South Africa's lacklustre uptake of mobile money services was not enough to deter mobile payments solution firm, Mozido, from setting up office in the country.
The international company will run its first African mobile financial business from South Africa. According to Mozido, the new business is aimed at providing African consumers access to payment platforms that will change how mobile money is utilised across the continent.
Mozido says Africa has some of the fastest growing mobile money markets in the world and it plans to capitalise on the growing market on the continent.
However, the country where Mozido has decided to set up office to achieve its target has a bad track record when it comes to the adoption of mobile money services offered in the market.
According to Ovum analyst Richard Hurst, South Africa has not seen the same success and uptake of mobile money services as elsewhere on the continent.
"The banking regulatory environment has prevented network operators from launching services without a financial services partner, and financial services companies themselves having been focusing on the unbanked and enabling their services via a number of different platforms," says Hurst.
Africa's success story
Mobile operator Safaricom's mobile money service, M-Pesa, has gained much traction in Kenya and Tanzania. East African nation Kenya has more than 20 million M-Pesa subscribers on the Safaricom network, according to the Communications Authority of Kenya.
Safaricom's M-Pesa success story has been replicated elsewhere on the continent by adopting a "cut-and-paste" model, which does not result in the same stellar performance, notes Hurst.
SA's largest mobile operator, Vodacom, tried to replicate Kenya's success by re-launching the M-Pesa service in the country, but the mobile operator has seen less than encouraging growth.
"South Africa is a challenging market in terms of mobile money because banking penetration is higher than in most markets and the banks have proactively been targeting low-income and unbanked population with low-fee banking products," states Thecla Mbongue, senior research analyst at Ovum.
Target market
Mozido says its mobile payments solution will address key financial payment challenges.
"Our mission is to provide financial accessibility globally. Africa is a vital region for implementing Mozido's operations and strategically it made sense to have our regional headquarters in Johannesburg," says Michael Liberty, founder of Mozido.
"Currently, Africa leads the world in mobile money use, therefore Mozido will have a great deal to contribute to and learn from the growing and active consumer base."
According to Mbongue, although SA may not be Mozido's main target market for mobile money services at first, the choice to set up its first African office in the country makes sense.
It may be motivated by a good level of infrastructure and ease to travel to and from other continents as well as within Africa, says Mbongue.
"South Africa is a usually a hub for companies setting up in Africa even if they do not initially plan to serve that specific market," she says.
It could work
Although regulation, lack of intense and constant marketing strategies, and the absence of strong distribution channels in African countries are often noted as the challenges that hinder the successful adoption of mobile money services, Hurst believes there is an opportunity for mobile money in South Africa.
"I think there is scope for operators to grow mobile money services in South Africa and beyond; new services are coming to the fore and providers are tapping into new markets.
"New opportunities would probably revolve around foreign remittances as the migrating populations begin to send money to loved ones in other countries," he notes.
Cuthbert Tembedza, executive vice-president of business development at Mozido Africa, says: "As long as the majority of our people do not have access to financial services, there is work for each of us to do.
"To date, mobile technology has proven to be a catalyst in addressing financial exclusion. What we need now is to ensure that someday each of the 1.1 billion people in Africa have access to financial services."
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