Zimbabwe is now almost completely a cashless economy. The latest report on payment systems from the Reserve Bank of Zimbabwe revealed that cash was responsible for only 2.05% of all monetary transactions. This means we are now effecting 97.95% of all payments through electronic means – cards, internet and mobile.
This did not come as a surprise, cash usage in the country has been falling for the past few years. We know that it is not by choice that Zimbabweans have discarded cash but rather it is because there just isn’t enough cash to go around.
The in-demand USD has largely disappeared from the official markets and there are withdrawal limits on bond notes. No one can rely on just cash to get by.
You would expect people to be at best excited about the convenience that comes with transacting electronically and at worst, indifferent. That is not the case on the ground though, most would rather use cash. Why?
The two biggest reasons are reliability and cost.
It seems like every other day, one gets the, ‘I’m sorry but our systems just went down’ statement. It usually happens at the most inopportune of times. You have 30 minutes to meet a payment deadline before you get hit by a 20% interest penalty? Tough luck.
Until people can be 100% certain that they will be able to pay for anything at any time using electronic means, they will always require a stash of cash as a backup option.
There’s no sugarcoating it, the fees levied on electronic transactions in Zimbabwe are just immorally exorbitant. We understand that the Zimbabwean economy has not been the easiest to operate in for decades now but that does not give businesses the licence to extort ordinary Zimbabweans.
Here is what Zimbabwean banks charge for point of sale transactions and withdrawals:
|Bank/ Building Society||Withdrawal fees||POS fees (transactions below $10)||POS fees (transactions above $10)|
Note that we only covered commercial banks plus CABS and only considered current accounts or their equivalent. Some banks charge different point of sale fees for different accounts.
High POS fees
Those POS fees are ridiculous especially when you consider that in South Africa it is the norm that card payments are free. We should commend Standard Chartered for being the only sensible bank when it comes to card payments – charging nothing for all point of sale transactions.
We updated the ZB Bank fees in the table above. Further, this version of the article has some text removed which was in the original article.
When we initially contacted ZB Bank customer support we were informed that the POS charge was $2.00 for a single transaction, regardless of the amount. After publication, ZB contacted us and informed us that the member of staff we talked to gave us incorrect information and we have adjusted the table accordingly. They are currently investigating the matter. Indeed we were shocked at the $2.00 figure as was evident in the original article:
You may be struggling to believe that ZB actually charges that much but you can call them yourself and inquire. I wrestled with a member of staff of theirs who told me the charge. Three times I asked them to confirm that they had just told me that they charge $2.00 for any transaction and three times, like Peter, they confirmed. It gets worse, $2.00 is the minimum charge but the actual charge is 2.5% of the transaction amount. This means if you pay for anything above $80, expect to pay more than $2.00 for that. So if for some reason you, a ZB customer, are being charged less, consider it a mistake.
The other banks charge similar fees, about $0.10 for transactions less than $10.00 whilst transactions above $10 will attract fees in the $0.42 range. Do note that $0.05 goes to the government as tax. Banks have more or less agreed that these should be the fees but these fees are still too high. Let’s not forget to shame BancABC ($0.37), Metbank ($0.22) and Ecobank ($0.20) for charging more than the others for transactions less than $10.00.
Transparency should be improved
It is quite the struggle to find out how much our banks charge us. That is a huge problem. It is us, the customers, paying the fees and so why should they be hidden from us. Charges are one of the major factors that we as consumers consider before choosing a bank. We should be able to easily compare which bank offers the cheapest rates to help choose who gets to safeguard our money.
Some banks, thankfully, have all that information (called business conditions) on their websites. Some will only avail that information after you contact them directly. Even then, expect to be placed on hold for minutes only for them to hang up. This means it will cost the researching customer more to find that information. I think banks should be compelled to have their business conditions on their sites by the Reserve Bank of Zimbabwe.
We also need banks to lay out clearly how much certain services cost. As a customer I want to know exactly how much I’ll have to pay. There is this habit of splitting the fees into bank charges, tax and whatever other category. So for example the customer is told that they will be charged $0.05 for a point of sale transaction and yet the total is $0.10 after tax.
To me that is like a retailer telling you something costs $100.00 but after you swipe, you find out that $115.00 was taken from your account. They then tell you that $100.00 was before value added tax of 15%. It is quite misleading and banks should stop it.
[Observation: after going through the comments and the Twitter exchanges, it is apparent that we need this transparency thing fixed ASAP. For some banks we are seeing people claiming they are charged different fees than what the banks claim they charge. In some cases, they claim to charge more that what is actually being deducted form their customers’ accounts. This could be reconciled if we consider how the fees are usually split between: government tax, Zimswitch fees and others.
So while we may quickly glance at a 37c charge on our statement and conclude that that’s the final charge we may be mistaken. Government tax and Zimswitch fees may be listed separately. It becomes even harder to determine just exactly how much we are being charged. This needs to change.
Also to note is that the figures we listed above may be incorrect just because banks have neither updated their websites nor informed their staff of the change in fees.]
Cash remains the cheapest option by far
It just makes more financial sense to use cash over card payments in Zimbabwe right now. Let’s look at a simple example:
Let’s say you need $60.00 to purchase 6 items from 6 different places. Four of the items cost $12.00 and the other two cost $6.00. How should you go about it? Let’s use the most common charges from our table: withdrawal costs being 1.25% of amount withdrawn and POS fees being $0.10 (below $10.00) and $0.45 (above $10.00)
Cash: you withdraw $60.00 and you are charged $0.75 (1.25%). You go on your way and pay cash for the goods.
Card payments: you are charged ($0.45*4) + ($0.10*2) = $2.00
That is a significant difference. Cash is clearly the way to go.
However, if you look at Standard Chartered’s set up, it actually promotes card payments and dissuades people from using cash. The withdrawal fees are 1.25% but a minimum of $3.00 will be charged. This means to withdraw the $60.00 you will be charged $3.00 but if you just go ahead and swipe for the goods, it will be completely free.
Greedy Zimbabwean banks
What irks me is the level of greed these banks are displaying. We mentioned that in South Africa the norm is zero charges for POS transactions. Standard Chartered in Zimbabwe is the only bank pursuing the same fee structure in Zimbabwe.
You might be thinking, ‘so are these banks just absorbing the costs associated with deploying and maintaining POS devices?’ No! These banks are not running charities and are actually getting paid for deploying POS devices and maintaining them. They just happen to charge the merchants and not the customers. So the businesses selling stuff are charged and we, the customers get to swipe for free.
So why don’t the other banks just charge the merchants and not the customer? I hear you ask. Well they are charging both. What!? All the banks charge the merchants for all POS transactions. So by also charging the customers, they are committing the gluttonous sin of ‘double dipping.’
You can bet your liver that merchants take the POS fees they are charged into consideration when making pricing decisions and in most cases they can pass that cost on to the customer. So effectively, it is us as customers who are paying twice for the priviledge of paying electronically.
How are banks getting away with it?
First we need to understand that Zimbabwean banks are not really performing well in their core business – lending. They warrant some blame for this but some of it is just down to the terrible economy in which they are operating. So, banks are currently reliant on income from non-core business – fees, commissions and charges. Without that income most of them would be in trouble.
Banks are tax paying entities and the government needs them to be profitable. The higher the profits they post, the more tax revenue flows to the government. No Zimbabwean needs reminding that our government is strapped for revenue, constantly spending more that it earns. So, why would the government step in and order banks to stop their double dipping when it would mean even less revenue for the government. The government is conflicted.
The banks know this and have shown that they will push their profiteering to the very edge. In some cases the government has had to step in and order sanity from the banks. We hope this issue of double dipping is addressed soon.
Techzim recently released the ‘Payment Systems Environment in Zimbabwe’ report . In the report we find out how this crucial sector is set up and issues like the one we discussed here are tackled. The report is available for sale below: