MTN’s insurance technology unit, aYo, which recently passed the 15-million-customer mark, is expanding to Nigeria and its home country of South Africa as the group seeks to increase earnings from its financial services business.
MTN has been aggressively diversifying its business in recent years, pursuing new revenue streams in mobile data, technology and related communications services to businesses, wholesale network services, fintech, and digital services.
aYo, a microinsurance fintech operator, operates in Ghana, Uganda, and Zambia. The unit has added 5-million customers (50 percent) in the last year and aims to reach 30-million customers by 2025.
AYo now hopes to replicate its success in its two largest markets, which are in very different insurance industries.
“The dynamic between Nigeria and South Africa is unique. The behaviors are distinct. “Mobile money penetration is different,” aYo CEO Marius Botha told Business Day SA.
“In South Africa, we’re looking to disrupt areas where we believe people are receiving poor value.” We have a sizable population of self-employed people and people with variable incomes. A traditional insurance model in which monthly premiums are deducted by debit order is not possible. It is ineffective for that population and segment.”
Insurance has proven profitable in recent years for competitor Vodacom, which has seen insurance policies increase 23.4 percent to 2-million in the last year, with revenue increasing 13.5 percent.
In the six months to June 2021, AYo earned $3.9 million (R56.7 million) in service revenue and $6.5 million in premium income.
AYo began as a 50-50 joint venture between MTN and Momentum Metropolitan Holdings (MMH). Over the past two years, MMH reduced its stake to 25% before exiting the venture entirely, leaving MTN as the sole owner.
Initially, the partnership relied on MTN’s mobile and distribution networks in its operating countries while leveraging MMH’s insurance expertise.
MTN has stated that it will collaborate with other insurers on the venture, with Sanlam a possible partner.
MTN and Sanlam, Africa’s largest non-bank financial services group, will form a $100 million (R1.51 billion) joint venture in 2021 to offer life insurance, phone insurance, car insurance, and basic savings products to the continent’s rapidly expanding consumer market.
“Our assessment is that there are still exorbitant profit margins in funeral [cover] in SA.” There is definitely room to provide good value.”
As a microinsurance provider, premiums are typically low and are funded through customer airtime and mobile wallets.
As a result, the company is pursuing scale, signing up as many users as possible in order to become profitable. Depending on the country, aYo offers three main insurance products: life, hospital, and device cover.
“We discovered that our hospital cash product is the most appealing in terms of tangible benefits.” That makes sense because it provides customers with immediate benefit value if they are in an accident or have a specific illness that necessitates an overnight stay in the hospital.
In Nigeria, the company intends to offer insurance products by capitalizing on the increased penetration of its mobile money platform.
Apart from competing with Vodacom and more traditional insurance players, when aYo launches in South Africa, it will face a branding conflict due to its similar name to Iqbal Survé’s Ayo Technology Solutions, which is listed on the JSE.
“We have no affiliation with them,” Botha stated.
“The word or term Ayo comes from West Africa and means to bring joy or happiness.”
He stated that MTN has a strong association with the term “ayoba,” with apps and marketing campaigns bearing the same name, and that it is “unfortunate that we have this association.”
“We’ll use a different strategy just to make sure there’s no brand confusion… But we’re not going to avoid using the term.”