InnBucks goes from transaction fees to monthly charge – why the shift in business models?

Mobile banking provider InnBucks recently announced that they would be doing away with transaction fees and having customers/users pay a one-time $1/month fee and proceed to transact to their heart’s content.

Source: InnBucks/Via X

We sent questions to InnBucks regarding whether or not this was a permanent shift in model or just a promotional offering but the financial services provider hadn’t gotten back to us at the time of publishing. From the wording used by InnBucks it seems this is a more permanent measure as they described the charging system as follows on Twitter in a reply to a customer:

“Good Evening [name redacted], thank you for reaching out to us, your first transaction of the month will trigger a $1 deduction, and afterward, InnBucks will not charge any fees for the rest of the month. The $1 charge only applies for the month you transact .^NM”

InnBucks/Via X

Naturally we had some questions regarding how effective such an approach can be or at the very least what the company hopes to achieve by adopting such a seemingly aggressive position. It’s also important to note that whilst there users will no longer incur charges from InnBucks there is still a 2% intermediate money transfer tax (IMTT) whenever users transact. Contrasted to InnBucks old transaction fees of 3% (IMTT tax + Innbucks 1% charge) + swipe charges where applicable this new model will see users instead part with 2% whenever they transact and the monthly $1 transaction fee.

This positions the service as cheaper than before for anyone intending to transact anything over $33 during the course of a month. For InnBucks wallet users looking to send significant amounts throughout the course of the month this new model could lead to significant savings. Let’s have some test scenarios to play out what this looks like:
Scenario A – user sends $100 four different times during the course of the month. Their transaction charges amount to $12. Under the new model this user will be charged 3% once and then 2% the remaining 3 times – amounting to $9 in transaction fees – a $3 saving. The higher your transaction values the more significant your savings are.

Scenario B – user makes low value transactions after funding their InnBucks wallet at Simbisa outlets after failing to get change. Let’s say they make 8 transactions of varying amounts – five $2 airtime, two $5 bread runs at the grocery store, and a $5 haircut. This users’ transaction fees amount to 75c (without accounting for swiping charges).

On the surface it seems as though low value transaction customers will now be paying more under this new model than they were before whilst high-value transaction customers will be saving significantly more than they did before. Which part of this spectrum you belong in is knowledge to you and you alone as InnBucks doesn’t share many details regarding the nature of its customer-base.

Personally, my usage of InnBucks has mostly consisted of sporadic low value transactions and for me it will most likely be more expensive under this new model. Perhaps the hope is that once I’ve parted with a $1 on my low value transaction I’m now incentivised to use InnBucks for the rest of the month but when you consider that I’ll still incur a 2% charge in addition to the swiping fees from time to time – it’s hard to see the upside of using InnBucks at the moments

What we know however is that historically, mobile wallet transactions are low value and high volume. If InnBucks customers fall into this stereotypical bracket that has come to define mobile money then they perhaps stand to make more as customers

Given the outlined savings scenarios we went through above this could be an attempt to incentivise people to start using InnBucks for higher value transactions as there are savings are clearer in that regard than in the low-value spectrum

How effective can such a measure be?

It’s hard to predict how effective this model will be given that the nature of InnBucks’ new model is not something we’ve seen attempted in this market. What’s more common is zero-rated transactions:

Many mobile money/remittance services have removed transaction fees as part of attempts to either gain market share and encourage the adoption of their services but the degree to which this is effective is not exactly clear.

The best examples we can attempt to isolate and derive meaning from are the Telecash and OneMoney attempts in 2014 and 2019 respectively. We can try to isolate their quarterly mobile money user numbers from the period they enacted the zero-ratings to try determine if there was a surge in user numbers during those periods.

*Important to acknowledge that TeleCash was also in its first year of existence and thus the growth might not be solely attributable to the promotion
** In this quarter the regulator only reported active mobile money subscribers a different metric to the rest of the numbers in the table. In the 3rd quarter of 2016 EcoCash had 3,260,270 subscriber and a year later this had grown to 3,738,056  

The case of TeleCash is interesting because it shows marginal market share gains of 2% a year after their promotion was complete; we can use this as a lower bound of sorts. A counter-argument could be that mobile money was a relatively new concept then and market enthusiasm might have been higher than it is now but that’s not quantifiable so let’s not factor that into play too much.

Data around EcoCash is also relatively noise in its own way. In the quarter after its own promotion users did grow by nearly 280k but their market share at the time slid (-0.8%). It’s hard to tell what really drove the growth of their competitors during this period but perhaps the announcement that the National Social Security Authority (NSSA) would be enabling pension payments via OneMoney (named OneWallet at the time) helped steer growth in their favour as they were the biggest growers during this period (13.9%).

The case of OneMoney’s promotion is interesting because to the untrained eye you could argue that it clearly worked as the mobile money service gained 8% market share after the promotion. It’s also hard to narrow down the effects of the promotion because the companies never disclose when these zero-rated transaction promotions end meaning something unrelated could be at play (as I think is the case). It’s important to keep in mind that 2020 was a significant year in which 3 events happened that incentivised usage:

1. The Zimbabwean government announced it would be disbursing COVID-19 relief funds and recipients could only receive this money into a OneMoney account. Many suggest OneMoney was chosen for this over the more popular EcoCash because it is government-owned. The government would reportedly offer this grant to around 450,000 recipients in the short term. Between Q4 2019 and Q4 2020, OneMoney grew by 467,519 subscribers… Coincidence? I think not.
2. 2020 also saw a money changing boom that saw informal forex traders overwhelm the financial system. Throughout the year OneMoney and EcoCash agents faced multiple bans and eventually the Central bank banned all mobile money operations in the country as they blamed these money changers for fuelling exchange rate volatility and money laundering. 
3. Lastly, EcoCash the market leader was forced to join ZimSwitch (Zimbabwe’s national switch) making it interoperable with other mobile money players – and therefore ensuring it was easier to send money regardless of which mobile money provider you used.

Given that these 3 monumental events occurred during the period under review it’s easy to see why OneMoney leapt in popularity and also incredibly harder to quantify just how much the promotion at the end of 2019 played a part in driving usage growth. 

All of this is a long-winded way to say that it’s incredibly hard to know just how effective these promotions are and how much they impact usage. From the two examples from our data that are least noisy (TeleCash in 2014 and EcoCash) we can say that in the quarter following a promotion TeleCash grew by 104,803 whilst EcoCash saw 279,860 new users onboarded. If the market today still reacts the same way – you can see why InnBucks would want to incentivise usage using this tactic. 

Perhaps the bigger takeaway here isn’t how effective the promotions are but how circumstances and events occurring around the same time a promotion of this nature is effected can have a tangible outcome on user growth – maybe moreso than the promotions themselves.

What makes it harder to analyse InnBucks?

In the case of InnBucks it will be even harder to determine the effectiveness of such a tactic given that the company doesn’t consistently report the number of users it has so the only points of reference we have regarding the size of the user base include a number of 1.5mn pointed out in a section of the website. Another point of reference is a revelation made in September of 2023 by Simbisa CEO Daisy Zinyemba who claimed that InnBucks had 1.8mn users at that point in an interview with Rest of World.Because of this along with the lack of financial information around InnBucks it’s hard to infer how this $1/month promotion will affect InnBucks’ financial position.

Given that this incentive has been put to customers, another question we had presently was how people can take advantage of it and which list of services/products are on offer to InnBucks users:

• Peer to peer money transfers (i.e remittances)
• Buying airtime (Econet & NetOne)
• Paying utility bills ( electricity, insurance)
• *Merchant integration (Simbisa brands, SafeGuard security services and Zuva service stations) among others

*I asked InnBucks (via its WhatsApp customer support lines) if they could share an up-to-date list of merchants accepting InnBucks as this would make it easier to use the service and I didn’t get a response…

At a glance, this list of services pales in comparison to the incumbent (EcoCash) InnBucks is in competition with;

*The company receiving the “✅” is not necessarily the sole provider of the service but offers a superior experience or more transacting options e.g InnBucks allows users to buy airtime from multiple mobile networks whilst EcoCash is limited to one MNO.

To be fair to InnBucks building up a merchant network takes time and the market is not necessarily winner takes all where they have to be better than EcoCash or else it’s a bust. This comparison just serves to highlight how much work the service has to do to become as embedded in the marketplace as an established competitor is.

Overall, the reports that InnBucks has become cheaper to transact largely depend on whoever is reading as for some it has become cheaper but for others it might be significantly more expensive than before… As for the reports claiming that service is offering free remittance services, you’re best served ignoring those altogether if this kind of an announcement has any bearing on who you use as your mobile money service provider.

Impact on the bottom line?

Because Simbisa Brands doesn’t share InnBucks metrics publicly in their reporting we’re going to have to clutch at straws to try and determine a revenue range this new promotion could be netting for Simbisa. We’re going to be going off the aforementioned 1.8mn user base number previously shared and to get a fairer revenue projection from this new model we’ll use a number of informed projections;

Scenario A – Let’s say the 1.8mn users claim made last September by Simbisa CEO does in fact refer to active InnBucks subscribers – this new model would therefore generate US$1.8mn on a monthly basis.

It’s important to keep in mind that this is a best-case scenario that is unlikely. GSMA data also indicates in their reporting that the Southern Africa region had 5 million active (30-day) mobile money accounts in their latest reporting on mobile money. It’s hard to believe that InnBucks makes up 36% of that number – though it could be that where GSMA is giving data for accounts active in the last 30-days, InnBucks number could be for the last 90 days which is the more commonly used number locally. Historically active mobile money subscribers also tend to be lower than the reported numbers and to try create an estimated range of InnBucks active subscribers we had to be a bit more creative;

Scenario B: Let’s say InnBucks’ Active 30-day accounts are in line with the Sub-Saharan Africa average which is 28% according to GSMA in their most recent State of Mobile Money report. This would give us a 30-day active user base of 504,00 users which in turn would mean a lower but still significant revenue figure of US$504,000. Let’s therefore use this as our lower bound revenue figure.

Scenario C – This relies again on GSMA’s calculations but this time taking into account Active 90-day accounts which is the standard we’ve seen more commonly used and applied locally in the past. This metric raises the average active account tally to 36.68% and using this metric would suggest that InnBucks has around 660 240 active subscribers and revenue would be in the $660k/month avenue.

Using these estimates this new model could generate anywhere between $504k-US$1.8mn in monthly revenue – therefore justifying why InnBucks is even taking the chance with this model. It could ultimately mean better cash flow for the FinTech putting it in a better position to compete for increased market share or usage… Given that InnBucks now operates as a microbank as well, perhaps the monthly fee is an apt model to adopt.