South Africa’s convergence war has been fought on two fronts simultaneously:
- Mobile operators have pushed into financial services – payments platforms, digital wallets, money transfers and insurance.
- Banks have pushed into connectivity – mobile virtual network operators (MVNOs), airtime, data the phone number as an anchor for the customer relationship.
The previous two pieces in this series (read them here and here) examined the banks’ structural vulnerabilities in that fight: the IMSI dependency, the host repricing dynamic, the data asymmetry, the wholesale cost the banks absorb every time a customer opens an app.
Briefly: the banks don’t own the phone numbers or the network access behind their own Sim cards, and the operators are using data pricing in ways the banks cannot match. That analysis stands. What those pieces didn’t examine was the constraint on the other side.
The operators have not advanced freely. They have built at the boundary of what South Africa’s regulatory framework permits – and that boundary has held.
The Banks Act has made independent deposit-taking structurally impossible, forcing both Vodacom and MTN to work through licensed bank sponsors for every financial services product they have launched in South Africa.
Vodacom launched M-Pesa in 2010 with Nedbank as its banking sponsor. When that failed, M-Pesa was relaunched in 2014 with Bidvest Bank replacing Nedbank as sponsor – an attempt Vodacom discontinued on 30 June 2016.
MTN’s MoMo platform today operates through African Bank. The operator provides the platform. The bank provides the licence. Neither can do what the other does. South Africa’s high levels of banking penetration were a primary reason M-Pesa could not achieve critical mass in South Africa. They are also a structural advantage the operators have not been able to cross.
That is the wall. It is also the wall that is beginning to move.
The regulatory wall
South Africa’s Banks Act of 1990 is clear on this point. No entity may accept deposits from the general public as a regular feature of its business unless registered as a bank. Registration requires approval from the Reserve Bank, which applies strict financial, governance and safety standards that no telecommunications operator is structured to meet.
The consequence is direct. An operator can build a payments platform, a digital wallet and a money transfer service. But it cannot hold deposits or participate directly in the national payments system without a licensed bank as intermediary. Every rand that moves through MoMo clears through African Bank. Every rand that moved through M-Pesa cleared through Nedbank, then Bidvest. The operator processes the transaction; the bank settles it.
Read: The trap inside South Africa’s banking MVNO boom
Holding deposits is a fundamentally different business from running a network. Deposits accrue interest – money the bank owes its customers. To cover that obligation, the bank must earn enough on what it lends out to pay depositors back. That requires a dedicated team managing the bank’s money and investments, the ability to assess and approve loans, and a risk management discipline that telecoms operators are not built around.
Then there is the capital. International banking safety rules (Basel III) – adopted by the Reserve Bank – require banks to hold a financial cushion proportional to the risk of their loan books. That cushion must sit in the banking subsidiary, not in network assets or spectrum licences. For a telecoms operator with institutional shareholders, this creates a direct conflict. Shareholders expect regular dividend payments funded by the network business. Diverting money into a banking subsidiary means either cutting those dividends or raising additional funding – neither of which shareholders welcome. Telecoms investors don’t want to own a bank. Banking investors don’t want to own a telco. A company trying to be both ends up valued less than either one alone.
It is likely why, despite building some of the most sophisticated financial services platforms in Africa, neither Vodacom nor MTN has pursued a full banking licence in South Africa. The wall is not only regulatory. It is operational, organisational, and financial. The licence is the visible part. The capital and dividend consequences are what make crossing it too costly to justify.
The wall is starting to move, albeit slowly
The Reserve Bank has been working since 2018 to open South Africa’s national payments system to non-banking entities. The reform is now in its most advanced phase. In March 2025, the Bank published draft proposals identifying the payment activities non-banks can perform without holding a banking licence, and the requirements that would apply. Public consultations on those drafts closed in April 2025.
The process has not moved as quickly as the original timeline suggested. As of June 2026, the Reserve Bank has published revised proposals and invited stakeholder comment by 15 June, with the final framework expected in the third quarter of 2026. The National Payment System Bill – the primary legislation enabling the reform – had not yet been introduced in parliament as of June 2026. If tabled in late 2026, enactment could follow in 2027, with operational provisions phased in thereafter. In February 2026, the Reserve Bank published a consultation paper on Vision 2030+, suggesting that payments modernisation is now a sustained multi-year programme, not a single regulatory event.
The direction of travel is clear even if the timeline has slipped. What the reform delivers – when it arrives – is direct access to the infrastructure that moves money between institutions, without needing a licensed bank as an intermediary. For MTN’s MoMo and Vodacom’s VodaPay this means independence in the payments layer: the ability to process and complete transactions without routing them through African Bank or any other licensed partner. It does not deliver a banking licence. It does not permit deposit-taking. It does not remove the capital and dividend constraints that make a full banking licence not worth the financial cost. The wall is being lowered in one section. The rest of it stands.
What the wall protects
The reform opens up the payments layer. It does not touch the deposit relationship. Those are different things, and the difference is where the banks’ real advantage sits.
The operators can see when a customer makes a payment. A bank can see everything: what comes in, what goes out, how much is saved, how debt is managed, when financial stress begins to build. That picture exists whether or not the bank has a mobile network. The MVNO adds detail between banking transactions. The banking relationship is the foundation – deeper, richer and built on a licence the operators cannot hold without the kind of capital commitment that conflicts with running a telecoms business.
Read: The MVNO trap deepens as the battle moves to data
When direct payments access arrives, MoMo and VodaPay will process transactions without a bank partner. They will not hold the deposit. They will not see the savings rate. They will not know the credit history. The reform strengthens the operators in the payments space. It does not touch the layer where the banks’ position is most defensible.
The closing window
The banks are not losing this war. The MVNO revenue numbers are real. The switching costs are real. The deposit relationship is an advantage the operators cannot reach under any regulatory framework likely in this decade.
But the payments layer is being opened, on a timeline now measured in years rather than decades. The operators become more formidable in the space where they already compete – without crossing into the territory the banks still control. That territory is valuable. It is also finite in the protection it offers if the banks do nothing with it.
The components exist. The regulatory protection exists. The window will not stay open indefinitely.
- The author, Pambos Soteriades, is a telecoms and strategy consultant with 28 years’ experience in African mobile markets, including executive roles at Vodacom Group and Telkom Kenya. He has worked in the South African MVNO market on both the operator and MVNO side. He is not affiliated with, employed by or invested in any institution, operator or MVNO mentioned in this article
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