MTN's Mobile Money wallets held by Ubank are in 'ring-fenced' account

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MTN entered into a partnership with Ubank in 2020.
MTN entered into a partnership with Ubank in 2020.
  • MTN's Mobile Money is a big money spinner across a number of markets on the continent.
  • There were 602 000 monthly active Mobile Money users in South Africa by end of December 2021.
  • MTN chose Ubank in 2020 as its partner in its Mobile Money service launched that year.

MTN says its Mobile Money (MoMo) wallets at partner Ubank are "ring-fenced" after the financial institution was placed under curatorship by the Reserve Bank's Prudential Authority this week.

The mobile operator entered into a partnership with Ubank in January 2020 to facilitate the financial transactions on the service. 

On Monday Reserve Bank governor Lesetja Kganyago announced that Ubank had been put under curatorship, as its the capital adequacy ratio had dipped to 3%, down from 23% in 2020. The ratio is below the minimum regulatory requirement set for the bank. Ubank continues to be open for business. 

MTN spokesperson Jacqui O'Sullivan, said "all the deposits taken into Mobile Money wallets are held in trust by Ubank in a ring-fenced, dedicated business deposit account."

O'Sullivan said MTN was engaging relevant stakeholders following the central bank's decision.

MoMo is an app-based service that allows users to store cash, pay bills such as DStv accounts, and electricity, buy airtime, shop and do money transfers using their cellphone without visiting a bank. The service, which is popular across a number of MTN African markets, is aimed bridging the gap between banked and unbanked consumers. 

The company's latest financial statement indicated that MoMo had garnered 4.2 million registered users since its launch and had 602 000 monthly active users as of 31 December 2021.

The service has proved to be a significant income generator for MTN, and the company is in the process of setting up a Mobile Money Payment Service Bank in Nigeria, which would allow it to extend its services to broader banking services. 

Transactions performed on the Mobile Money platform (MoMo) platform increased by 56.8% to $239.4 billion (~R3.6 trillion at the time) in the 2021 financial year.

According to MTN, Mobile Money "remains a prime growth driver as it plays a critical role in enhancing financial inclusion."

Ubank, formerly known as Teba Bank, is owned by the Teba Fund Trust which is administered by  National Union of Mineworkers and the Minerals Council of SA, with three trustees each. The beneficiaries of the trust are the bank's customers. KPMG South Africa has been appointed as the bank's curator.

Kganyago said the move to place the bank under curatorship was a proactive measure to mitigate the adverse consequences on Ubank's depositors, and to preserve the stability of the South African banking and financial services sector as a whole. 

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