The Sunday Mail
. . . national payment systems need to be interoperable first
A REAL “culture shock” awaits tobacco farmers who will have to open bank accounts for the first time in order to access proceeds from their crop during the marketing season that begins on March 30, 2016.
Not only will they be baptised by the bureaucracy and strictures that are often imposed by brick-and-mortar banking institutions, but they will have to painfully adjust to a national payment system that seemingly not only punishes customers for compliance but also make it difficult for them to transact.
According to the latest communication from the Reserve Bank of Zimbabwe and the Tobacco Industry and Marketing Board, all tobacco farmers will have to open bank accounts, as no payments will be made in cash at the auction floors.
The conditions have however been relaxed.
Instead of contending with the a strict vetting process that is considered normal procedure in opening bank accounts, farmers will only have to present their national identity card and grower number in order to have an account opened.
Furthermore, bank charges for maintaining the bank account will be waived.
It is unquestionable that such a facility is pro-growth and pro-development as it allows farmers to maintain a traceable footprint of transactions that can be used as collateral for future borrowings.
It also formalises a money spinning sector that has remained thoroughly informal, especially for the new crop of farmers that benefitted from the agrarian reforms.
Ideally, it sets the foundation for a banking and savings culture that is usually a bedrock for developing economies.
Without a sufficient savings stock, it is increasingly difficult for the financial services sector, which is a critical pool for resources for both industry and commerce, to play its intermediary role in the economy by allocating resources to sectors that need them the most.
Ordinarily, such a policy will have been most welcome in an environment where the national payment systems were integrated and affordable, which is not the case at the moment.
Of course, there are real fears that once that money has been locked in bank accounts, there will obviously be an added and inconvenient cost to access it.
Quite often, bank branches are few and far between, particularly in the rural areas where most of the tobacco farmers live.
Visiting one to make a withdrawal costs both time and money.
It, therefore, makes it difficult for account holders to transact, especially in cases of emergency. In such circumstances, plastic money, especially in the form of debit cards, will be most ideal for the rural folk.
But, again, this means that there is need for an additional investment in point of sale machines for rural business owners, most of whom are naturally averse to take up additional costs in putting up such an infrastructure.
The RBZ, as the custodian of the national payment system, can assist in this regard.
Clearly, a situation where between 70 percent and 80 percent of the local population is unbanked is unsustainable for the economy going forward.
Similarly, an economy where more than 80 percent of the population, according to RBZ statistics, transact in cash is untenable.
But the major import of my argument is that there is need for the wholesale integration of bank accounts and electronic wallets (e-wallets) that are currently being provided by mobile phone service providers.
If electronic wallets offered through mobile money (m-money) services such as EcoCash, Telecash and OneWallet are integrated to bank accounts, consumers – farmers included – would find plastic money relatively attractive.
Recent statistics from telecommunications regulator Postal Telecommunications Regulatory Authority are quite revealing and telling.
It is convenient to use mobile money.
While unofficial estimates from Marc Sternberg, the managing director of South African-based Spark ATM Systems, suggest that there were less than 200 functional ATMs in the country by 2013, figures from Potraz show that the country’s mobile penetration rate was measured at 95,4 percent at end of December 2015.
Also active mobile subscriptions stood at 12,8 million in the period.
On the overall, the total value of transactions on mobile money platforms rose 16,3 percent to US$533 million in the quarter to December 2015 from a quarter earlier.
The number of mobile money subscribers and agents used by mobile money services also increased to 7,3 million and 33 300 respectively.
Encouragingly, cross network transfers, which were implemented by the fourth quarter of last year, generated transactions worth US$2,3 million, which represents only 0,4 percent of the total transactions.
It is also comforting to learn that Econet’s platform, through EcoCash, is now linked to six banks – CBZ, ZB, NMB, Banc ABC, Agribank and Stanbic.
It makes it convenient to move money from one’s bank account to an electronic wallet.
But there are obvious concerns about the charges that are attracted by this convenient service.
Monetary authorities are duty-bound to ensure that, in the interests of a promoting cashless society, there is a seamless and affordable ecosystem between banks and mobile service providers.
There is obvious need for the RBZ, through moral suasion, to engage all banks to ensure that their platforms are open to all mobile money services.
If need be, the costs also need to be subsidised in order to ensure that the ordinary transacting public can afford the convenience offered by interlinked platforms.
Currently, the costs are prohibitive.
Further statistics from Potraz indicate that Econet controls about 97 percent of the market in terms of market subscriptions, while Telecel and NetOne have 3,1 percent and 0,01 percent of the market in that order.
What is absurd about this statistic is that there are some services that are limited to particular platforms.
For example, consumers can only buy electricity tokens using the OneWallet provided by NetOne, which is however unpopular with mobile money subscribers.
In the three months to December, NetOne only handled mobile money transfers worth US$55 000 compared to total transactions worth US$533 million.
It becomes unreasonable not to rope in other service providers as vendors of the electricity tokens. These are some of the unreasonable protectionist measures that are limiting mobile commerce.
All these services have to be liberalised.
In sum, the RBZ needs to ensure that the system is wholesale and allows the ease of moving money from a bank account to an electronic wallet and to the service provider.
This can only be possible if banks, service providers and retailers are able to share platforms at an affordable cost.
There might also be need to use part of the Universal Services Fund – a levy of 1,5 percent of gross annual turnover that is charged on telecommunication companies – to ensure that the services are subsidised and become cheap for users.
Without such reforms, it will become difficult to promote plastic money or to deepen mobile money services and transactions.
Feedback: [email protected]
