South Africa’s cellular operators have been trying for years to crack the mobile commerce code, but haven’t been able to repeat the successes they’ve had in countries such as Kenya, Tanzania and Uganda. MTN, working with Pick n Pay, may just have found the key to success at home.

The mobile operator and the retailer this week took the wraps off a plan to offer consumers, especially those in lower income groups, access to free banking. And when they say “free”, they mean it: MTN customers who take up the offer don’t pay any service fees or transaction charges, only R29 upfront and once-off if they want a Visa-branded debit card to shop at places other than Pick n Pay and sister chain Boxer. They can even do money transfers without any third-party fees being levied. Customers don’t have to maintain a minimum balance, either.

Pick n Pay customers who sign up for the service don’t even have to be on MTN — which could prove key in securing a large user base — though the range of free options is more limited for those who sign up using a Vodacom, Cell C or Telkom Mobile Sim card.

Here’s how it works. Pick n Pay and MTN sell a co-branded Sim card, which provides users with access to the full range of MTN’s prepaid tariff plans for voice and data. Each time someone with one of these Sims recharges at a Pick n Pay or Boxer store, they receive 10% of the recharge value as bonus airtime.

They also receive double loyalty points through Pick n Pay’s “Smart Shopper” programme as well as quarterly rewards of airtime and loyalty points for using the Sim.

Pick n Pay deputy CEO Richard van Rensburg says the retailer had given serious thought to launching a mobile virtual network operator along the lines of Virgin Mobile, but decided instead to work with MTN to launch the co-branded Sim and to drive mobile banking solutions to its clients.

Shoppers who want to purchase goods at a Pick n Pay or Boxer point of sale dial a special code on their phones and provide a unique number that is displayed to the cashier. They can also withdraw or deposit cash at till points, buy prepaid electricity or pay for municipal services.

And a complex Fica (Financial Services Intelligence Act) registration process is not even needed. Basic accounts, called GN6 accounts, can have as much as R25 000 stored in them and can be used to make daily transfers up to a value of R1 000 — more than enough for the main target market. Those needing higher limits can provide their Fica documents in-store, which are scanned and stored using a special machine that partner Tyme (part of Bank of Athens, which has the banking licence) has rolled out countrywide.

MTN South Africa CEO Zunaid Bulbulia claims this is the first time consumers can get a “fully Fica’d bank account without going into a bank”.

“This is the first time there will be a bank account with no monthly fees, no fees for swiping and no need to have a minimum monthly balance. This is pretty compelling and has the potential to get the 8m unbanked people in South Africa [using financial services] more so than any other product.”

Though Bulbulia says MTN has no plans to become a full-fledged bank, there’s little doubt that this latest move represents a direct challenge to South Africa’s big banks. Van Rensburg describes the service as effectively giving consumers a “bank without a bank”.

It seems to be the smartest approach to mobile money in South Africa so far. The question now is this: can MTN and other mobile operators, working with retail partners, succeed in getting the unbanked into the formal financial services system where the banks have come up short?

Vodacom will announce its plans to relaunch M-Pesa soon. M-Pesa has proved a huge success in Kenya and Tanzania, but that hasn’t translated into success in South Africa. With a rethink in its approach, that could soon change, and a real turf war could break out between South Africa’s banks on one side and the cellular providers on the other.

What’s not to like?