Vodacom to expand financial services in South Africa

Vodacom is planning to expand its financial services offerings in South Africa with new products, including investing, lending, and merchant services. The company expects its South African financial services business to generate nearly R4bn in revenue this year. This move is part of Vodacom's strategy to diversify its revenue streams beyond traditional telecommunications.

The company's financial services business in South Africa generated R1.9bn in revenue for the six months to end-September, a 6% increase year on year. CEO Shameel Joosub said Vodacom welcomes plans by the South African Reserve Bank to create a dedicated licensing framework for fintech operators. This would allow mobile money providers to operate independently of banks, giving Vodacom greater flexibility to develop products.

Currently, mobile money providers in South Africa must partner with banks, which can slow product development and rollout. Joosub said a separate mobile money licence would accelerate the introduction of services that have proven successful elsewhere in Africa. Vodacom has already introduced services such as insurance, airtime advances, and lending and payment solutions, building a financial services customer base of about 15-million in South Africa.

Insurance has emerged as the division's strongest growth driver, with revenue increasing about 18%. Joosub said Vodacom plans to export its insurance capabilities to other African markets while broadening its financial services portfolio. The company previously launched M-Pesa locally but later withdrew the service after it failed to gain traction.

The potential regulatory changes come as competition in financial services intensifies, with retailers and consumer-facing companies moving into banking and financial products. Shoprite and Investec recently announced a partnership to expand financial services offerings, while Pepkor continues to build its presence in the sector. However, Joosub downplayed the competitive threat from retailers and digital banks.

Vodacom's South African strategy differs significantly from traditional mobile money models, with a focus on offering different services. Unlike Kenya and Tanzania, where mobile money platforms are central to daily transactions, South Africa has a well-established banking system. Across Vodacom and Safaricom's operations, financial services customers increased 15% to 108-million over the past year.

The financial services drive forms part of Vodacom's broader strategy to reduce its dependence on traditional telecommunications revenue as voice services continue to face structural decline. Voice revenue in South Africa is expected to keep falling as customers migrate to data-based communication services. Financial services, fixed connectivity, internet-of-things, and digital services now contribute 27.4% of group service revenue.

Key points

• Vodacom expects its South African financial services business to generate nearly R4bn in revenue this year.
• The company has a financial services customer base of about 15-million in South Africa.
• Financial services, fixed connectivity, internet-of-things, and digital services now contribute 27.4% of group service revenue.