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Vodacom’s Cassim turns loss-making unit into golden goose

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 19 Sept 2019
Mariam Cassim, chief officer of Vodacom Financial Services.
Mariam Cassim, chief officer of Vodacom Financial Services.

With over 43 million active customers, Vodacom says it’s leveraging this massive customer base to bring financial products to everyone in South Africa. The driving force behind this is Mariam Cassim, chief officer of Vodacom Financial Services.

Because of her leadership in advancing financial inclusion, she has turned a loss-making department into a billion-rand cash cow in 36 months.

Out of Vodacom's 43.2 million South African customers, the vast majority, 37.3 million, are prepaid customers and only 5.8 million are postpaid. This, Cassim says, presents opportunities “any insurance company and bank would kill for”.

“What we are saying is that we have too many assets as a mobile network. How do we leverage on these assets and start offering better products, value-added products and financial services products to our customers?”

Cassim says financial services is the newest part of the Vodacom stable outside voice and data, which will always remain the core business and play a significant role moving forward.

“What we find in big corporates like Vodacom is that there are so many of these little gems that are hidden in the business and because people are so busy focusing on voice and data, nobody is really unlocking value from these assets.”

In an Interview with ITWeb, she explains how the Vodacom customer base will soon become a golden goose for the telco.

“I don’t come from a mobile telco background, I come from financial services, and when I joined Vodacom, I was saying to the CEO and the exco at the time, guys you don’t realise what you have as Vodacom, you don’t realise the assets that are available to you.

“If I think of any financial services company, they spend up to 30% of their revenue on customer acquisition and building brand. Everywhere you turn these days, there is an insurance advert waiting to hit you, be it life insurance cover or motor vehicle cover.”

This, she says, isn’t the case with Vodacom.

“At Vodacom, we already have a trusted brand. People in SA love the Vodacom brand and trust it. We have a base of 43 million active customers that is massive. Any insurance company or bank would kill to have access to that amount of customers.”

Cassim says the global payments industry is undergoing huge transformation, from embracing new technologies like artificial intelligence and crypto-currencies, to advancing financial inclusion in the developing world.

She feels it is from this position that Vodacom will be competitive, buoyed by introducing new, disruptive products, dismantling long-standing entry barriers in financial services.

“Globally, we have seen the world evolve, industries converge. We have seen banks want to be telcos and telcos wanting to be banks. We are seeing e-commerce players getting into financial services. We are seeing Facebook wanting to into the crypto-currency space. The world is changing more and more. Companies that are going to win are those with a direct relationship with a customer.

“I joined Vodacom three years ago; we have grown the business significantly – 400% – in this period. In this past year, we delivered profit of just under a billion. We are really focused on four areas – insurance, payments, lending, and savings and investments, which is our newest product in the portfolio.”

Vodacom has 1.3 million active insurance policy-holders and Cassim says it’s growing.

“Insurance is by far the most established part of the business. When I joined the financial services [unit], it was making a loss of R88 million and now we have turned that into profit of just under a billion, so it’s been a great success story.

“We are the only telco in the world – unless there are some we may have missed – that has its own insurance licences. We actually underwrite all our policies on our licences, so we are a fully regulated entity, regulated by both FSCA [Financial Sector Conduct Authority] and the Prudential Authority.”

With this foray into financial services, Vodacom joins a long list of mobile operators on the continent that have been entrenching themselves in the space to cover the unbanked and make transactions simpler.

MTN Group recently announced its fintech transactions reached R666 billion in the six months to June.

The JSE-listed telco says its fintech strategy is starting to pay off, reporting a 30.7% hike – customer growth went up 8.9% to 30 million, while active Mobile Money (MoMo) users and average revenue per user is pegged at R19.60 ($1.30).

M-Pesa in Kenya, of which Vodacom holds a 30% stake, remains the mobile money business case study of payment innovation in emerging markets.

In Southern Africa, EcoCash is a success story in Zimbabwe. It is a mobile payment platform hosted by local telco Econet. EcoCash is an offshoot of Cassava Smartech, an entity that offers more financial services than mobile money, including remittances, digital banking and all kinds of insurance.

Analyst Peter Takaendesa, portfolio manager at Cape Town-based Mergence Investment Managers, says: “Mobile money has been the biggest driver of success in the rest of Africa, while handset insurance as well as airtime advance are key drivers in South Africa. It's clear that telcos will gradually displace traditional financial services providers in some categories, especially financial services for consumers.

“The financial services pie is large enough for traditional financial services providers and telcos to co-exist for a long time, as we have seen in East Africa where M-Pesa has been a great success.”