MTN scraps mobile money business in South Africa

People walk past an outlet of South Africa's MTN Group in downtown Cape Town, November 10, 2015. REUTERS/Mike Hutchings

JOHANNESBURG (Reuters) - South African mobile phone operator MTN Group MTNJ.J has pulled the plug on its local mobile money business, saying it was not viable in a country where around three quarters of the population already has a bank account.

Mobile money services that allow customers to transfer funds using their phones have proved hugely popular in some other parts of Africa, particularly where people have less access to traditional bank accounts.

MTN launched its South African service in 2012 after the success of Safaricom's SCOM.NR M-Pesa in east Africa convinced some executives the service was the industry's next growth area.

However MTN, Africa's biggest wireless phone group, now joins Vodacom VODJ.J in abandoning the service in South Africa.

“The operating costs of providing a mobile money platform has become prohibitive,” MTN said in a statement on Thursday.

Both Safaricom and Vodacom are controlled by Britain's Vodafone VOD.L.

MTN said its decision did not mean a complete exit from financial services.

“MTN is still committed to remaining a significant player in the financial services space and we are exploring opportunities in financial services space and other adjacent sectors,” it said.

Reporting by Tiisetso Motsoeneng; Editing by Mark Potter