crack the SA consumer market?

By Marius Botha, Group CEO at African insurtech aYo Holdings I am usually drawn to personalities that have a comeback flair about them. Think about your favourite sport and then…...

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By Marius Botha, Group CEO at African insurtech aYo Holdings

I am usually drawn to personalities that have a comeback flair about them. Think about your favourite sport and then those individuals who surprised everyone by coming from nowhere, suddenly, and won. They have a propensity to overcome and triumph. Simply hoping for a rebound or new opportunity was not enough for them. They confronted the existential threat they faced and were deliberate in staging a comeback with focus, skill and resilience.

Could mobile money be the financial inclusion comeback kid for underserved communities in South Africa?

Of the 1.6 billion mobile money accounts globally, 781 million are in Africa, with accounts on the continent increasing by 17% year-on-year. However, mobile money has never reached the incredible adoption rates in South Africa that the rest of the continent boasts.

According to the GSMA, there are currently 18 million mobile money accounts in Southern Africa, compared to 290 million in West Africa and 390 million in East Africa.

There are several reasons for this disparity. South Africa has a highly-developed formal banking sector that offers structured banking services for a wide range of consumer needs and across income levels. The country’s highly-developed industries and mature financial services sector is the most advanced on the continent, enabling a large percentage of the population to find suitable banking and other financial services from larger, mainstream institutions, despite the popularity of mobile devices.

Mobile money can play an enormously important role in South Africa’s immediate financial services future. Cash still rules in much of the economy, and even with a mature banking sector, much of the population that can be described as “irregular income earners” are still outside the formal financial services sector.

To achieve true financial inclusion, a more agile, low-cost and innovative approach to the design and distribution of financial services for irregular earners is called for.

In a recent report, the Financial Sector Conduct Authority (FSCA) defined financial inclusion across three dimensions: access to services, usage of such services, and the quality of services offered.

Mobile money services potentially accelerate access to services for a greater share of the consumer market, reaching into the sectors of the economy that is often left untouched by the more established incumbents.

The growing platformisation of mobile financial services – where mobile network operators leverage their extensive technology infrastructure to offer services that range from entertainment to money transfer to micro-insurance – is also set to improve the access, usage and quality of financial services offered to consumers.

The mobile network’s vast reach provides an astonishing level of scalability to financial services, allowing the distribution of tailored banking, insurance and other services to tens of millions of consumers through the near-universal language of mobile phones.

aYo South Africa’s recently announced partnership with MTN South Africa, under the MTN Khava brand, sees a MyMTN Prepaid Funeral product launched in the market as an accessible and budget-friendly insurance cover and with the option of paying premiums from your mobile money account. I hope this product will reach those who really need it.

I can think of many other low-cost use cases for mobile money in South Africa and believe this continue to evolve. With a revitalised mobile money sector on the horizon and an ecosystem of innovative partners to drive its growth, mobile money could deliver a marketplace of financial services offerings to the consumers who need them most.