The Sunday Mail
THE breakneck pace at which the local mobile telecommunications sector is evolving is brewing a revolution in Zimbabwe’s national payment system, with mobile money – a key tool for mobile commerce (m-commerce)- gradually replacing cash, as plastic money’s appeal takes root.
Buoyed by record subscriptions epitomised by a mobile penetration rate of 106,4 percent, theoretically implying that the entire population owns a cellphone, mobile operators continue to push the frontiers of innovation, particularly after the recent launch of debit cards by Telecel Zimbabwe and Econet Wireless Zimbabwe.
The debit cards are linked to the operators’ mobile money platforms.
Econet launched EcoCash in September 2011, while Telecel launched Telecash on January 19 this year.
Stakeholders believe Zimbabwe has potential to become a significantly cashless society by year-end.
Overlay or value-added services currently being rolled out mean the mobile phone has metamorphosed from being simply a tool for communication into a device that allows payments on both local and international markets.
However, it is believed that failure by regulators to make the various platforms interoperable through compelling them to build interlinked systems might ultimately be inconvenient to the consumer.
On Wednesday, Econet launched the EcoCash debit card that is linked to MasterCard, a platform that is operated by New York-headquartered American multinational financial services firm, MasterCard Incorporated. The debit card, which is linked to the customer’s EcoCash account, allows the cardholder to make payments to local and international retailers.
Formerly, cross-border and offshore payments were made through a brick and mortar facility – the bank – which meant that one initially had to be a bank account holder in order to make such payments.
The rigidity of the banking sector, which still maintains a strict vetting regime on new applications, means that few locals have accounts.
Government estimates that more than US$7,4 billion is presently circulating in the informal sector, dwarfing the US$4,5 billion deposits banked by the financial services sector.
The Zimswitch Curse
It, however, seems that Econet’s debit card is for the elite as transactions are limited to MasterCard-licensed automated teller machines and merchants who accept MasterCard payment cards.
As difficult as it is to find reliable Zimswitch-supported point of sale (POS) devices locally, it might even prove daunting to find devices that are linked to MasterCard.
It is also not surprising, therefore, that only three million MasterCard debit cards will be issued in the five years to 2019. Considering that Econet has more than nine million subscribers, it means the new debit card will not be available to the majority of them. The mobile operator says more than 50 percent of Zimbabwe’s adult population uses EcoCash.
But it seems that the country’s biggest mobile company by both subscribers and assets is paying dearly for its fallout with local banks.
Banks have been pushing Econet to open up its transacting messaging system platform, the unstructured supplementary service data (USSD), a gateway to its mobile money service.
The company insists that banks should pay a tariff to gain access.
Econet intended to levy US cents 30 – far more than the average USc9 charged for an ordinary SMS.
As a result, Econet is excluded from the ZimSwitch Mobile platform.
ZimSwitch Mobile is a shared mobile banking platform and USSD gateway that used to connect member financial institutions to all three mobile operators.
It principally offers full USSD connectivity for banking-related services as well as SMS and Direct Airtime functionality.
While the platform has generally stiff-armed Econet, it has readily embraced its fierce rival, Telecel, effectively granting the operator unrestricted access to all ZimSwitch POS terminals.
There are more than 5 000 ZimSwitch points of sale across the country. Also, through the Telecel Gold Card, launched on July 16, cardholders can conveniently make withdrawals from any ZimSwitch ATM facility. Market watchers believe that it is this ability that perhaps makes the facility more “revolutionary” and “user-friendly”.
The card can be used to pay for groceries, DSTV subscriptions, restaurant and hotel bills, and many other goods and services. Its limitation is that it cannot make cross-border transactions. At the launch of the service, Telecel noted that it intended to integrate the card with international payment options such as VISA and MasterCard in the long term.
Perhaps what consumers might consider convenient about Telecash is its integration to ZimSwitch for the ZimSwitch Instant Payment Interchange Technology (ZIPIT) functionality where funds can be transferred instantly from any Telecash wallet to any ZIPIT-certified bank account (Wallet-to-Bank); or, alternatively, from any ZIPIT-certified bank account to any Telecash wallet (Bank-to-Wallet).
This allows funds to move seamlessly between accounts operated by banks and those that are operated by mobile companies, which is essentially a ground-breaking development in banking.
So, not only is the Telecash Gold Card a welcome innovation for bank account holders, it is also a transformative tool for the unbanked market.
Unofficial estimates suggest that more than 40 percent of Zimbabweans are unbanked.
There are groups who claim that mobile money services must be compelled by law to interlink in order to establish a “seamless global mobile money ecosystem” that is in the interest of consumers.
Currently, EcoCash, Telecash and One Wallet, which is offered by parastatal NetOne, exist as “islands of excellence that don’t talk to each other”. Experts say the introduction of debit cards by the mobile operators will help policymakers’ long-held ambition to promote use of plastic money, especially in an environment of tight liquidity.
Transacting and moving money, especially through m-commerce, has also become easy.
Regulation of local mobile money
Questions remain on whether or not regulators are keeping pace with the speed at which the telecommunications sector is developing.
As revenues from voice calls and SMS’ continue to drop, mobile operators are increasingly forced to introduce overlay services to thrive.
However, such innovations often stray into other jurisdictions.
There is always concern of who is supposed to regulate mobile money services.
Econet Wireless Zimbabwe group chief executive officer Mr Douglas Mboweni said last week EcoCash is moving about US$400 million every month — or nearly US$5 billion yearly. It is still unclear if they fall under the ambit of the Reserve Bank of Zimbabwe or the Postal Telecommunications Regulatory Authority of Zimbabwe.
Former advisor to the RBZ Governor Dr Munyaradzi Kereke warned in November 2013 that the services stripped the public of the protection the Banking Act provides.
The crucial question is: who is liable if the system collapses for whatever reason? Deposit-taking, according to Dr Kereke, is legally restricted to licensed financial institutions.
“Econet Wireless therefore cannot legally accept deposits from the public, even in electronic money form. The advice to the RBZ, Econet Wireless and Steward Bank is that they must quickly realign the provisions of the Terms and Conditions of the EcocashSave product to be consistent with the provisions of the law or needlessly risk penal applications of the law,” Dr Kereke was quoted as saying. Global financial crimes leader at Ernst & Young Mr Steven Beattie says “the current regulatory environment can best be described as ‘immature’ in terms of how it’s going to govern and provide guidance to the mobile-payment and mobile-money industry”.
Mobile money is relatively new around the world and regulators are debating on how best to tax the services, including defining the legal status of money that is stored in a mobile phone. Kenya, which launched arguably the first mass mobile money facility in 2007, the M-Pesa service operated by Safaricom, also grappled with putting the sector on a leash.
The Kenyan government subsequently pushed the Central Bank of Kenya to probe the sector and it was concluded that M-Pesa was not a banking business as defined by the country’s laws.
There was, however, consensus that there was need for a National Payment Bill to bring the service under the central bank’s control.
Overall, it is believed that consumers and the local economy will be the winners if telecommunications companies continue to fight for the hearts and pockets of customers.