MTN South Africa has announced plans to set up a bank to cater for its Mobile Money Service (MoMo). This is coming as the South Africa Reserve Bank (SARB) has revealed plans to allow fintech and other non-banking entities access its national payments system including the clearing and settlement systems.
Launched in January 2020, MoMo offers basic financial services such as payments and transfers. MTN reports that the platform has 11 million registered users in South Africa, with 3 million of them active. Notably, MoMo became the first non-banking entity to offer real-time payments through PayShap, a key milestone in South Africa’s payments ecosystem.
Currently, MoMo operates under a partnership with African Bank Limited. Establishing its own bank could give MTN greater autonomy, enabling it to expand its offerings beyond basic services to include savings products, credit, and loans. This could enhance its ability to serve existing users and attract South Africa’s unbanked population.
Opportunities and economic impact
If approved, MTN’s transition into a full-fledged financial institution could contribute to improving financial inclusion. By leveraging its reach as the leading telecoms operator, MTN has the potential to offer affordable, accessible financial services to millions, particularly in underserved areas.
The move aligns with a growing global trend where telecom companies leverage their customer bases to enter financial services, filling gaps left by traditional banks.
Regulatory hurdles remain a challenge
While the plan appears promising, it raises questions around regulation and compliance. Fintechs often thrive on innovation and agility, qualities that may clash with the strict regulatory frameworks governing traditional banks. Adapting to the compliance requirements of a core banking licence could pose challenges for MTN and other fintechs seeking entry into the payments system.
SARB has acknowledged these concerns and is working on developing a regulatory framework to allow fintechs to operate with greater flexibility without compromising financial stability. However, finding the right balance between innovation and compliance remains critical.
Kagiso Mothibi, Chief Fintech Officer at MTN South Africa, expressed optimism about the regulatory direction. “We welcome any regulations and policies that remove barriers to entry and encourage innovation. If you crowdsource the problem by including more players in the system, the solution has a better chance of being solved,” he stated.
MTN’s track record with MoMo across 14 African countries highlights its capability to execute financial services beyond telecom operations. However, whether this expansion will deliver on its promises of inclusion and affordability remains to be seen as it navigates South Africa’s evolving regulatory and economic landscape.
