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Zimswitch fees increase counterproductive to plastic money

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) ?

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.

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8 thoughts on “Zimswitch fees increase counterproductive to plastic money

  1. “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.” — This is not correct, even after the increase Bank transactions are still way cheaper compared to mobile money (MNOs) charges.

    1. The idea of a retail bank is that they are custodians of your money, or provide you with credit should you comply and should you require it.

      The prevalent use of banking services in Zim involves keeping custody of money. Savings!
      So bank fee increases would mean higher (ONGOING!!) charges to keep custody of your money as well as transaction charges.

      The prevalent use of Ecocash is for money transfer. Meaning charges are once-off.

      I hope you follow. The rest, your brain can infer.

  2. Erm the article you linked to about the increase is over a year old, hardly “recent” unless theres a fresh increase thats just happened?

    1. Thanks for pointing that out hey! We’ve now linked to the proper article. yes it’s a fresh increase.

  3. Would have expected, at least, a breakdown of the “before” and “after” of these bank charges than just a link to another article.

  4. $4 that too much 1 reason i used zimswitch was because ost me .50c to do a cashback transaction. now it makes more sense to keep my money outside zimbabwe and use international cards only 2% at POS and $5 for atm transaction. defeating the whole purpose in this country this means people will resort to withdrawing all their cash in 1 transaction and use telecash, ecocash etc cz they cheaper.
    Times are tough this is when you act like how innscor and delta do reduce prices

  5. This time l agree with you.

    This just shows how greed and less technical, visionless leadership we have leading the technical drive.

    We have people who does not know how to fix a PC being appointed as CTOs in companies.

    Now, do we still blame Masiwa for buying Steward Bank and intergrate Ecocash with it?

    How are MNOs who do not own banks going to keep prices down!

    How many jobs are killing by such move?
    Imagine some website which was selling cheap goods and fully intergrated zimswitch because it was cheap!

    I recall this guys pushing hard for Ecocash to be fully intergrated with there greedy project, even pushing for gvt attention. The monster’s head is now coming out(rine manyanga hariputirwe)

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