1Introduction and Context 3 2Global Context on Mobile Money 4

1Introduction and Context

FMT would thus like to engage a consulting company to help it engage all the key stakeholders that will help it answer the questions regarding the performance of MPESA South Africa.

With a focus on financial inclusion and the role of mobile money, the 2015 South Africa FinScope Survey indicates the following information:

• 
  Levels of financial inclusion remain stable at 87%.
  
• 
  About 31.2 million (84%) of adults are formally served; that is they have a bank and other formal non-bank product/service(s).
  
• 
  While overall inclusion figures have not changed substantially, the make-up of inclusion in terms of product usage has changed:
  
  • 
    The percentage of the banked population increased from 75% in 2014 to 77% in 2015.
    
  • 
    The percentage of adults relying exclusively on informal mechanisms to manage their money declined from 6% in 2014 to 3.4% in 2015.
    
• 
  A breakdown of the critical area of remittances reveals:
  
  • 
    Total remittances have declined slightly (from 23 - 21%), as well as the frequency with which people are remitting. This is interesting to note considering that household incomes and cellphone-based remittances have increased from 1.5m to 1.9m. This could potentially be linked to fewer people being financially aided by friends and family.
    
  • 
    31% (11.6 million) of the adult population use cellphones to manage their finances, but mainly to buy airtime.
    
  • 
    Channels used for remitting money underwent the following movements:
    
    • 
      Through a bank: increased by 36% (from 2.5 million to 3.4 million).
      
    • 
      Through a supermarket: increased by 50% (from 2.2 million to 3.3 million).
      
    • 
      Through a cellphone: increased by 27% (from 1.5million to 1.9 million).
      

Furthermore, although smartphone penetration in the adult population is narrowing the digital divide with about 18.9 million adults having smartphones, digital adoption is not necessarily progressing at the same pace – with only 40% of adult population using smartphone applications. The study shows that 37% of the population use digital payment mechanisms on a monthly basis; the other 63% opt to use traditional brick and mortar branches to pay bills, send remittances or transfers.

Overall, the study shows that there has not been a dramatic change in financial inclusion in South Africa. FinMark Trust aims to continue with its forward-thinking through its investigation into the drivers and inhibitors of mobile money services in South Africa and other developed markets with particular emphasis on the journey of MPESA in South Africa.

2Global Context on Mobile Money

According to the 2015 GSMA Report on the state Mobile Money, the service was available in 93 countries, however:

• 
  Only 51 of those were considered to be under an enabling regulatory environment. More regulators are recognising the importance of creating an open and level playing-field
for mobile money services, although policy improvements are still required to ensure mobile financial services reach the full addressable market and achieve financial inclusion. These objectives need to address the balance of not only managing the cost of ‘owning’ the customer, but also the associated industry risks of doing so.
  
• 
  Only 19 of these markets had more registered mobile money account-holders than bank account-holders.
  
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  Lastly, only one-third of these markets had 10x more registered agents than bank branches.
  

3Project Objectives

The study should achieve the following:

1. 
   Develop an assessment of Mobile Money in South Africa through with a particular emphasis on the deployment and performance of Vodacom MPESA in South Africa. The study should look at the macro overview of the South African environment and its conduciveness to mobile money and why the unbanked do not react positively to mobile money in South Africa.
   
2. 
   Overviews of the factors that affect banking and mobile money in South Africa as opposed to other markets in Africa. What data do the Financial services providers use in South Africa to offer banking services to the underserved? This should involve:
   
   1. 
      Assessment of the conduciveness of the regulatory environment to Mobile Money in South Africa as opposed to other markets in Africa.
      
   2. 
      Assessment of the distribution network for Vodacom MPESA and marketing approaches used by Vodacom affected the performance of Vodacom M-PESA.
      

1. 
   What was Vodacom MPESA’s unique value proposition and Brand appeal to the Vodacom customers?
   
2. 
   Include an explanation of how other relevant information/processes, such as data, price, banking infrastructure and branding of the product affected the performance.
   
1. 
   Identify and explain opportunities to launch a Mobile Money solution that can serve the underserved in South Africa. The study should help to answer the question, is there an opportunity for Mobile Money in South Africa and how should it be harnessed?
   

4Project Scope

The following institutions will be within the scope:

• 
  MPESA Agents across the country
  
• 
  MPESA Customers
  
• 
  Central Bank of South Africa
  
• 
  MPESA Billers
  
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  MPESA Business partners in South Africa and these could include Banks or Big Retailer shops
  

5Methodology