We estimate a discrete choice model of demand for banking and mobile money services for Botswana, Eswatini, Lesotho, and South Africa. Our results suggest that mobile money services are highly price inelastic, while bank services are more price elastic. This suggests that mobile money providers are able to charge higher mark-ups over costs than banks are. There is some evidence that bank and mobile money services are substitutes in at least Lesotho. However, the degree of substitution is weakened particularly for younger consumers and consumers in rural areas, who are likely not in a position to use banking services as readily as a substitute. Our counterfactual simulations show that while reductions in monthly bills will increase uptake of banking services to a small degree, the uptake of mobile services would not increase substantially. Introducing a new fintech entrant that is cheaper than banking services would likely attract a small but significant market share and may help expand the uptake of financial services. This is especially the case in Botswana and South Africa. Indeed, we have observed successful entry by TymeBank in South Africa, which has attracted large numbers of customers in a relatively short space of time.
The paper is available here.