Electrum is a South African fintech company that uses modern technology to make transactions easier. Electrum appointed Mthente to conduct research on Value-Added Services (VAS) in South Africa, with the primary objective of investigating the VAS landscape, understanding the current and future landscape of VAS in the country, and develop recommendations for building a VAS business for Electrum’s clients.
In the context of this study, VAS is defined as providing a way for banking, retail and mobile network operator (MNO) customers to purchase digital products such as airtime and data, lottery tickets, conduct money transfers and pay bills. The total market value for VAS transactions is estimated at a little over R565 billion per year, with retailers facilitating the largest number of transactions.
An estimated 700 million VAS transactions take place in South Africa every month, with prepaid airtime and data purchases making up the largest percentage of these transactions. Prepaid airtime and data also constitute the largest share of the market in value terms, followed by money transfers and utility payments.
This study aimed to update research that was conducted in 2019, in order to understand changes in the VAS landscape. The study used a mixed methodology approach, which included a consumer survey, industry research through expert interviews, and desktop research, to establish the current and future trends in the market and understand the impact of COVID-19 on consumer behaviour and purchasing patterns.
In the study, we identified that while there have been limited changes in the VAS ecosystem over the past two years, there have been significant changes in consumer behaviour. Most prevalent among these have been increases in the purchasing of prepaid airtime and data, sports betting and travel and ticketing. Despite the growing popularity of sports betting among consumers, providers are concerned about the ethical and regulatory stability of the sector, making it unlikely that this sector will become a strategic priority for consumer-facing businesses. Perhaps the most impactful finding of the study is the asymmetrical impact of VAS provision for businesses: while positive consumer experiences with VAS purchases are unlikely to draw a large number of new clients, failure to deliver strong value and good customer service with VAS products is likely to drive existing customers away.