Explosive growth in pre-paid money vouchers in South Africa has killed the mobile wallet as a viable payment instrument says Herman Singh, CEO of Beyond Payments, the payment innovation arm of Standard Bank.
Standard Bank operates its own virtual currency mimoney, which consists of a voucher number delivered to the recipient's cell phone via SMS. The bank has also teamed up with retailer Spar on a P2P money transfer service, in which SMS vouchers are redeemed at Spar stores throughout the country.
Singh says that over R100 billion is generated in sales of prepaid airtime and electricity annually, while over 2.5 million money vouchers valued at over R4050 each, are created and redeemed every month in South Africa.
He argues that vouchers create a slick and painless way for individuals to load and move funds using their phones without the need for a wallet.
"Lower income segments in this country are asking for less 'banking bling' and more utility and value based offerings," he says. "These solutions must be extremely simple to use and available almost everywhere at extremely low costs. This explains the boom in prepaid money voucher sales."
Singh points out that of the close to 20 wallets that were launched in the last four years in South Africa only a handful remain, struggling to survive within a niche market or trapped in small closed loop systems, which are usable only by a single banks' clients on their own ATM's.
"It's open systems that will win. Consumers want freedom of choice, not freedom from choice," he says.
Singh also takes a potshot at M-Pesa, the Kenyan mobile money transfer system operated by Safaricom that has recently launched in South Africa in partnership with local rival bank Nedbank: "The launch of M-Pesa in South Africa has seen slower uptake and I contend that a major cause is the prevalence of alternative voucher based solutions in RSA."
He argues that the sheer simplicity of ubiquitous money voucher schemes is more appealing to credit-challenged consumers in lower income markets than complex mobile wallet propositions.
Says Singh: "The true innovation champions in Africa are those deploying less features and more value, less Western fad elegant obsolescence and more basic down to earth home grown African ingenuity."