Vodacom has plan to win Africa’s remittance market

Vodacom plans to corner the African international money transfer market — remittances — by making its mobile platform compatible with both external and internal players.

In September, MTN, Africa’s largest mobile operator, launched a service that allows for the movement of money in more than 10 countries.

Fitch Solutions, a unit of Fitch Group, said it expects Vodacom may enter the same market and compete on lower fees.

“We do not exclude the possibility that M-Pesa may start offering its own remittance solution, perhaps at a lower a fee,” said Fitch.

A person in SA looking to send R10,000 in cash to Malawi now might pay a bus driver making the trip R500 to physically transport the money. For many the risk is justified by formal channels charging as much as 15% for such a transaction.

MTN is charging a 4% fee for such transactions, while the industry average is about 10%.

Africa’s largest mobile operator has 61-million active monthly mobile money users across 16 markets, while Vodacom and Safaricom’s M-Pesa has more than 73.5-million subscribers in seven countries.

Vodacom already operates in the remittance market and is looking to grow that piece of its business, group CEO Shameel Joosub told Business Day.

“We’ve seen the opportunity. We’re doing about $5bn of international money transfers. It is a very big market for us. A lot of the success has been in Kenya. And we’re now trying to expand that to the rest of the markets.”

A person can, for example, send money through one of the dedicated remittance services such as World Remit from a Standard Bank account in SA to an M-Pesa mobile money account in Kenya.

The group has built an international money transfer hub out of M-Pesa Africa.

“Effectively, all the markets including SA will plug [into it]. It, of course, has to comply with local regulation around international money transfers — that will be for inbound and outbound.”

“That will also connect a lot of the bigger players into the platform, so that we’ve got multiple routes of money coming in. Everything from Moneygram to Western Union to Mukuru to whoever it might be. We’re connecting all of that into this hub.”

According to Fitch, M-Pesa boasts a much larger active user base in SA, sitting at 13.6-million users at the end of its second quarter, compared to MTN’s current 9-million.

“Both MTN’s and Vodacom’s mobile money solutions have gained strong brand reputation across SA and neighbouring operations, so a price competition over fees on core services such as peer-to-peer transfers and deposits could emerge in the future,” said Fitch.

Ultimately, Vodacom’s plan is to have a remittance platform that allows for external players to send money into its mobile wallets, internal transfers, as well as integration with other cellphone providers.

“So the hub is a multitude of options,” said Joosub. “The one is to get all of the international routes, getting all of the different players that you can connect. And then it will bring in new routes over time. Because there are certain routes — an example being Ethiopians in the US sending money home — then you’ll cater for that unique part, then we can build certain opportunities in there.

“But we want to get all the major players in, from Alipay, within the platform. So that’s one side. All the merchants. We negotiate once, get all the volumes and so on,” said Joosub.

The second part is M-Pesa to M-Pesa. Essentially, this is about moving money within the platform from different countries.

The third is getting the regulation and compliance in order. “As you connect in the countries, you also need to comply with all the regulations,” said Joosub.

The fourth part is moving funds from VodaPay to M-Pesa, M-Pesa to VodaPay, VodaPay to VodaCash, connecting the group’s various fintech platforms.

“And then it’s about connecting with the likes of MTN and Orange, so that you can seamlessly move money across countries and across platforms. That’s the big opportunity for us,” said Joosub.

Vodacom recently reported that its financial services customers, including Safaricom on a 100% basis, now sit at 73.5million, transacting $1bn a day.

Financial services revenue increased 39.9% to R6.2bn for the six months to the end of September 2023, contributing 10.5% to group service revenue.

New services in SA, including financial and digital services, were up 18.1% and contributed R5.1bn to revenue. In the home market, revenue from financial services grew 10.8% to R1.6bn due to a strong performance from the insurance business.

VODACOM ALREADY OPERATES IN THE REMITTANCE MARKET AND AIMS TO GROW THAT BUSINESS