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MultiChoice pulls plug on ‘pricey’ payments firms

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 14 Jun 2023
MultiChoice Group CEO Calvo Mawela.
MultiChoice Group CEO Calvo Mawela.

MultiChoice was paying a fortune to third-party payment service providers before it decided to form its Moment fintech firm.

Now, the company is culling the payments service providers, as it looks to capitalise on Africa’s bourgeoning fintech space.

This was revealed yesterday by MultiChoiceGroup CEO Calvo Mawela, in an interview with ITWeb after announcing the pay-TV provider’s financial results for the year ended 31 March.

Last month, MultiChoice forged a partnership with UK-based payments company Rapyd and venture capital (VC) firm General Catalyst to develop an integrated payment platform for the African continent.

The joint venture will operate under a new company called Moment.

Moment will offer expanded payment infrastructure for businesses across Africa, helping them collect and make payments “easier, quicker and more affordable” in any manner their buyers or suppliers prefer.

“As a group, we are processing about $3 billion (R56 billion) of payments each year. We have about 200 payments companies that we integrated into our payments ecosystem across the 50 markets that we operate in,” said Mawela.

“Just by looking at that, there is a lot of money that we are leaving on the table, as a result of the commissions that we pay to these payment companies that allow our customers to pay us through them.”

Seizing the Moment

According to Mawela, MultiChoice wants to set up Moment in the same way as the company did with its security division Irdeto.

“When we looked at it [Moment], we thought that this can play out similar to Irdeto, where it was a security company of ours, which we turned into a profit-making division within our organisation.

“In the same way, we can establish a payments company, and will be able to make sure we take out the amount of commissions we pay to third-party players.”

The second element in setting up a payments firm was that the pay-TV business is what MultiChoice knows the most, said Mawela.

“We have done a good job on payments and we decided to go and look for partners that are best-in-class globally − and I think it doesn’t get better than Rapyd. They have been successful in Europe and Asia. General Catalysts, as a VC firm, has invested a lot in payments companies with the likes of Stripe, Rapyd itself, and many others that they have invested in.

“So, on the table, we’ve got the best minds that can leverage the business across the continent, as well as our understanding of how to do business on the continent, while they bring expertise in regards to tech from Rapyd and the investment drive from General Catalyst.”

Asked how much commission MultiChoice was paying the third-party payment service providers, he said: “Some few years back, some would charge us as far as 7.5% of the subscription fee; some 2%, 3% or 5%, depending on how big that payment platform is and the more leverage they might have.

“However, we believe very strongly that if you look at payments these days, the business model is such that they are not necessarily making a lot of money by just taking commissions.”

There are other forms that they can make money out of, Mawela added.

“So, that really helps us because once we have established this kind of a business in Moment, it can then help us in understanding the spending patterns of our consumers much more deeply and be able to use that data to drive our product.”

Power woes

According to Mawela, MultiChoice customers are reeling from the adverse effects of load-shedding.

“On our side, the biggest challenge on load-shedding is on the consumer side. It’s unlike the telcos who have got thousands of towers across the country and, therefore, they need either diesel, solar or batteries in all those base stations for them to be powered for people to remain connected.

“With us, we have two hubs – one in Randburg and another one in Samrand, which is our disaster recovery station that we have to power with diesel to make sure that our content gets uplinked and distributed.

“On the receiving side, that’s where our consumers are feeling the pinch. As load-shedding hits, we are seeingacross the broadcasting sector a 32% drop in viewership as load-shedding levelsgo to stage six. It’s still a considerable number considering that it’s a double-digit dip in viewership.”

In its results yesterday, MultiChoice said load-shedding has had a negative impact on the South African pay-TV subscriber base and activity levels, with a noticeable increase in churn when load-shedding reaches stage four and above, even when consumers have disposable income.

It explained this is evidenced by the disconnect between the 290 000 growth in 90-day subscribers (that shows customers still value the group’s products) and the 140 000 decline in the active subscriber base at the end of March (customers are more selective when they sign up to avoid periods of excessive load-shedding).

“It’s having a very huge impact on us if you combine that with high inflation, the indebtedness of consumers and the falling rand value – people are really feeling the pinch all across.”

Asked how much the company is spending on diesel to keep the lights on during load-shedding, he said: “It’s not significant for a company like ours because we are just running two sites. It’s not something significant that we should really worry about in terms of reporting.”