In 2011, Visa, a worldwide company that handles payments, declared its plan to purchase Fundamo, a South Africa-based company. Fundamo provides mobile financial services for mobile network operators and financial institutions in developing nations.
The agreement, sealed at $110 million, aimed mainly to help Visa connect with the affordable consumer market in Africa. Back then, Visa was performing well as a global provider of payment cards, but most of its customers were in the middle-upper income bracket.
Many individuals in the lower income group needed an internet connection to perform card transactions, whether at an ATM, on the internet, or using a Point-of-Sale machine.
Moreover, there was an expectation that Africa would become a significant area for payments, thanks to Safaricom’s mobile money platform MPesa. This platform was launched in 2007 and had expanded to 17 million users by December 2011 in Kenya alone.
The challenge was low mobile internet usage, around 4 percent according to the International Telecommunication Union. This meant many people in Africa couldn’t use cards for payments.
Visa aimed to tackle this by acquiring Fundamo. Around the same time, Visa’s rival Mastercard was finalizing a $37.4 million partnership with the International Finance Corporation.
This partnership, signed in May 2012, was to help microfinance banks expand rapidly and develop new products while reaching difficult areas.
Experts consider Visa’s acquisition of Fundamo a poor investment.
“Visa bought Fundamo unexpectedly and it didn’t align with their plans. They moved on,” said Osaretin Victor Asemota, a growth partner at AnD Ventures and Africa partner for Alta Global Ventures.
Though Visa invested in more fintech companies recently, the unsuccessful investment casts a shadow over their approach in Africa. Asemota mentioned Visa lost by not letting Fundamo adopt the telco-led agent banking strategy.
“Firstmonie remains the most successful bank-fueled agent network in Nigeria, but it’s isolated. No one is building on top of it, similar to how Opay is enabling,” stated an industry expert.
Mastercard has adopted a distinct strategy when investing in Africa. Initially, it acquired ownership stakes in two of Africa’s largest telecom operators, which also possess extensive fintech operations. These telecom companies rank among the primary mobile money agent providers.
In 2021, Mastercard and Airtel Africa expanded their commercial agreements and established a fresh commercial framework valued at around $100 million. This arrangement aims to strengthen their collaborations across various regions and aspects, including card issuance, payment gateway, payment processing, merchant acceptance, and remittance solutions.
Recently, Mastercard also signed a Memorandum of Understanding for a partial investment in the fintech sector of MTN Group, Africa’s largest mobile network operator.
This investment elevated MoMo’s valuation to $5.3 billion, positioning it as Africa’s most valuable fintech firm. In addition to serving 60.5 million customers, MTN MoMo experienced a substantial 18.1 percent growth in active agents, totaling 1.3 million.
“Mastercard isn’t acquiring MTN’s fintech division. Instead, it’s becoming a significant partner by obtaining up to 30 percent ownership of the business. While more details will emerge, it seems like a long-term investment, not an immediate objective,” commented Emeka Ajene, founder of Afridigest.
For Mastercard, the priority doesn’t necessarily revolve around reaching the final stretch of the payment ecosystem, as telcos attempt to access remote regions for airtime sales, as per Ajene.
A 2022 report from McKinsey & Company projected a 7 percent growth in payments. In Africa, revenue expansion in payments is forecasted to be nearly three times swifter, driven by efforts to expand financial inclusion.
Nonetheless, mobile money is expected to take the lead. However, the adoption of mobile money is still in its nascent stage; thus, card adoption will continue to surge due to the burgeoning agent banking sector in Africa.