A more aggressive expansion appears in store for M-Pesa now that Vodacom and its subsidiary Safaricom have announced their expected acquisition of the mobile payments platform from the UK’s Vodafone, (the part-owner of Vodacom).
Ths deal places M-Pesa firmly under African control, stirring hopes of a substantial boost to Africa’s already hot fintech sector.
The future for mobile money is particularly bright in African, as its growing smartphone penetration could pave the way for more sophisticated consumer fintech solutions. According to Vodacom, only 25% of M-Pesa customers currently have a smartphone, yet the number is growing by 10% year-on-year.
According to the press release announcing the deal, the acquisition “will accelerate M-PESA’s growth in Africa by giving both Vodacom and Safaricom full control of the M-PESA brand, product development and support services as well as the opportunity to expand M-PESA into new African markets.”
Launched in 2007, M-Pesa (which means “m-money” in Swahili) is now Africa’s largest mobile payments platform, serving some 40 million users across Kenya, Tanzania, Lesotho, the Democratic Republic of Congo, Ghana, Mozambique and Egypt. The service processes about one billion transactions every month.
What does this deal mean for the future of M-Pesa, and mobile payments in Africa generally?
A More Aggressive Path for M-Pesa?
This deal doesn’t come as a surprise, given last year the two telecoms formed a joint venture with the intention of acquiring M-Pesa.
The deal enables the two telecoms to expand M-Pesa throughout Africa without being burdened by hefty licensing fees to Vodafone.
This should results in a more aggressive expansion strategy for M-Pesa across the continent.
Vodafone sees M-Pesa as key to its further expansion into fintech.
Shameel Joosub, Vodacom Group CEO, said: “This is a significant milestone for Vodacom as it will accelerate our financial services aspirations in Africa. Our joint venture will allow Vodacom and Safaricom to drive the next generation of the M-PESA platform – an intelligent, cloud-based platform for the smartphone age. It will also help us to promote greater financial inclusion and help bridge the digital divide within the communities in which we operate.”
Round 2 Coming in South Africa?
A key question is whether Vodacom will make another attempt at launching M-Pesa in South Africa.
Vodacom launched M-Pesa in South Africa in 2010 with hopes of building to 10 million users. The firm ended up discontinuing the service six years later after acquiring only 76,000 users.
It’s hard to imagine re-entry into South Africa isn’t high on at least Vodacom’s priority list.
The Mobile Money Opportunity
M-Pesa is the leader in a vibrant, if a bit uneven, African mobile money landscape. Africa is by far the global leader in mobile money, with 50 million new subscribers in 2019 and a 12% growth rate over 2018. Total mobile money users regionwide totaled 469 million last year.
Notably, Southern Africa has been a lagger among regions within sub-Saharan Africa.
Southern Africa has 3 million mobile money subscribers, compared with 102 million in East Africa, 56 million in West Africa and 20 million in Central Africa.