After pulling the plug on its “failed experiment” with M-Pesa in South Africa 4 years in the past, the telecom operator, Vodacom, is making one other daring fintech guess by rolling out a brilliant app, not not like China’s WeChat.
And the second time could be the allure — or not, because of the telco’s troubled historical past with fintech and the state of monetary companies in South Africa.
In a press launch dated July 20, Vodacom revealed that it’s rolling out a super-app packed full with choices, from “paying for your morning coffee, listening to a podcast on business management, sending money to your family, paying your utility bills, shopping online for everything from clothes, to groceries to electronics, checking on your business point of sales transactions and ordering new stock – all through the same, easy-to-use, super-app, from the convenience of your smartphone.”
To make this occur, the telco introduced that its fintech arm, Vodacom Monetary Companies, had scored a know-how partnership with the close-to-IPO Chinese language fintech big, Ant Monetary Companies, maybe higher recognized by the identify of its common product, Alipay, which claims over 1.2 billion customers worldwide.
Vodacom says its new fintech play won’t solely serve people but additionally SMEs, that are being focused with lending and insurance coverage companies. Nevertheless, the corporate is believed to be additionally eyeing the roughly 11 million South Africans who make up the nation’s unbanked inhabitants.
The entire thing seems like a plan which may come collectively, up till it begins to register that the telco has been right here earlier than. And it didn’t go so properly.
In 2016, Vodacom, which is the main telco in South Africa accounting for 42 p.c of the nation’s cell subscriptions as of 2019, was pressured to euthanize the M-Pesa cell cash service which it launched within the nation in 2010.
The favored cell cash service that’s M-Pesa is now co-owned by Vodacom and Kenyan telco, Safaricom, ever because the UK’s Vodafone divested its stake within the service in April.
Having seen M-Pesa rapidly turn out to be successful in East Africa (particularly in Kenya the place the present 83 p.c monetary inclusion price was largely pushed by M-Pesa), Vodacom determined to “copy-and-paste” the service in South Africa.
However it turned out a largely underwhelming enterprise. M-Pesa backfired spectacularly in South Africa, the telco fell wanting plans to seize as much as 10 million South African customers in three years by far. The truth is, by 2016, Vodacom had managed solely 76,000 energetic customers.
Quite a lot of explanations have been put ahead through the years to account for the failure of M-Pesa in South Africa. However maybe essentially the most steadily occurring entry within the autopsy file is the reckoning that Vodacom tried a one-size-fits-all as an alternative of being attentive to the peculiarities of South Africa.
There are greater than 25 million M-Pesa customers in Kenya and the Safaricom-provided service at present accounts for almost 99 p.c of all cell funds.
In nations like Kenya, Tanzania, Lesotho, Mozambique, and the Democratic Republic of Congo the place a big proportion of the inhabitants has at all times been unbanked and thus excluded from formal monetary companies, M-Pesa has excelled; serving as the primary hyperlink to not simply know-how (cell phones) but additionally formal monetary transactions for the beforehand unserved/underserved.
However M-Pesa was maybe at all times going to flop in South Africa from the outset because the large hole it crammed so properly in Kenya was not as vast in Jozi land. About 75 p.c of adults within the nation have bank accounts, in response to a survey carried out by know-how analysis physique, FinMark.
Certainly, there are broadly reported however untested claims that there’s a bank, department or ATM inside a 20 kilometre (12-mile) radius in any city or rural settlement in South Africa.
As a matter of truth, the nation has essentially the most technologically superior, financially liquid, and accessible banking system on the continent. A 2015 KPMG report revealed that South African banks are rising at an annual price of seven p.c and the business has belongings worth USD 361 Bn. No different African nation comes shut.
Therefore, Vodacom at all times had a mountain to climb making an attempt to repair one thing that’s not precisely damaged, so to talk. At the same time as knowledge from Pew Analysis Centre signifies that 9 in 10 South Africans personal a cell phone and a 3rd of those are smartphones, Vodacom was taking up a strong monetary system by making an attempt to propagate cell cash companies and there was solely ever going to be one winner.
One other clarification that’s generally cited for the M-Pesa fiasco in South Africa is the choice by the Vodacom to hyperlink up with Nedbank to offer the monetary service on its platform.
Nedbank is without doubt one of the largest banks in South Africa and the notion is that it caters to middle-class and high-income earners who’re already having fun with monetary inclusion. Therefore, it was arduous to promote the service from there.
There are additionally talks of stiff banking rules in South Africa and the absence of a “very dominant” telecom participant in South Africa (like Safaricom in Kenya) as different points that prevented M-Pesa from taking off in South Africa.
4 years on from the failed M-Pesa experiment, Vodacom has as soon as extra got down to compete within the nation’s fintech turf by a freshly-minted tremendous app backed by a worldwide fintech heavyweight. And it could be hoping to get it proper this time, although the warning indicators are nonetheless there now as they have been in 2010.
Featured Picture Courtesy: Khusoko