MTN South Africa is keen to acquire a banking licence when the regulator opens the industry up to non-banking players, as it moves to diversify income sources and boost its growth plans.
The mobile network operator is one of many companies that have entered the banking sector by providing a digital platform for payment, money transfer, lending and insurance. However, regulations require these companies to partner with a bank or a financial institution that has a banking licence and access to the national payment system infrastructure.
But as part of a programme to modernise the payments ecosystem, the South African Reserve Bank (Sarb) is exploring frameworks for authorising non-banks to directly access the national payment system to reduce customer reliance on cash transactions. The aim is to have banks and other companies, including fintech firms, compete for the full range of payment services under the same legal and regulatory frameworks.
In recent years, there has been an increase in the participation of fintech companies in the financial sector as they compete with traditional financial services providers.
In an interview with Business Times, Kagiso Mothibi, chief fintech officer at MTN SA, said with the review of the national payments system under way, fintech companies would get an opportunity to participate in the banking sector.
“When that is rolled out, we'll definitely be looking to pursue our own [banking] licence. But for now, given existing regulations, we are dependent on banks as sponsors. But if regulation allows, we would want to get our own licence because then it allows us to have a lot more control of our destiny.”
MTN’s sponsor is African Bank.
The Sarb said future payment systems would be marked by the inclusion of new players across the value chain and the wider adoption of capabilities such as real-time payment processing. It said regulatory frameworks should keep pace with the rapid evolution in the sector and that the uniform application of regulation to all parties providing similar services would help to maintain a level playing field.
If regulation allows, we would want to get our own licence because then it allows us to have a lot more control of our destiny
— Kagiso Mothibi, chief fintech officer at MTN SA
MTN’s fintech unit MoMo provides a range of services including funeral insurance, payments and money transfers. Its key target market is small businesses, including spaza shops, and also the mass market. For businesses, MTN's MoMo platform enables them to receive payments directly from customers in real time and without incurring any transaction fees. Customers are also able to withdraw cash at their local stores, make payments at retail stores, buy electricity, and settle pay TV subscriptions.
The mobile network operator plans to add savings and investment products targeted at the lower end of the market.
Mothibi said the biggest focus area would be community savings products, including stokvels.
“We are looking to drive financial inclusion. Community savings initiatives are already pretty much prevalent in the market. So we are definitely in an advanced phase of launching those kinds of offerings to drive savings. There's a huge opportunity on the upside. And in terms of how the market wants to participate in savings, they've proven that a community savings type of approach is what speaks to them.”
Mothibi said while South Africa has a strong banking environment, with 80% of the population holding bank accounts, many people still prefer to withdraw all their money at once to avoid high bank charges. “That’s where the opportunity arises. So there's an opportunity to digitise that cash.”
MTN has 11-million customers registered for MoMo, but about 3-million of them are active users. It has 20,000 spaza shops and 10,000 merchants on the platform. It is targeting 5-million users and Mothibi is confident it will reach the target.
MTN will also add life insurance products, more short-term insurance as well as micro-lending options to its offering.
“We have many thin files but creditworthy customers, meaning they do not have enough data points around them. But actually, they could still be creditworthy because they have been paying their rent on time, or they've been buying or topping up their airtime consistently, for example. So those are variables that one can look into ... even though we don't have a credit record on them,” he said.
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