Trying to launch the same M-Pesa product in SA and Kenya "was a terrible idea", according to an analyst.
Analysts believe M-Pesa failed in SA because Vodacom did not take into account the major differences between the Kenyan and South African markets.
This after Vodacom announced it plans to discontinue its M-Pesa offering in SA on 30 June.
Vodacom has pulled the plug on its mobile money offering in SA, saying there is little prospect of M-Pesa achieving a critical mass of users in its current format in SA in the mid-term.
"Trying to launch the same product in a completely different market was a terrible idea," according to IDC research manager for IT services Africa, Jon Tullett.
"They miscalculated and got everything wrong. We don't have the same economic drivers here as in Kenya. The demographics just aren't the same and SA does not have the same challenges getting banking to the people here," he adds.
"The success factors for M-Pesa in Kenya were never present in SA. Over the first two years, we identified no less than 12 such factors that were key to the overwhelming success in Kenya, and that were absent in the South African market," says World Wide Worx MD Arthur Goldstuck.
Goldstuck says in 2013, World Wide Worx fleshed out a list of rules of mobile money and "very few of these were followed for M-Pesa in SA". Among these were the fact that Kenya has a high unbanked population, a culture of remittances, regulatory openness, a low cost of use and a dominant telco at launch.
Banked vs unbanked
Vodacom CEO Shameel Joosub says one of the factors that hindered M-Pesa in the country was the high level of financial inclusion.
"I think Vodacom was dazzled by the success in other markets but the reality is that in SA, we may have a lot of people that are economically stressed, but they don't lack access to banking services," says Tullett.
Goldstuck agrees there is not enough of a market for theunbanked in SA.
"Almost all people in full-time employ have bank accounts, and 75% of the total adult population has a financial instrument of some kind. Those that are unbanked have found many workarounds, such as retail money transfer and airtime as currency," says Goldstuck.
"The banking system in SA already has so much on offer that there is an insufficiently large gap to exploit - unlike the other countries where [M-Pesa] has taken off," agrees BMI-TechKnowledge director Brian Neilson.
"We have a population that might not be particularly wealthy but they are savvy when it comes to banking, so to attract them to a mobile money platform you need to offer them a value-added service," says Tullett.
"SA banks have all made it a priority to offer banking services to the economically disadvantaged. There is no shortage of ways for an SA consumer to interact with banks and M-Pesa in SA didn't offer much on top of that to make it attractive."
"In Kenya in particular, the service was launched at the time of the election violence [in 2007] which resulted in massive displacement of people, and a desperate need for individuals to get money to and from each other. The lack of financial inclusion and the high perceived need, along with the ease of opening an account, resulted in the perfect storm for M-Pesa," adds Goldstuck.
However, Ovum senior analyst Richard Hurst believes there is still a massive unbanked market in SA and a huge potential to increase the penetration of financial services across the country. He points out M-Pesa's success in Kenya was partly down to the fact it launched when there was still a loophole in the existing banking regulations, which has since been closed.
"Essentially these services were launched without the use of banking licence. This enabled the operator to offer lower costs of transactions and compete head-to-head with the existing retail banks and gain a massive market share by virtue of its mobile subscriber base. In SA, the market environment is slightly different," adds Hurst.
Paint by numbers
When M-Pesa launched in SA in 2010, Vodacom hoped to have 10 million subscribers within five years, but by the end of March 2015, it only had around one million customers signed up in SA, with about 76 000 actively using the service.
The latest statistics paint an equally bleak picture. Vodacom spokesperson Byron Kennedy told ITWeb there are approximately 172 000 customers with a positive balance that will be affected by the M-Pesa shutdown in SA.
"The vast majority have a balance of less than R200," he says.
This out of 9.7 million M-Pesa customers across its operations.
In contrast, Kenya-based Safaricom has over 22 million registered M-Pesa subscribers, and in terms of 30-day active customers, there were 15.7 million at the end of September 2015.
M-Pesa was launched in March 2007 by Safaricom in Kenya. Vodafone, which owns 65% of Vodacom, also owns 40% of Safaricom.
For Vodafone in general, M-Pesa has been a huge success. At the end of March 2015, there were more than 25 million active customers using the mobile money transfer service across 11 markets in Africa, Asia and Europe.
Alive and kicking
Despite Vodacom's troubles, other mobile money offerings are doing a bit better in the South African market. First National Bank (FNB) says its eWallet had over four million users in SA in 2015. In July 2015, money sent to recipients via the FNB mobile money solution topped the R1 billion a month mark.
"There certainly is a way for a mobile money proposition to work in SA. However, perhaps it will not be in the form of something like M-Pesa, but rather a more bank-centric model," notes Hurst.
Meanwhile, MTN Mobile Money had 34.7 million subscribers at the end of 2015, across 15 countries, with about 13% of those in SA.
"MTN Mobile Money has been successful primarily because no great expectations were placed on it for SA. It has been far more successful in Ghana and Uganda ? markets to which it is more directly geared ? but it is made available in SA, and has a partnership with Pick 'n Pay, giving it far more traction than M-Pesa, which was in effect a disembodied service that ultimately only lived somewhere inside a USSD menu," concludes Goldstuck.
