Comment — Imagine waking up one day to find MTN Uganda operating electric purses, issuing debit cards and prepaid cards, taking fixed deposits, and investing some of the money they get in bonds and securities.
Industry experts apparently believe this to be a fairly accurate dream.
The road to the reality of an 'MTN Uganda bank' could well have started a few years ago.
In 2021 MTN Group announced a revised 'Ambition 2025' strategy. "Going forward, we believe that Ambition 2025 will position the business to capture the exciting opportunities across our markets ...." said President and Chief Executive Officer Ralph Mupita.
That same year, May 2021, saw the separation of the MTN business from the core telecom business, which resulted in the establishment and license of MTN Mobile Money Uganda Ltd (MMMUL).
In Uganda, around 40% of the adult population is unbanked, so there lies an opportunity. Uganda is dominated by a very informal market, which is a huge potential customer base that stastistics indicate has been missed by 25 commercial banks, four microfinance deposit-taking institutions, three credit institutions and more than 300 non-deposit-taking microfinance institutions.
The Ambition 2015 strategy
Part of the strategy has been to grow MOMO Pay merchants and the results are already out. MOMO merchants enable business to receive payments from customers and businesses for goods and services. They can also pay salaries, pay suppliers and transfer money to the bank.
As of February 2023, the MMMUL announced a MOMO pay merchant milestone with the number of business services crossing the 200,000 mark. I have learned from reliable insiders that the goal is to increase this number twofold, to 400,000.
According to MTN audited financial results for the period ending December 2022: "the MoMoPay platform has gained significant traction....Our initiatives helped to drive a 27.8% expansion in the number of transactions on our platform to 2.6 billion and transaction value growth of 39.8% to Ugx. 92.3 trillion."
On top of this, MTN has added more Service Centers in emerging and current towns.
Analysts predict that these Service Centers can easily be transformed into bank branches where the current more than 16 million MTN customers can conduct financial transactions.
MTN also has over 16,000 mobile money agents scattered all over the country. Analysts say, these agents could be important allies when the 'MTN bank' dream comes true.
Expand the ecosystem
According to experts, MTN is expected to expand her ecosystem to a crucial stage of being able to offer large loans, trade on stock exchanges, trade in government securities, and accept fixed deposits.
This is emphasized in the 2022 MTN FY report: "In fintech we look forward to launching new products to drive growth in our MoMo verticals, with a priority to further accelerate growth in advanced services revenue."
Customers of MTN were able to purchase MTN shares in 2021 through MTN MoMo via USSD or the MyMTN app. According to observers, MTN users will soon be allowed to purchase government securities.
Via Mokash, MTN is currently providing micro-loans ranging from UGX 3,000 to UGX 1,000,000 at 9% monthly interest. MTN is reportedly already profitable from Mokash.
Mokash features a savings function as well, and customers can save from as low as UGX. 50 shilling to any amount depending on their KYC.
According to analysts, the other significant next step will be to give slightly larger loans to customers by increasing loan offer from the existing UGX 1,000,000m limit. In the same vein, MTN, which has been urging customers to save through Mokash, will soon begin accepting fixed deposits from clients.
On top of all this, MTN already makes international money transfers possible.
All MTN MoMo user can send and receive money internationally, thanks to MTN MoMo Remittance. The money received from outside of Uganda is credited in Ugandan shillings to the customer's MoMo account.
For the convenience of customers, the currency changes in both circumstances are carried out automatically. Analysts claim, this alone is already shrinking the remittance market for the banks.
Analysts expect that soon, MTN-Uganda will be able to meet the standard for operating a commercial bank in Uganda as more transactions pass through its system. A similar development happened In Nigeria, with the MTN payment service bank rolled out In April 2022.
The potential impact on Uganda banking by an 'MTN bank'
The Ugandan traditional financial services system would definitely be greatly impacted by an 'MTN bank' license, even if it might not be similar to a conventional banking license given that it would allow MTN to accept deposits while also allowing its customers to open savings accounts.
'MTN bank' customers would ordinarily include individuals and small businesses, which would put MTN in direct competition with the over 20 existing commercial banks, who depend on deposit volumes and transactions from individuals and small businesses, to remain profitable.
An 'MTN' Bank would also be able to issue debit, prepaid cards, and operate electronic purses. It would also invest some of the deposits they collect in bonds and Securities. This means the current banks may just have to offer rates that are more competitive.
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Enter FlexiPay
According to analysts, Stanbic Bank, Uganda's largest commercial bank by assets and branch network is fully aware of MTN's efforts and the threat they pose to her ability to survive in the long run. The market leader was forced to relaunch FlexiPay, a brand that is thought of as a counter brand.
FlexiPay enables people without bank accounts to establish wallets, send and receive money, deposit money into their wallets using mobile money, and access their bank accounts using their phone numbers.
Other features are; Send and receive money on your phone from other Flexipay users at no charge; Access to cross platform transactions i.e. deposit or withdraw cash between the App, Mobile Networks and your bank; Make bill payments with ease; Shop and pay multiple merchants for goods and services.
However, the problem with FlexiPay is that it runs on a bank model which is restrictive. Already the bank has been slow on opening bank agents-agency banking.
Well, as it is, if an 'MTN bank' happened today, it would have the most coverage and immediately be the largest bank by customer base and value, with over 16 million customers, 400,000 proposed merchants, over 160,000 mobile money agents on top of the many Service Centers dispersed across the country.
Are Ugandan banks ready for this monster?
