Vodacom needs new M-Pesa model

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 22 May 2012

Despite the fact that Vodacom's mobile money service is still struggling to take off in SA - two years down the line - the operator is not planning to pull the plug on M-Pesa, opting rather to change its local model.

Since being introduced to the South African mobile market in 2010, Vodacom's mobile money transfer solution, M-Pesa, has struggled to gain traction. This is in contrast to its Tanzanian and Kenyan operations, which have seen the facility flourish. While SA currently has a marginal 850 000 users signed up to the service - just 2.9% of the local customer base - a third of Tanzanian subscribers (3.1 million) are active users of the service.

According to Vodacom CEO Pieter Uys, the imbalance is largely due to inherent disparities that exist in the respective markets. “It is a first world versus third world scenario. For one thing, SA's banking regulations are far stricter than those in other African countries.”

Uys cites SA's Financial Intelligence Centre Act (FICA) as one of the barriers to uptake, as many informal traders do not want to go through the process and cannot justify the administration of FICA without sufficient customer demand.

Fresh functionality

Uys says, despite the dismal South African figures, he remains positive regarding the future of M-Pesa and e-commerce at large, and believes the service has the potential to eventually take off, given the right functionality and a model more fitting for the local market.

“The demand is there and we are still hopeful, but there definitely has to be different functionality. E-commerce and mobile payments are the way of the future. We don't know how it will happen, but it will happen. It is far easier to develop security around a mobile phone than it is a credit card.”

One of the changes Vodacom is looking at instituting, says Uys, is the point of sale solution required for M-Pesa transactions. He says M-Pesa needs to be paid directly into till points, as opposed to cash transfers requiring a cellphone on both the customer and agents' sides. “We are going online with this now, which should make a difference.”

High hopes

Nedbank and Vodacom launched M-Pesa in SA in September 2010. The service enables unbanked customers to transfer money from person-to-person using a cellphone. It was originally created as a pilot funded jointly by Vodafone and the UK Department for International Development Financial Deepening Challenge Fund.

Since then, the service has been successful in the Kenyan, Tanzanian and Afghanistan markets, gaining over 10 million customers. At the time Vodacom SA MD Shameel Joosub said Nedbank and Vodacom were “confident” that M-Pesa would “change the lives of unbanked South Africans”.

On launch, the two parties estimated there were more than 13 million “economically active” people without a bank account. Vodacom projected it would sign up 10 million users in the following three years.

Banking tech hits mass market