Mastercard to buy stake in MTN’s $5.2 billion fintech unit, MoMo
Yesterday, we all saw the synergistic play of two giants when it was announced that Master Card Inc will be taking a minority stake in MTN Group’s fintech (Mobile money) Company. Here is my take on how this could play out for key parties.
What is in it for Mastercard?
1. Investment Opportunity: An avenue to take a stake in one of the Fastest growing verticals in Africa, riding on the backs of a key regional player; MTN. MTN’s Fintech is growing in Key Markets like Ghana, Uganda, Côte d’Ivoire, and Nigeria. With Payments and the E-commerce ecosystem leading the way and services like International remittances and Loans meeting market needs.
What is Mastercard Investing in? A massive fintech operation; MTN Group’s Overall fintech revenue grew by 17.9%* YoY in Q1 2023. Their active Mobile Money (MoMo) users went up by 5.2% to 61.7 million in Q1 2023. While Fintech transaction volumes increased by 38.8% to 4.1 billion. Results from Q1 2023 indicate key markets are showing great top-line growth namely;
MTN Rwanda – Fintech grew by fintech revenue (+39.4%*).
MTN South Africa – Growth growth of 31.8% YoY
MTN Ghana – Fintech revenue grew 24.4%*
MTN Cameroon – fintech (+12.8%*)
MTN Nigeria – Fintech revenue grew by 8.5%*
MTN Côte d’Ivoire’s service – Fintech growth (up by 7.3%*)
2. Expansion into the e-wallet market. Mastercard can further distribute its core products and launch new products/services as well using the massive distribution channel of MTN (Mobile money Agents and merchants). Certainly, this will enable Mastercard to participate in the wallet space in Africa. Even with a minority stake in MTN’s MoMo, they can make great use of the partnership.
What is in it for MTN?
MTN Group spun its Fintech business as a separate operation a couple of years ago. The Fintech operation was one of the Telco giants’ plays into becoming a Tech company, not just a Telco company. Here is the likely value for them with this move;
- This is In line with MTN’s Ambition 2025. Building and Leading digital solutions in Africa, harnessing the power of MTN – building the largest technology platforms, and the Fintech is just one of them. It is therefore no surprise if they have agreements with selective strategic partners to introduce a potential minority equity investment into the fintech business, which is still growing. This move and cash injection will support the acceleration of the growth of their fintech platform across Africa.
- Improving returns and reducing risk. After massive growth for over 20 years, MTN Group got into that phase of Optimization. Reducing its risk and Improving returns. They started Pushing for value-based capital allocation. One of the initial moves was Outsourcing non-core operations in Key markets, divesting from its Tower business (Sold to IHS towers).Of recent they are in motion to exit from high-risk markets or markets with little commiserate value to them. Namely; MTN’s decision to exit the operation from MTN Yemen. Currently in the process to exit MTN Afghanistan through the sale of MTN’s entire shareholding to a wholly-owned subsidiary of M1. Presently, MTN is also evaluating the exit of three operations in West Africa over the medium-term; namely MTN Guinea-Bissau, MTN Guinea-Conakry, and MTN Liberia, the MTN Group (Currently has received an offer from Axian Telecom, which is being evaluated).
- Accelerated Growth in its Fintech business: Integration between Mastercard and MTN’s wallet systems across these markets will drive growth. It will drive massive expansion in services like International remittances/Cross Border payments. It will also help then Compete and crack open some tougher markets. Opening up their Fintech in markets where traditionally Banks have dominated (e.g., Nigeria).
What does this mean for the market?
The possibilities are endless. I am hoping beyond the ability to dominate the space both can co-create products and services that can meet existing needs in the market. There has been a lot of talk about using Fintech solutions to create Financial inclusion. A lot has been focused on just the Consumer market, but SMEs/SMBs/MSEs that are the bedrock of the African Economy.
In conclusion, I believe both giants have what it takes to bring value to the SME/Enterprise space beyond tactical and operational moves like a reduction in transaction fees, etc. Small businesses are lacking support in Africa; Access to funds, Lack of proper knowledge on how to run their business, basic and affordable digital tools to help operate and scale their business. This partnership can easily address that and in doing that we can effectively start bridging the financial inclusion gap.
What is your expectation from this partnership between both? Let me know in the comments below.
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