The Zimbabwean financial services sector has never been for the fickle.It takes a lot to survive in the territory, what with all the turmoil and uncertainty that characterises the industry.
Just ask any of the institutions that have survived the local financial services roller coaster.
Standard Chartered Bank, one of the surviving institutions is the one that looks like it’s in stormy waters. Earlier this week the Herald reported that the bank is downsizing local operations by closing six branches which, according to unofficial comment in the article, is all part of a larger plan to exit the country.
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There is no need for investors to panic just yet, the bank officially stated in the same report that it is not exiting the country completely.
According to the same article, some sources point to Zimbabwe’s indigenisation laws as the reason for this move, even though on a global scale Standard Bank had already made plans to shut down 8% of its branch network in a cost cutting plan.
There’s that scary phrase in banking again; cost cutting. Standard Chartered isn’t the first local bank to wield it. It all comes with the need to be competitive in an aggressive industry and is usually followed by contested layoffs.
Last time it was Steward Bank cutting costs when the bank was trying to claw out of a $24 million loss pit and gear itself as a tech centred bank that relies less on the brick and mortar model.
Eight months and eight branch closures later, the Econet owned institution has gone on to set up an agent banking model that rides on the EcoCash mobile money agent network. Steward Bank did away with most of its conventional branches and tapped into a huge potential “branch” network in the process.
The jury is still out on whether or not this agent banking model will be a huge success and act as a substitute the existing model. What is clear though is how this is designed to offer a greater advantage to Steward Bank by bringing banking convenience through mobile money points that have been the Zimbabwean majority’s access to formal banking.
So perhaps as Standard Chartered closes branches it should consider adopting a similar strategy? I doubt there’s any hope in seeing this happening with EcoCash but there are other options, perhaps Telecel?
The MNO’s 3600 plus agent network might be dwarfed by it’s rival EcoCash but it’s a huge potential network of virtual branches for a bank that is facing branch closure and diminishing visibility. Telecel has warmed up to banking sector before with services like its Gold Card that link its telecash mobile money wallet to the Zimswitch POS and ATM platform.
With a Telecash/ Stanchart arrangement Standard Chartered would be able to maintain a presence in the towns that are strategic business areas like Victoria Falls and Beitbridge and extend its visibility in other communities.
That being said the reality is this partnership shouldn’t be considered by Standard Chartered only. Other banks should be looking at this option.
Branch closure might not be on the horizon but the market for financial services that mobile money has carved out in the past three years is too big to ignore. The majority of Zimbabweans have turned to mobile money for formal transactions and its been an easier substitute for traditional banking.
Such relationships between MNOs and banks are not easily structured, these intricacies are what probably prompted Econet to have its own institution.
However a lack of initiative to embrace the next wave leaves any retail bank exposed to the monster of tech innovation. This time it’s in the form of EcoCash, Telecash and One Wallet; the three guys that have eaten traditional banking’s lunch money.
If you can’t get people to come to your bank why not approach them? Currently this involves making an arrangement with someone who is more in tune with the community as a financial centre (ie the mobile money agent), so perhaps the banks like Standard Chartered should do just that.