Mobile money stalls in SA

What are the factors that will influence the uptake of mobile in South African banking?

Rabelani Dagada
By Rabelani Dagada, Professor, University of Johannesburg
Johannesburg, 10 Feb 2015

The cost-to-income ratio is debatably one of the most significant ratios in any bank's yearly reports. It indicates how much of every rand earned is used towards the payment of the running of the bank, and therefore, how proficient the bank is in the process of creating value for the shareholders.

One aspect the South African banks are focusing on in their pursuit to improve the ratio is to moderate customer dependence on branches and to urge customers to start using cheaper self-service delivery channels, like the Internet, cellphones, automated teller machines, and mobile money. The banking industry is looking at digital banking services as a resource of reduced operating costs and as an area to use to hold on to customers.

Together with several of my MBA research students, I have conducted various studies to determine factors that affect the adoption of Internet and cellphone banking. I used the following theories as a theoretical framework to conduct the aforesaid studies: Technology Acceptance Model; Theory of Reasoned Action; Theory of Planned Behaviour; and Innovation Diffusion Theory.

Some of the factors found to influence the adoption of the Internet and cellphone banking included: perceived usefulness, perceived ease of use, trial-ability and observe-ability, self-efficacy, and risk and credibility.

I have recently encouraged some of my MBA students to conduct the research studies both qualitatively and quantitatively, focusing on factors that influence the adoption of mobile money in SA.


I searched several journals and research databases to find if there are studies that have already been conducted in this area. Surprisingly, my search yielded nothing - there are no studies in public that have been conducted on this topic. Be that as it may, there are studies that show mobile money is one of the enablers of electronic and mobile commerce in SA.

With the support of the Wits Business Case Centre, I conducted part one of the M-Pesa (mobile cash) study in 2012 and part two in 2015.

Cellphone money is characterised by the use of cellphones to "transfer funds between banks or accounts, deposit or withdraw funds, or pay bills. This term is also used for the broader realm of e-commerce or mobile commerce; and it can refer to the use of a mobile device to purchase items, whether physical or electronic." (1) Due to crimes such as skimming, hacking and ATM bombings, the use of cellphones to make payments has arguably become the most secure way to conduct financial transactions.

The most famous and predominant mobile money system in Africa is M-Pesa. It was initially launched in Kenya in 2007, and now M-Pesa is used in more than 13 countries by more than 18 million people to conduct payments and other banking services through cellphones. The leading country in terms of M-Pesa uptake is Kenya, followed by Tanzania.

What's in a name?

The term M-Pesa was made up by combining the Swahili word 'pesa' (money), with 'm' for mobile. "The Vodafone Group originally developed money transfer technology to receive and repay microloans. In partnership with Kenya Faulu, a microfinance institution (MFI) partner, and by using the network of the leading mobile network operator in Kenya, Safaricom Company, Vodafone launched a successful pilot in 2005." (2)

In spite of this, customers started using M-Pesa for various digital banking transactions - including transferring money to relatives. Vodafone took advantage of this and redeployed it as a branchless banking system which mainly targeted the unbanked market. M-Pesa grew exponentially, and by 2012 there were more than 28 000 agents in Kenya only, and that was far bigger than the number of traditional banking branches in the country.

The most famous and predominant mobile money system in Africa is M-Pesa.

Inspired by the high uptake and the sophistication of M-Pesa in Kenya and Tanzania, Vodacom and Nedbank Group decided to initiate the system in SA, with the hope of gaining a market share of the 15 million unbanked South Africans who were economically active. Vodacom brought the cellphone technology to the relationship, while Nedbank provided a banking licence in line with the requirements of the South African Reserve Bank.

During the research I conducted during part one (2012) of the M-Pesa business case study, it became apparent the system would not be that successful in SA: "M-Pesa had a slow start in its first months, with 100 000 registered customers at the end of March 2011, and 140 000 at the end of July 2011. In early 2012, the number of M-Pesa subscribers in SA stood at 652 000. Compared to Kenya and Tanzania, the numbers were disappointing and the growth rate far less than had been anticipated." (3)

Whereas Internet and cellphone banking uptake has been impressive in SA, mobile money services have not been successful. 20Twenty and MTN Banking have floundered immensely. Actually, an article which appeared in the Financial Mail a few years ago declared MTN Banking a failure. The MTN banking was a venture between MTN and Standard Bank. It seems Standard Bank had high hopes for MTN banking, to the extent that it neglected its digital banking.

In July 2014, MTN and Pick n Pay announced their Mobile Money joint venture. MTN has also introduced MTN Mobile Money.

It was mentioned in this Industry Insight that the uptake of mobile money (M-Pesa) in SA is very low compared to countries such as Kenya and Malawi. This low uptake could be attributed to the use of various payments standards that lack interoperability. Empirical studies should be conducted to determine factors that influence the uptake of mobile money in SA.

2. Dagada, R, Townsend, S (2012). Vodacom M-Pesa: 'Mobilising' Cash in Challenging Market. Parktown: Wits Business School Case Centre
3. Ibid