The recent increase in ATM and Zimswitch fees by local banks is counterproductive and somewhat ill-informed for me. The world is rife with enablers for plastic and mobile money including NFC and mobile payments solutions, yet the Electronic Payments Association in Zimbabwe (EPA) are pushing in the opposite direction.
Somehow, the EPA seems to not be thinking about providing innovative solutions for electronic money, but about getting the maximum juice out of the situation and in the process maintaining a cash dependent ecosystem to support their main stream banks’ falling interest income.
Shouldn’t this be the very organization which should collectively be popularizing electronic banking alternatives to the prevalent mobile money solutions from competing service providers, especially the mobile network operators (MNOs) ?
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Zimbabwe is already using multiple foreign currencies which are expensive to get for trading and the situation does not need unnecessary toll gate hurdles in adopting plastic money solutions. Perhaps a counterargument would say that by making cash withdrawal fees expensive, they can encourage the use of electronic money. Unfortunately Zimbabwe is still a cash economy and despite how many channels currently exists, there is always a need along the money movement chain where cash is required until a reformed ecosystem is implemented.
As a result there is surety that customers will continue to withdraw all their cash at once from the banking halls soon as it hits the account.
Granted, ATMs are expensive and there is need to recuperate costs and service them, and yet banks keep buying them with no plan except to pass the cost directly to the consumer defeating the convenience they are supposed to give.
As if this is not clear enough you have banks like ZB Bank and the now defunct Allied Bank and Tetrad Bank introducing even more expensive cash recyclers which will not work in Zimbabwe in the current economy. Various options exists including retail teller machines and voucher systems that are less cash-dependent and much cheaper, but not a single bank has explored these or has shown innovation in alternatives.
Perhaps one of the worst affected services in terms of limitation in potential is the Telecash Gold card that is dependent on Zimswitch as Telecel is not a bank and does not have equipment of its own. There will be lesser pressure from Gold card holders to use ATMs and Point of Sale (POS) terminals as opposed to agents as they become ultimately cheaper.
In my opinion, ATMs and POS should not be a channel for milking customers for non-funded income to such an extent that banks begin to consider them a real source of revenue. These additives should be complimentary services that one gets from banks for convenience and for which one should pay token fees for transacting.
In fact in the recent requirement by the RBZ that banks offer their strategies for financial and financial services inclusion, I thought I would see some banks offering ATMs and POS for “free”.
The increase in switch fees will force the few customers who were beginning to appreciate plastic money regardless of bank to stick to devices from their own banks. This takes us back to the primitive argument of who has the most ATMs and POS or who has the most branches. The competition thus goes back to who has the most infrastructure, and not the best service. It takes us back to the situation where one selling point has numerous POS devices from numerous banks a scenario being driven out through infrastructure sharing in telecoms. The time will soon come when the same infrastructure sharing that is passing in telecoms will hit the financial services sector.
The fees increase will also push more customers to avoid banking services altogether and instead opt for mobile money which banks are not yet a strong challenge to 4 main operators Ecocash, TeleCash, One Wallet and Nettcash.
The only reason that some individual customers are still using a bank account is purely because that is where their salary is deposited. Mobile money has however been making advances and will very soon crack the formula that will allow salaries to move en masse from banks to mobile wallets.
As such, these restrictive transaction fees are nothing more than accelerants for that move. The scenario also gives credence and relevance to the upcoming sponsor cards like the MyCash card and MyClub card which are providing more channels through which plastic money may be utilized, albeit not yet seamlessly.
It doesn’t take much to see that these solutions or the value store use case that does not have banks in them will soon find its place in the informal sector. City of Harare has already introduced electronic parking cards and electronic vendor cards as basic examples.
As a last word, with the coming in of the new payments legislation currently tabled in Parliament, a lot of things that banks are taking for granted may be eroded overnight, especially in terms of fees and charges related to electronic and mobile commerce.