Vodafone Cash Free Mobile Money Strategy comes at an interesting time

Telcos in Ghana reacted to COVID19 by removing mobile money transaction fees for GHS100 and below.

Then Vodafone went a step further: they removed fees from all transactions to all networks.

The reaction online was swift:

It appeared though that some wondered what Vodafone was trying to achieve here:

To which I said:

I want to expand a bit on that here.

Basically, VodaCash is leaning into users sending any amount for free, instead of worrying about users splitting their transactions into multiples of GHS100 or below to avoid paying fees. They had to do it too for a number of reasons.

The time we find ourselves in
COVID19's impact means people are looking for safe and affordable ways to transact.

With that in mind, the COVID19 free transfer policy probably gave VodaCash insights into the market’s reaction to free transactions and what it does for mobile money adoption. People will certainly be more sensitive to fees than usual and be more willing to use other mobile money platforms.

People have very little reason to switch mobile money platforms: The Environment
MTN Ghana has 98% market share in value terms, as at 2019. Vodafone really needs to grow their mobile money customer base if they are to compete. At the same time, people have an incentive to use the same mobile money platform as those they transact with a lot. Especially if they’re to avoid interoperability fees which are slighted higher. There’s a switching cost for users and by this single move its been significantly reduced.

Among other factors, launching relatively late may have contributed to them having roughly 2% of the market

VodaCash was launched 6 years after MTN first introduced their mobile money product into the Ghanaian market. By which time, in general, mobile money was strongly associated with MTN.

Interesting time for VodaCash
Generally, it takes 3–5 years for successful mobile money firms to reach profitability. Interestingly, this is Vodafone Cash 5th year.

But from a cost perspective, due to the digital nature of transfers, VodaCash can afford to make transactions free. The cost to them is fixed and tiny, regardless of the amount sent over the platform.

Interesting time for the industry
It can be argued that in response, MTN Momo could also reduce/remove fees to win any little market share VodaCash has. But they won't.
One main reason:
Any such move from MTN will be at a time when the telecom regulator is trying to control MTNs pricing to control their dominance. A response through fees is out of the equation (at least for now). VodaCash is safe in that knowledge.

If Vodafone Cash were ever going to embark on this campaign, they couldn't have picked a better time than this. Of course, eventually, fees will go back up and some users will leave but they’ll definitely retain some. Some of which will use VodaCash for value-added services like data bundles etc.

Thanks for reading.

Analysis on Ghana relevant issues - Farming - Economics - Statistics. Also blog on http://SimpleEconomicsBlog.wordpress.com/. You're awesome!