African telecoms giant MTN has canned its mobile money service in South Africa, the second mobile company to do so this year. MTN South Africa announced Sept. 15 that it was decommissioning the product “due to a lack of commercial viability.”
The announcement illustrates the difficulty of cracking the financial services market in South Africa via mobile payments services. Unlike most of Africa, South Africa has a well-established and competitive banking sector. Elsewhere, MTN’s Mobile Money subscribers grew by 5% to 36.5 million last year, according to the company’s interim results (pdf). The product’s revenue increased by 40.8% and performed well in Uganda, Ghana, Rwanda and Benin. The MTN Group has allotted more funds to marketing the product in countries like Cameroon and the Ivory Coast.
In South Africa, however, “the operating costs of providing a mobile money platform have become prohibitive,” Larry Annetts, MTN South Africa’s Chief Consumer Officer, said in a statement. “The decision by MTN SA to shelve its mobile money service does not signify a complete exit from financial services.”
In August, parent company the MTN Group reported disappointing interim results, posting a loss of 271 cents a share. The telecoms company’s misfortunes began after a run-in with Nigeria’s regulators that led to a $1.7 billion fine over unregistered SIM cards.
Earlier this month, the MTN Group announced the launch of a micro insurance product called aYo. The telecoms company partnered with financial services company MMI Holdings, which operates in 17 countries, 13 of which are in Africa. The investment and insurance firm will work with telecoms giant to to provide more “accessible insurance” in African countries with low insurance penetration. The move will allow both companies to compete in the mobile money services, a joint statement said.
Mobile financial services are still likely to be a key part of MTN’s strategy. In June MTN poached Vodafone’s Rob Shuter, as its new group CEO. Shuter’s background in the financial industry may point to the company’s push to diversify into Africa’s multi-million dollar mobile money and financial services sector.
South Africa’s biggest cellphone company also failed to launch mobile money in the country. In May, Vodacom announced that it had to shut down M-Pesa, the continent’s most successful and pioneering mobile money service.
This article has been corrected. The article erroneously stated that the total number of MTN Mobile Money subscribers had increased by 23.3% to seven million last year. The correct figure is 36.5 million subscribers, an increase of 5% from the previous year.