Good news for mobile and banking customers in South Africa

Thanks to their respective diversification strategies, banks and mobile networks in South Africa have begun venturing into each other’s markets.

However, this could ultimately increase revenue on both sides while increasing competition to the benefit of their customers.

Some of the country’s major banks offer mobile virtual network operator (MVNO) services that provide customers with affordable data plans via physical or eSIM. Examples include Capitec Connect, Standard Bank Mobile, and FNB Connect.

Similarly, mobile networks are starting to offer financial services to their customers. These range from customer-orientated services, such as the VodaPay and MTN Mobile Money (MoMo) apps, to contactless point-of-sales systems for businesses.

An interesting fact about these diversification strategies is that both sides facilitate each other’s entrance into their market, creating another revenue stream.

Providing mobile services can be a cost-intensive venture, given the capital expenditure (capex) needed to roll out the necessary infrastructure and maintain it to provide a reliable service.

Vodacom has consistently spent over R11 billion on capex per year since 2022. That does not account for the technical skill and experience needed to build and operate a national telecommunications network effectively.

Mobile operators also need to acquire radio frequency spectrum, which refers to the frequency bands in which they are permitted to operate. The bandwidth suitable for cellular networking is limited, making it a scarce and expensive resource.

However, as the rise of MVNOs in South Africa has shown, a business does not need to own spectrum or infrastructure to provide mobile services.

Instead, they can buy wholesale services from mobile network operators to provide to their customers.

This is similar to how an Internet service provider (ISP) does not need to own any fibre infrastructure to provide users with access to the Internet.

Cell C was the first to begin offering wholesale services to MVNOs in 2006 when it partnered with Virgin Mobile.

Since then, all other major telcos have begun offering the same services. MTN was the first to jump on the bandwagon in 2013, followed by Vodacom in late 2024 and Telkom in early 2025.

These banking MVNOs have seen major success since launching their offerings, with Capitec Connect accumulating 1.4 million subscribers, FNB Connect 1.3 million, and Standard Bank Mobile 300,000 customers by the end of 2024.

These mobile services have also proved very popular among customers, with telecommunication products receiving the highest net sentiment ratings out of all banking products, according to DataEQ’s South African Banking Sentiment Index for 2024.

While several banks have diversified into telecommunications, South Africa’s two biggest telcos, Vodacom and MTN, have entered the fintech space.

For instance, MTN’s Momo app sells itself as a banking app, offering all the essential features, such as paying bills, applying for loans, recharging airtime, convenient online payments, and playing the lotto.

Similarly, VodaPay is marketed as “the only app you need”, allowing users to access exclusive deals, pay bills, send money, order takeaways, and buy airtime and data bundles.

Depositing funds into a VodaPay wallet and transferring money to other VodaPay users is free, while withdrawing cash from the account attracts a fee.

MTN has adopted a different strategy, charging users a fee to withdraw cash, transfer funds to another MoMo customer, or send a money voucher.

Both mobile networks also offer business payment solutions. VodaPay and MTN MoMo offers businesses of all sizes contactless point-of-sale (POS) machines. Vodacom also offers business funding.

The POS machines can be linked to accounts on their respective platforms.

MTN and Vodacom are able to offer these services in a similar way to how they enable banks to provide customers with MVNO services — by partnering with a bank to provide the regulated financial services.

Vodacom has partnered with Bidvest Bank and MTN with African Bank to secure and facilitate payments between users and third parties. MTN has also partnered with Investec to introduce PayShap support on MoMo.