MTN's mobile money service has the potential to contribute 15% of MTN SA's total revenues in the long term, the company said last week.
In June MTN partnered with Pick n Pay, Boxer stores and Visa to re-launch mobile money service that will enable customers to transfer and receiving money, and also pay bills. Mobile money is one of the key areas of focus for MTN Group as it focuses on growing data-driven services.
MTN's total mobile money subscribers increased by more than 20% in the quarter to September, to 22.2-million, or about 10% of the total number of subscribers.
MTN SA CEO Ahmad Farroukh said the take-up of the service was still slow but it would contribute significantly in the future.
It will be nice to get 15% of total revenues from mobile money.
MTN SA chief marketing officer Larry Annetts said from next month the company would add more agents especially in townships as mobile money distribution channels. This will enable people in areas where Pick n Pay or Boxer are not in close proximity to receive and send cash.
Kagiso Asset Management investment analyst Aslam Dalvi said mobile money was most successful in markets with low formal banking penetration. With SA already having a high level of financial inclusion, we would expect the opportunity for mobile money services to be smaller.
MTN SA reported an improved performance in quarter to September attracting 1.4-million to take its total subscriber base to 26.7-million. Combined average revenue per user for pre-paid and contract was down 4.6% to R89.26.
Data subscribers increased to 16.1-million, and data usage grew by 55.9% supported by attractive data promotions and improved network quality. Data now contributes 22.7% to MTN SA's total revenue.
MTN SA had a rough trading period in recently -- losing its market share. But its recent promotions have played a key role in helping the company to gain traction.
Kate Turner-Smith, an analyst at BPI Capital Africa, said while the performance was pleasing, it was not enough to make full year look great. The promotions that MTN has been doing in SA are not sustainable and the company needs to invest more in network and to ensure that it retains its customers through among other things mobile money, to keep customer loyalty.
Mr Dalvi said management's strategy on improving value to customers through promotions and a clear focus on lowering costs was yielding results.
While we would expect an improved SA performance from the current base, regulatory uncertainty and price competition remain significant headwinds for the business. he said. In order to remain competitive and deliver improved profits, management would need to focus on further improving its cost structures in SA, said Mr Dalvi.
MTN SA is slashing costs across the organisation. This has led to hundreds of job cuts.
Overall MTN Group grew its subscriber base by 2% to 219-million in the third quarter of the year.
Data increased by 34% and contributes 17.8% to total revenue.
MTN continues to benefit from good growth in non-voice revenue driven by data and mobile money across key markets, said MTN Group CEO Sifiso Dabengwa.
Mr Dalvi said data performance across the group, and especially in Iran post the conversion to a 3G licence, was strong and the growing from mobile money, where we see good medium-term opportunity, were highlights of the results.
The Financial Crimes Enforcement Network (FinCEN) has released new guidance for custodial bitcoin exchanges and payment processors, ruling that such companies may be considered money services businesses under US law.
In a response to twin letters submitted in late 2013, the chief US money laundering and terrorist financing regulator explained that bitcoin exchanges may be money transmitters, even if they only match buyers and sellers on their platform. Further, the letters suggest this is true, even if the exchanges behave more like traditional securities or commodities exchanges, where no money is transferred between the company and any counterparty.
While the first of todays issuances may have been expected by those following the space, the more surprising update is perhaps that such guidance could apply to bitcoin processors as well as exchanges.
The finding is notable as big companies in the sector like BitPay have indicated in the past that their services are exempt from FinCENs guidance as they facilitate purchases between consumers and merchants, only accepting and transmitting funds as necessary to the sale.
However, Pillsbury Winthrop Shaw Pittman attorney Marco Santori told CoinDesk that FinCENs latest guidance implies that the exemption only applies in instances where both sides of the transaction are Bank Secrecy Act (BSA) regulated institutions, as is the case in credit card processors, which transfer funds between customer and merchant banks.
What most payment processors do today is just accept peoples bitcoin, from wherever those bitcoins may be, possibly their own wallet software [...] and accept those coins and send them on to the merchant using whatever software they might be running. What this is saying is that if youre a merchant payment processor and youre doing that youre not exempt from the rules, in fact, youre a money services business.
Andrew Ittleman, an attorney at Fuerst Ittleman David amp; Joseph, PL, further stressed the implications of the rulings, suggesting that they perhaps are a troubling sign for how the industry could be treated by the agency as a whole.
Based on my reading of these documents, Im not sure if theres a limit to the breadth of [the MSB] definition, he said. It seems to me that, according to FinCEN, any company thats dealing with bitcoin is a money transmitter, and I dont know if I could have said that before before I read the payment processor note.
In the two letters, FinCEN policy division associate director Jamal El-Hindi outlines the governments arguments for why the unnamed businesses in question fall under the money transmitter definition. As a result, companies in the US that facilitate such bitcoin transactions may be required to adhere to additional reporting and compliance standards.
FinCEN told CoinDesk that the ruling is meant to be an official opinion to the companies in question, however, and that it may not apply more broadly.
We encourage businesses to ask us directly if they are uncertain about their status as money transmitters, and to determine if they need to register with FinCEN, a spokesperson said. Depending on the specific facts and circumstances described to us, we offer an official opinion. These rulings are not meant to signal trends or to be interpreted as some broad pronouncement for the industry.
CoinDesk has reached out members of the industrys bitcoin processing services sector for further comment.
Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.
Images via FinCEN; Shutterstock
Safaricoms popular mobile money-transfer service may finally have met its match as innovation in the banking sector catches up.
Deep in sprawling Githurai, a low-income residential estate on the outskirts of Kenyas capital, Nairobi, a cashier sitting in a small cubicle at a cement outlet is busy counting a wad of cash as dozens of customers queue.
once the platform becomes operational M-Pesa might be forced to review its pricing
A mean-eyed but careful security guard monitors the booth - an agency for Kenyas second-biggest lender by assets, Equity Bank.
The premises is also an agency for the countrys mobile money-transfer service, M-Pesa. At the booth customers can load money onto their phones to pay bills, buy things or send it to relatives, or convert money received via M-Pesa into cash.
So far, so familiar - but Kenya is sitting on the verge of yet another mobile money revolution. Equity Bank (#86), Kenyas largest lender by accounts, is to launch its own mobile banking platform with Airtel, offering its full suite of services - including, crucially, loans - by mobile phone to its eight million customers.
It is the first serious challenge to M-Pesa since the launch of the popular money-transfer system by Safaricom seven years ago.
Equity Bank is not the first to offer real-time loans by mobile phone.
In November 2012 Commercial Bank of Africa (CBA, #113) partnered with Safaricom to launch its M-Shwari platform, a complement to M-Pesa that offers savings and micro-loans.
But its the cheapness of Equitys products that will keep M-Pesa on its toes. It says it will lend money for only 1-2% interest per month compared to M-Shwaris 7.5%.
Peer-to-peer transfers will be charged at 1% at capped at KSh25, whereas M-Pesa customers can pay up to KSh125 for the transaction. Equity will also allow its mobile bankers to receive international remittance payments.
The buzz - and the resistance - the planned Equity Bank product has generated in the telecoms and banking market could only be a hint of the expected shake-up in the two lucrative sectors.
In April, Equity Bank and two other service providers acquired mo- bile virtual-network operator licences to enable them to roll out the mobile banking solution.
A consumer lobby has contested these licences in court, arguing that they were issued without public consultation and before the banking regulator, the Central Bank of Kenya, granted approvals.
The other two licences went to Mobile Pay Limited, owned by Tangaza Money, and Zion-cell Kenya. This will heighten the battle for control of mobile money in Kenya.
Despite the onslaught by banks and other operators, Safaricom is still clock- ing up millions of dollars from M-Pesa.
In the year ending March 2014, the company said M-Pesa revenues hit $305.2m, up 21.6% from the previous year.
Equitys rivals, mainly Kenya Commercial Bank (KCB, #60) and CBA, want to get a bigger slice of the mobile money business.
CBAs M-Shwari platform has attracted new customers to the bank, allowing it to overtake Equity Bank in the number of borrowers: CBA closed 2013 with at least 897,000 loan accounts compared to Equity Banks 840,000 borrowers.
It is worth pointing out, however, that today CBA is still far less profitable than Equity, which ranks second after KCB. Some of this may be due to the difficulty of controlling risks with mobile credit.
At a briefing in February, CBA admitted that 140,000 M-Shwari customers had defaulted on their loans.
Borrowers are expected to pay their 7.5% interest at the end of a 30-day period or be rolled over for another month at 7.5%. After this they are struck off the register and banned from using the service.
KCB runs two mobile banking platforms - Mobi Bank and M-Benki - which allow customers to transfer money from their bank accounts to their mobile phones and vice versa.
They can also transfer money to other bank accounts, whether with KCB or any other lender.
The court case aside, Equity Bank says it hopes to partner with other banks in expanding the use of the new service.
This will deepen the countrys payments systems, which are increasingly shifting to mobile phones.
In its partnership with Airtel, Equity Bank will lease up to 60% of the telcoms network capacity, and Airtel will issue its subscribers with the banks branded SIM cards.
Given that four years ago the bank ventured into a similar product in collaboration with Safaricom, but which flopped, the market will be watching keenly how this innovation plays out.
Equity Bank CEO James Mwangi believes the product cannot suffer the same fate as the doomed M-Kesho: We now have control over the infrastructure. We have removed the middleman and, therefore, cannot blame anybody for the pricing of our products, he said at the announcement of the partnership with Airtel in May.
Equity is primarily a financial services provider, not a telecoms operator. All we have done with the mobile virtual networks is to digitise 12 of our existing products and offer another channel for financial transactions.
Bankers get proactive
Analysts suspect that mistrust between Safaricom and Equity Bank may have killed M-Kesho.
The authors of a recent book on the subject argue that Safaricom and Equity wanted to share revenues 50/50 but they later fell out over the profit-sharing formula.
So, is the initiative in the battle for mobile money shifting from the telecom companies to the bankers?
The banking lobby - in the form of the Kenya Bankers Association - is seeking a new platform that would allow real-time interbank money-transfer services.
In mid-April, the lobby invited bids from firms to offer the service that, once implemented, will allow banks to compete directly with M-Pesa - which derives its core competitive advantage from real-time settlement.
In our view, once the platform becomes operational M-Pesa might be forced to review its pricing; in the medium-term we expect M-Pesa to retain a significant portion of its market share riding on its expansive agent network, said analysts at Standard Investment Bank.
And the rest of East Africa is catching up. More firms seek to play in the space, especially in Tanzania, Uganda and Rwanda, where competition among mobile operators to dominate the mobile money-transfer services market is broadening at a quicker pace.
Some players are teaming up in efforts to provide cross-platform services.
In the coming months, the Bank of Tanzania is expected to release new regulation to increase oversight on mobile payments, and to make it mandatory for mobile-phone companies to offer money transfer services across networks.
Tanzania has 31.8m registered mobile money accounts but only a third are active.
Vodacom is the market leader with 5 million customers using M-Pesa, while Tigo Pesa is second with an estimated 3.4 million subscribers, beating Airtel Money and Zantels EzyPesa.
Recently, Tigo, Airtel and Zantel signed a partnership agreement.
Safaricoms M-Pesa is available to customers in more than 20 Tanzania banks, and a recent report by the GSM Association shows that Tanzania will overtake Kenya as the worlds leader in money payments in 2014.
The value of mobile money transactions in Tanzania stood at $17.7bn 2013 (equivalent to 54% of Tanzanias GDP), much lower than Kenyas $21.9bn (49% per- cent of Kenyas GDP) in the same year.
Across East Africa customers are also paying their insurance, social security, pay-TV services, electricity bills and water bills on mobile banking platforms.
In Uganda, mobile banking services have penetrated rapidly over the past two years.
Banks including Bank of Africa Uganda and Barclays Bank Uganda are trying to recover lost ground by rolling out mobile wallet products.
These offer customers access to integrated banking and mobile money networks suitable for flexible cash transactions in times of crisis, and banks stand to reap big from new sources of fee income and the retention of clients that had been swayed by lower transfer charges in recent years.
So far, MTN Uganda and Airtel Uganda have partnered with Crane Bank and Barclays to offer integrated transaction platforms to their clients, but techno- logy-related risks are yet to be addressed.
These include frequent system failures and fraud incidents experienced by local mobile money services, plus security risks tied to certain ATMs located in crime-infested areas.
Lack of sufficient coordination between the banking and the telecoms regulators has complicated matters, with the latter notably trailing on risk surveillance in a fast-changing industry dominated by young users, weak fraud-control systems and relatively poor earnings among operators.
Data by the Bank of Uganda shows the number of transactions in the mobile money services segment stood at 399.5m by close of December 2013, while the total value of transactions stood at $7.5bn during the period.
The number of registered customers rose to 14.2 million in the same period. These trends are now being seen across the continent.
The Alliance for Financial Inclusion reports that nine African countries can now claim more bank accounts created through phones than through traditional banks: they are Cameroon, DRC, Gabon, Kenya, Mada- gascar, Tanzania, Uganda, Zambia and Zimbabwe.
The race between telecoms companies and banks, and the alliances they will build between themselves, has only just begun. ?
By: Daniel L. Glaser
Each year millions of Americans use money services businesses (MSBs) to pay bills, cash checks, exchange currency, and send funds to family members and friends. Both domestically and abroad, money transmitters, one type of MSB, also serve the unbanked and under-banked. Ensuring that money transmitters continue to be able to send funds through legitimate and transparent channels requires an approach that balances the complementary goals of financial inclusion and financial transparency.
Money transmitters and remittances play an essential role in financial inclusion; over one-quarter of US households use non-bank financial institutions, including money transmitters.
Yet, money transmitters can also be vulnerable to abuse by money launderers and terrorist financiers. There have been a number of enforcement actions against money transmitters for the movement of drug trafficking, fraud, and human trafficking proceeds. There is also a long history of terrorist financing that has occurred via money transmitters.
In our effort to foster financial inclusion and combat money laundering and terrorist financing, Treasury has led inter-governmental efforts over the last 15 years to establish domestic and international standards for the regulation and supervision of money transmitters. Our efforts have helped create international standards and a domestic regulatory framework that protect consumers, expand financial access, and curtail money transmitter abuse by criminal actors and terrorist financiers. Due to these efforts, record volumes of remittances are being transmitted through legitimate and transparent channels.
We take seriously concerns that some money transmitters are having difficulty obtaining or maintaining bank accounts and that some banks are no longer providing banking services to money transmitters, regardless of risk. Such a development can erode both financial inclusion and financial transparency and work against the efficiency of financial systems.
To address these concerns, Treasury will continue to actively reach out and provide guidance to the private sector. We have conducted extensive outreach to money transmitters and the communities they serve to explain anti-money laundering/counter-terrorist financing (AML/CFT) obligations. We have also conducted outreach to banks to reiterate that providing services to a wide range of MSBs - even those deemed high-risk - is possible while still remaining in compliance with the Bank Secrecy Act. Additionally, we have worked with state governments to help achieve greater transparency and consistent oversight of the industry. It is our view that financial institutions that establish and maintain appropriate risk-based anti-money laundering controls and compliance programs will be well-positioned to appropriately manage such accounts, prevent illicit transactions and avoid enforcement actions.
In August, the President signed the Money Remittances Improvement Act of 2014. This legislation should improve the oversight of money transmitters by explicitly allowing the Financial Crimes Enforcement Network (FinCEN), and the IRS, to rely on examinations by states of these institutions. This, in turn, should allow for better allocation of state and federal resources, better targeting of higher risk MSBs, and improved AML/CFT compliance across the industry.
Moving forward, we at Treasury see four essential components necessary to improve the banking access of money transmitters: improve the clarity of our expectations for banks, strengthen money transmitter AML/CFT controls and compliance, further enhance money transmitter AML/CFT oversight, and continue ongoing outreach to financial institutions and the customers they serve.
Treasury is working with the federal banking agencies to update guidance to make clear that banks should not be treating all money transmitters as high-risk and that with sufficient controls, banks can effectively manage high-risk money transmitters.
To that end, we are working bilaterally - such as our recent meetings with United Kingdom financial officials - to address issues surrounding money transmitter accounts and we are also working multilaterally, including with the World Bank and G-20, to support a global survey on money transmitter account closures, and underscore the importance of effective supervision of money transmitters.
Finally, we are working with counterparts at the Financial Action Task Force to provide guidance to governments on effective supervision over financial institutions regarding these issues and to financial institutions on effectively identifying and managing the risks associated with MSB accounts.
This issue will remain a high priority for the Treasury Department. We believe our efforts to engage industry stakeholders, clarify expectations for banks, and further enhance AML/CFT compliance will help money transmitters continue to be able to send remittances through legitimate and transparent banking channels at record levels.
Daniel L. Glaser is the Assistant Secretary for Terrorist Financing at the US Department of the Treasury.