MTN plans to launch bank

MTN plans to acquire a banking licence once the South African Reserve Bank (SARB) opens up its national payments system to fintechs and other non-banking entities, Business Times reports.

South Africa’s second-biggest mobile network operator already supports limited transactional banking services through its MTN Mobile Money (MoMo) service.

MoMo offers payments and money transfers to individuals and businesses. Customers use their phone numbers instead of bank account numbers to identify digital wallets holding their money.

MoMo’s primary target customers are small or informal businesses like spaza shops and the low-income mass consumer market, both of which still rely heavily on cash.

As it stands, MTN or any other fintech which wants to offer these types of services without a banking licence must work through a licenced bank as a sponsor. For MoMo, MTN uses African Bank.

However, this past week, TechCentral reported that the SARB was working to enable non-banking entities like fintechs to gain direct access to the core clearing and settlements system.

SARB National Payments System department head Tim Masela said although banks were the backbone of the financial system in terms of savings and accounts, non-banks were offering convenient transactional services.

“We believe that we should move with the times and open up the system for the entry of non-banks,” Masela said.

MTN South Africa chief fintech officer Kagiso Mothibi confirmed to Business Times that fintechs will be given an opportunity to participate in the banking system following an ongoing review of the payments system.

“When that is rolled out, we’ll definitely be looking to pursue our own licence,” Mothibi said.

The SARB is currently developing frameworks to authorise fintechs and other non-banking entities to access the national payment system directly.

MoMo is one of several fintechs that participated in the SARB’s working groups to develop the regulatory framework that will enable greater direct participation in core banking services.

The frameworks are necessary to balance innovation with the risks associated with a more flexible and open financial system.

Mothibi said that bypassing a traditional banking partner would allow MTN to exercise much more control over the future of its banking services.

MTN has ambitious plans to make its MoMo service a true low-cost alternative to traditional banking accounts.

The service has expanded to 11 million registered users, of which roughly three million are active users.

Helping drive this adoption is MTN introducing several significant enhancements to MoMo in the past two years.

In September 2023, it launched a business wallet and international remittances.

In February 2024, MTN announced an agreement with Mastercard that gave all MoMo wallet holders a virtual and physical card that they could use to make payments in numerous countries.

That came after the world’s second-largest payments network provider took up a minority stake in MTN Group Fintech, worth up to $200 million (R3.8 billion at the time).

These enhancements have helped boost MTN’s fintech service revenue, which increased 59.1% year-on-year in the first half of 2024.

This continued into the third quarter of 2024, when the segment’s revenue jumped 61.8% compared to the same period in 2023.

Vodacom has also increasingly focused on its financial services offerings, including VodaPay and M-Pesa, Africa’s most successful mobile money service.

The shift towards financial services aims to diversify telecom offerings.

While conventional cellular service revenue continues to be their bread and butter, growth in this segment has slowed down in recent years.

The rapid expansion of mobile network infrastructure, declining data prices, and increased competition have made cellular connectivity in South Africa more accessible, limiting growth prospects in cellular revenues.