Opinion: Why M-Pesa Failed In South Africa

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Written by Dana Sanchez

From Quartz. Story by Sibusiso Tshabalala.

With just 1 million subscribers at the end of March 2015, the uptake of the mobile money platform M-Pesa has been labelled a failure in South Africa.

M-Pesa enjoyed unprecedented success in its home country Kenya where it was launched by mobile network Safaricom with more than 20 million subscribers. In Tanzania, its second biggest market, M-Pesa boasts some 7 million subscribers.

But its been a very different and sobering story in South Africa, the continent’s most advanced economy. Vodacom—Safaricom’s sister network in South Africa—acknowledged as much in its 2014-2015 annual report.

South Africa, when compared to Kenya and Tanzania, has a more developed banking market. Local banks have succeeded in providing reliable and easily accessible banking services to low-income customers.

A report by Genesis Analytics, a South African research consultancy, shows how South Africa’s three major retail banks–Absa, First National Bank and Standard Bank–have individually increased their share of low-income customers by opening up entry-level bank branches and banking kiosks in remote areas, bringing banking services closer to where people live.

Added to this, South Africa’s financial system provides a number options other than M-Pesa, for its unbanked population. First National Bank’s e-Wallet allows anyone with a valid South African cellphone to send and receive money, even if they don’t have a bank account–and major retailer, Shoprite, has a countrywide money transfer service priced at just $1 per transaction.

So unlike in Kenya–where during its launch stages, M-Pesa virtually dominated the unbanked market before other competitors like Mobikash, Orange Money and Airtel Money popped up–the platform is up against a well-established competitors for South Africa’s unbanked market.

A rigid regulatory environment has also contributed to M-Pesa’s slow growth.

Read more at Quartz.