More brain less brawn, please!

Darlington Musarurwa Business  Editor’s Brief
OBVIOUSLY incensed by the stubbornness and indiscipline of truant players in the market, the Reserve Bank of Zimbabwe (RBZ) – in typical spare the rod and spoil the child mood – is now seriously considering wielding the rattan cane.

A fortnight night ago, the central bank’s directive for all foreign companies to open local bank accounts gave the clearest sign yet of its new intentions. But we have been down this path before.

The idea of the RBZ turning itself into a Robocop of sorts that is determined to frog-march companies to banks is not appealing at all.

As is often said in financial circles, cash is a coward that, most often than not, is likely to flee at the slightest sign of danger.

I, however, believe that cash is not a coward, but a sleek customer that is always ahead of the curve.

Our recent history shows how the market is likely to react to heavy-handedness; and it is understandable that many fear that it will be an uncontrollable slide down a slippery slope.

While obviously indicating the structural weaknesses in the economy – of high imports relative to exports – the current cash crisis highlights the untapped potential inherent in the country’s national payment systems, particularly in using mobile telephony and broadband to facilitate ease of transactions.

The most dominant debate that is emerging in Africa today is how to situate new technologies within the developmental aspirations of States, especially of promoting economic growth whilst including previously marginalised groups.

Arguably, the cash crisis in Zimbabwe today mainly lies in difficulties in accessing physical bank notes rather than the value therein.

In its digital and electronic form – through debit cards and bank transfers, respectively – local money has retained real value as it is capable of buying goods and services.

But the conduit and outlets through which such transactions are conducted is still limited as Point of Sale (POS) machines and physical bank infrastructure remains insufficient to meet the current demands of the market.

Moreover, where they exist, the strictures of the formal banking system – which inconveniently require documents such as IDs and proof of residence, among others, before accessing debit cards (plastic money) – has excluded a large number of economically-active Zimbabweans.

In an economy where the informal sector or small to medium enterprises (SMEs) now account for 40 percent of gross domestic product (GDP), and employ more than 5,7 million people, it means most of the people are transacting outside the formal banking system.

Of late, while financial inclusion has been a favoured tag-line of the RBZ, there haven’t been substantive steps on the ground to use new technologies to bring all transacting individuals into the mainstream.

And this is precisely the mandate of the RBZ through Section 6(i)(e) of the RBZ Act [Chapter 22:15] and the National Payment Systems Act [Chapter 24:23].

Statistics show that there is scope to harmonise and link mobile banking and payment solutions to bank platforms to create a seamless ecosystem that makes it easier to move money and use it.

Almost every Zimbabwean owns a mobile phone.

As at September 30, 2016, industry regulator, Potraz (Postal Telecommunication Regulatory Authority of Zimbabwe), indicated that active mobile telephone subscriptions stood at 12,9 million, giving a mobile penetration rate of 94,8 percent.

Similarly, Internet subscriptions stood at 6,7 million people, or 50 percent.

This simply represents an available infrastructure that the RBZ can use as a vehicle to deliver financial inclusion.

However, there is a big problem: Interoperability, the ability of mobile banking platforms to entirely open up to the Zimswitch Shared Services platform of banks, and vise-versa.

Although various banks, through ZIPIT (ZimSwitch Instant Payment Interchange Technology), offer mobile money services, the movement of money among such services is not as convenient and as cheap as consumers would expect.

There needs to be a system where depositors can simply transfer money from their bank accounts to their mobile phone wallets at little or no cost at all.

Conversely, the reverse should be made possible, and this can only take place is a system that is highly interoperable.

The RBZ therefore needs to caucus with Zimswitch and mobile companies – Econet Wireless Zimbabwe, NetOne and Telecel – to explore ways of creating a platform where this would work.

Under the current system, the apex bank also needs to convince the operators transacting with the national payment system to move from a margin-based business to a volume-based business model.

Technology essentially maximises on efficiencies and reduces costs.

The current scenario where Steward Bank – majority-owned by Econet – charges US$1,25 to move money from one’s bank account to EcoCash, which is also a unit of Econet, is disheartening.

Such services should be free.

The more banks and mobile phone companies open up, the more the transactions and business, which is a win-win for everyone.

Bank queues simply represent an opportunity that can be monetised.

If the central bank succeeds in making it easy for the transacting public to move money between their mobile phone wallets and bank accounts, it will then need to invest to make sure that there is infrastructure for the public to easily use their mobile phones to transact – seamlessly and hassle free.

Instructively, Econet tried this with its Near Field Communication (NFC)-enabled technology called Ecocash Ta!

Through a sticker that is attached to the mobile phone and automatically linked to the wallet, a consumer can simply tap on the vendor or merchant’s micro Point of Sale (POS) device and the payment is automatically deducted from the wallet.

This suits the informal sector quite well. But as usual, investment in such hardware and software – which is once-off anyway – has to be made.

Educational and marketing campaigns to a population that is made up of digital immigrants (those new to technology) and digital natives (the tech-savvy youths) in equal measure also has to be financed.

It is definitely a worthy investment for the central bank. Main-streaming transactions, besides shedding pressure off the conventional banking system, helps policymakers to trace transactions and plan accordingly.

For the consumers, it helps build traceable transactions and a payment history that can be used as collateral.

In an age where the world is talking about the Fourth Revolution, which is driven by technology and innovation, there is need for the RBZ to change from being a technophobe institution to one that is technophile.

It is all about brain, not brawn. Sweden’s central bank – the Riksbank – has moved in the right direction.

Statistics show that in 2016 cash transactions made up barely 2 percent of the value of all payments made in Sweden.

Also, 900 of Sweden’s 1 600 bank branches no longer keep cash or take cash deposits.

Swedish buses are no longer taking cash, while retailers are “legally entitled” to refuse cash.

Even churches prefer card or phone payments.

This phenomenon speaks less of Sweden’s affluence than it does of its dogged commitment to become a cashless society.

It’s time for the RBZ to be pro-active in linking the various local payment systems that currently exist on the local market.

Leaving this to the caprices and whims of profit-driven business is not a sound strategy.

Quite frankly, it’s time the central bank comes from behind the curve, and take its rightful role to lead.

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