Don’t burn your wallet: why SA hasn’t reached its mobile, cashless future (yet)

When it comes to technologies that have failed to deliver on the hype that preceded them, it’s pretty difficult to beat mobile money in South Africa. Following the rise of MPesa in Kenya, everyone thought South Africa, with its massive mobile population, would follow suit. While few would have dared to say it at the time, there was a sense of expectation that, within a few years, everyone would have abandoned cash and would be paying for things on their phones. Boy was that wrong.

A number of factors hindered the growth of mobile money in the country, including restrictive regulations around the country’s banking sector and a slew of poor decisions by the people trying to introduce it. Perhaps the best example of both was Vodacom’s attempt to introduce MPesa back in 2011.

After a high-profile launch in partnership with Nedbank failed to live up to expectations, the mobile operator was forced to go back to the drawing board, with its new offering only expected to come out later this year.

So why the failure to launch? How is it that, in a country with 128% mobile penetration only nine percent of mobile customers use mobile to send or receive money? And what, exactly, is being done to change that?

Not Kenya. Not Japan

First off, let’s deal with the elephant in the room: the Kenyan form of MPesa didn’t work in South Africa because it’s not Kenya. We’ve said it before, the circumstances that allowed the mobile money transfer system to work so well in Kenya were unique to that country.

As Memeburn columnist Hilton Tarrant noted back in 2011:

MPesa got traction as a means for workers in urban areas to send money home to their family. (Originally the service was designed for microfinance borrowers to receive and repay loans using Safaricom’s airtime reseller network.) “Sending money home” was a killer use case — creating a user base that grew exponentially.

The distribution network makes it all work — it’s far easier to find one of 25 000-odd agents, than it is to find one of 1 000 bank branches. Add to this the fact that Safaricom’s airtime resellers are agents — real people — not faceless banks. Safaricom also managed to successfully leverage its trusted brand. The low transaction fees for using M-Pesa was a further attraction.

Without those factors, MPesa and could have been the slickest technology ever invented and it would have flopped. Safaricom rivals in Kenya found that out the hard way, as did the mobile operator’s parent company, Vodafone, when it tried to launch MPesa in a number of other markets.

MPesa never really took off in South Africa the way it did in Kenya (image: Andrew Currie via Flickr).

Yolande Steyn, CEO of eWallet Solutions at FNB, backs this up, saying that the South African mobile money and payments space has seen a lot of plays by “uninitiated” people “who don’t necessarily understand the nuances that drive mobile money uptake”.

That might also be why widely reported upon partnerships, such as the mobile bank food and clothing retailer Pick ‘n Pay and mobile network MTN launched in 2012, have never really gained traction.

At the other, pricey-smartphone owning end of the market things haven’t been much better. As is the case with most countries that aren’t Japan, NFC payments have never really taken off as it was hoped they would.

There have been attempts at other forms of mobile payment using smartphones, including Geo-payments from the likes of FNB — a space that the tech community found so exciting that even mobile social network Mxit made a play at one stage — but those too seem to have faded into nonexistence.

There are a few reasons for that. The Geo-payment systems that were launched in South Africa a couple of years ago were all very cool from a techie point of view, but were hardly convenient enough to entice people into ditching their wallets.

According to Herman Singh, the managing executive of mobile commerce at Vodacom, the problems here were pretty obvious. “Too many people took on too many techie propositions,” he told Memeburn in an interview. “No one asked the customer what they wanted”.

In the case of NFC meanwhile, there are plenty of issues around the technology (even in its more stable card form) but with mobile NFC in particular, the issue runs a lot deeper.

NFC still has massive issues

While referring to a different market, the head of business development at Transport for London, Matthew Hudson, put it best when he said: “there are too many stakeholders — with banks, retailers, mobile network operators, device manufacturers and advertisers all fighting for a share of the revenues.”

Come to think of it, those words could pretty much be applied to most of the attempts to introduce mobile money and payments systems to South Africa over the past few years.

A new hope

It’s not all doom and gloom though. In fact, despite the rocky time mobile money and payments providers have had over the past few years there are signs that it could start delivering on its promise, or at least on more tempered version of that promise.

You see, one of the benefits of having had a lot of people make mistakes in a particular space is that a fair few of those people will have learned from those mistakes.

“I believe the stakeholders that have been at this mobile money thing in South Africa for some time do get it”, Steyn says and that seems to be something that rings as true for the big players as it does for disruptive startups.

Among the bigger players, it’s fairly certain that Vodacom’s reboot of MPesa, scheduled to launch in the mid to latter part of 2014, will bear little similarity to the product it’s set to replace. A like-for-like relaunch would be lunacy, to put it mildly.

And the noises coming from Vodacom have indeed suggested a new format for the much-vaunted mobile money system.

“We think it will also be more effective in the South African market in the new format in which we are launching,” Vodacom CEO Shameel Joosub said in late 2013.

That said, it’s already over deadline.

“Effectively what we would like to do is launch [MPesa] in a different way, with a much bigger distribution, in the first quarter of next year, somewhere,” he said at the time.

When we spoke to Singh however, he said that this was because the mobile operator wanted to ensure that it was ready for rapid adoption from launch day.

On the startup front, there are as many players as there have ever been but the most recent one to have stuck its nose ahead of the pack is SnapScan.

The app’s recent success — which includes a partnership with Standard Bank and a 2013 MTN app of the year award — is interesting because to the casual observer it simply shouldn’t work.

I mean, for starters it makes heavy use of QR codes — in order to make a payment using your Apple, Android or BlackBerry, you have to scan one customised for the retailer in question. Yup, that’s right, it’s pretty much relies on those things that were constantly frustrating us as far back as 2011.

Thing is, QR codes seem to have become a lot less finicky in the past three years because I’ve never actually seen anyone battle to use SnapScan.

And that’s another thing, I’ve actually seen different people in different places using it (and delighting their friends every time they do). That’s not something I’ve ever experienced with a mobile payment product in South Africa before.

SnapScan: a mobile payments app people can actually use

Dig a little deeper into the app’s features and you’ll see that it’s taken a few other lessons from its forebears that could stand it in good stead.

Linking to your card for instance is something that’s been a major hassle in the past, but SnapScan’s taken a leaf out of private car hailing app Uber’s book so that all you have to do is take a picture of it to get going (although you still have to spend a little time putting your details in the first time you sign up).

Retailers meanwhile just need to have their unique QR code printed out, meaning that they never have to worry about technology failing them if they’re using it at a market, or for deliveries. Sure the people using it to buy stuff have to be banked, but merchants without bank accounts can cash out their takings at Standard Bank ATMs or at SPAR grocery stores.

And that’s where the app’s ultimate success might lie: it most likely won’t ever own the whole game, but it could own a very important niche.

Making the niche common

Indeed, Steyn reckons that the real future of mobile money and payments in South Africa lies in people identifying a niche and making it their own.

“I don’t think there is one product that will cover the entire spread of the economy,” she says. “What will probably happen is the niche and variety to evolve to some common standard, or a small number of standards”.

Another great example of a mobile payment company finding a niche and exploiting it is Gust Pay. Rather than attacking the mobile payments space as a whole, it’s primarily gone after the music festival and events market, where its technology allows people wearing NFC-enabled wristbands or using a mobile app to pay for drinks and merchandise in a setting where carrying your wallet with you isn’t always a good idea.

Gust Pay: Owning a niche

Interestingly, the company might really take off overseas before it does in South Africa because it’s recently been announced as one of 11 companies selected to take part in the Barclays Business Accelerator in London.

There are still plenty of hurdles to jump

Despite the promise in the space, there’s still a long way to go before mobile money and payments systems become really commonplace. One of the primary barriers to big players and startups alike entering the space remains regulation.

“The payment space is a regulated space that includes banks and non-banks,” says Steyn. “What makes it hard for private players is to enter this regulated space, not necessarily being a non-bank”.

While it’s important that the space be controlled — this is, after all, people’s money we’re talking about — any regulation that stifles innovation for the sake of protecting current business models is likely to be damaging in the long run.

That said, things do seem to be improving. While Singh points to tough regulation as one of the reasons MPesa wasn’t as widely adopted as people were expecting the last time around, he doesn’t anticipate that being a problem this time.

Finally ready

Another reason Singh is excited about the reboot of MPesa — although he couldn’t provide us with too much detail about what it’ll entail — and the mobile money and payments space as a whole is that it finally seems like South Africa’s ready to embrace it.

“What should’ve happened in South Africa 10 years ago is happening now,” he said. What he means by that is the country’s limited telecommunications infrastructure meant it couldn’t take full advantage of the web’s rapid expansion in the early 2000s, something which he believes actually harmed the ability to take mobile to the next level.

Improvements to mobile networks, thanks in part to the rise of competitors to Vodacom — along with the rise of affordable smartphones — mean that the South African mobile space is very different to the one that existed back in 2004. That in turn means there’s a lot more mobile access, and opportunity, in the country than there was a decade ago.

“There’s been a fundamental shift and mcommerce is going to be huge,” he said during our interview. “South Africa is going to grab its second opportunity to disrupt the mobile space”.

If any play in the mobile payments and money space is going to work however, Singh is adamant about a couple of things:

The first of these is that the play has to be “an enabler that allows other people to do business”.

The second meanwhile, hearkens back to the point we made at the beginning of this article: “What worked in the rest of the world won’t work here,” he told us.