South African operator MTN has closed down its mobile money service on the grounds that it was no longer commercially viable. MTN Mobile Money debuted in 2012 and since then had acquired more than 2 million users. But on Thursday MTN chief consumer officer Larry Annetts said, “The operating costs of providing a mobile money platform have become prohibitive.” He added, “MTN is still committed to remaining a significant player in the financial services space and we are exploring opportunities in [the] financial services space and other adjacent sectors.” The company said it plans to introduce “innovative and customized” financial services products “in the near future.”
Mobile money has been looking very strong for the past several years. Having started as an alternative financing method for the so-called “unbanked” in developing economies, it took off in sub-Saharan Africa and then spread to more developed countries, including in the West. However, the example of MTN South Africa may be an indication that there are limits to the growth of this type of service. In economies like South Africa that already have a vigorous banking sector, the uptake may be too low, and therefore the costs to an operator of offering banking services may simply be too onerous. In fact, the industry leader, Vodacom’s M-Pesa, has already pulled out of South Africa. In May Vodacom said that it was unable to get enough traction in the country due to the strength of South Africa’s banks. Mobile money cannot expect unlimited expansion, it appears. It is still best suited to markets in which there are few alternatives.