The failure of Vodacom’s M-Pesa mobile money transfer initiative in South Africa, in contrast to its spectacular success in Kenya, has led many pundits to the conclusion that a mobile money solution will never fly in this country.
Vodacom failed to recognise crucial differences between the countries, it is argued, most notably the far higher levels of financial inclusion here and relatively more accessible financial infrastructure.
This meant the market for a mobile money solution was far smaller, leading Vodacom to the conclusion last year that it would never achieve the critical mass required for M-Pesa to take off.
By the time the mobile operator pulled the plug, it had just 76 000 active users of the service, compared to sister company Safaricom’s 15.7 million active users in Kenya by 2015.
But the success of mobile money account provider IMB tells a different story.
Since 2009 it has processed transactions to the tune of R3bn and its customer base is growing at a rate of about 10% a month.
This shows there is indeed a market for such a service, as long as it meets the actual needs of South African customers.
One of the barriers to adoption of M-Pesa was its closed-loop nature: customers could transfer funds to and from each other, but were cut off from other transactional infrastructure such as till points and ATMs.
IMB has solved this problem with a hybrid model that links customers’ mobile wallets to an optional MasterCard debit card that unlocks access to the “real” world via ATMs or any shop or retailer with a card machine.
South Africa’s unbanked or under-banked citizens are also reluctant to trust faceless institutions with their money, having often been victims of crime or fraud in the past.
Ironically, this lack of trust leads them to hold on to cash which is vulnerable to theft or loss.
Going against the grain of increasingly forcing technology adoption on customers and cutting out the middle man, IMB has reasserted the value of a human interface by creating a network of service centres owned and operated by members of the community where they operate.
This establishes a trusted point of contact for would-be customers in the form of someone who lives among them.
These financial entrepreneurs are also trained to educate and help potential users sign up to the service, removing the technological barrier to adoption that new technologies often face.
The benefit for customers wanting low-cost, convenient financial services is easy to understand – a friendly, trusted source within the community to assist them with practical, hands-on training to set up and operate their mobile money wallet.
They are also always on hand to give their customers on-going support.
IMB also offers its customers protection from illegal debit orders.
In an economic climate where about 31 million debit orders are processed nationally each month, 1.2 million of which go unpaid, according to the Payments Association of SA (Pasa), IMB gives consumers control over their repayments with a unique account protected from debit orders.
This gives customers back control of their finances, allowing them to manage their cash flow on their own terms.
Moreover, IMB also helps customers reduce their debt repayments by renegotiating payment terms with creditors so they have financial stability while repaying their debt.
This is especially relevant in a country where more than half of consumers are at least three months’ in arrears on their accounts and there has been a 120% growth in indebted consumers since 2013, resulting in about 75% of South Africans spending three quarters of their income on debt repayment.
Though three quarters of adult South Africans have a bank account, according to a survey by technology research body FinMark, the “unbanked” and “under-banked” still make up a large portion of rural and disadvantaged communities, a large group who are trapped in poverty, without access to financial services, restricted to cash and unable to store money safely.
Cost and physical location are both barriers to entry for this group, and mobile money and mobile phones offer a financially inclusive solution for them.
It is clear that there remains a significant need for these services in South Africa, despite its important differences from the Kenyan experience.
What we require are unique solutions tailored to meet our circumstances, rather than models that may have worked elsewhere, but which are unsuited to our needs.
IMB provides customers with affordable and convenient access to their money, but with a familiar human interface, empowering them to manage their accounts effectively and ensure long-term financial freedom.
These are services that resonate with customers and show the way forward in creating greater financial inclusion and a safer, more efficient way for them to manage their money, especially vulnerable rural and disadvantaged communities.