Yesterday a colleague mentioned that they were denied using EcoCash at a service station. All other forms of payment were acceptable except EcoCash. This didn’t surprise me. First let’s make sure those who have been living under a rock are caught up:
On Friday the 26th of June 2020, the Government of Zimbabwe declared that all mobile money (of which EcoCash has 98% share of market) was suspended with immediate effect. The government then made a face saving ‘clarification’ which was that all agents had been suspended but all transactions could proceed as normal except that merchants have no other way to move money out of their merchant wallets besides transferring it into linked bank accounts.
This is a problem for EcoCash
If merchants start discouraging the use of EcoCash for purchases it’s a serious threat to EcoCash. It makes sense though that merchants would do this because of the limited flexibility they are now offered on the platform.
Suddenly EcoCash is in a position where their utility to users is now less than it was. The payments company has gone into overdrive promoting their service. They are particularly promoting liquidations unto their platform which currently due to agent suspension can only happen through moving money from bank accounts unto the mobile wallet. Here is an example of EcoCash promotional material:
Sadly for EcoCash, money can now only come on to their platform through banks and therefore they now need to have as many people as possible opening bank accounts. The government really handed them one this time.
The gvt is not the biggest problem
Ultimately what poses a threat to EcoCash is EcoCash itself and the organisational culture into which the fintech was born. The Econet group (Yea Econet Wireless, Cassava…) sucks at customer service and more importantly at customer centred product design. This is what makes EcoCash vulnerable. Let’s try to trace that one out a bit:
How EcoCash won in the first place
We have documented EcoCash’s excellent strategy from the time it was founded in a write up we did two years ago. What they did well was to copy MPesa in Kenya really well and more than that, they were able to translate what they saw in Kenya to their context in Zimbabwe for example by choosing to base their service on USSD and not via SIM Toolkit.
The decisive factor however, was that Econet (at that time this was just an Econet product) understood that mobile money was a two sided market which requires figuring out the chicken and egg problem effectively. They went all out to recruit agents that would facilitate liquidations onto and off the mobile money platform. At launch, the service already had a very strong network of agents which gave it utility for internal remittances immediately.
EcoCash never rested on their laurels, they kept expanding their agent footprint. They started recruiting merchants too: businesses that would receive payments via the mobile money service. As users saw utility in the services, they signed up in droves. The more users signed up, the more merchants and agents were attracted to the service creating a vicious cycle. That, ladies and gentlemen is what they call network effects.
Markets with network effects are generally ‘winner takes all’ kind of markets. Indeed, EcoCash took it all. They dominate the space. Their dominance made them refuse to compromise when they
dictated negotiated terms with banks to integrate with their system. Some banks held out for a bit but the service was just too dominant in the retail and peer to peer payments space that literally all banks capitulated and accepted the EcoCash terms.
Customer as a trapped victim
In the USA Facebook is a bigger deal than it is here. The social networking site is used by everyone and their dog kind of. Facebook the company is hated though. I have heard a lot of folks from the USA saying they were going to leave Facebook but then they never do. Reason: network effects. When everyone is on there, moving away means you are cut off.
That is the beauty of network effects but that is also the problem. Network effects make customers stick with a business because they can’t leave not because they want to stay. I believe that is the case with EcoCash and Econet in general. Their customers really love to hate them but they feel they need them.
It sounds like an enviable position right? To be needed, not just wanted. On the internet though where competition is unlimited, the only solid way to win is to be wanted. This is why Econet has always struggled with products that inherently need to have internet assumptions. The group is excellent at leveraging licenses and such but they are not at all good at actually building products.
What happens when they fall out of favour with the guy who dishes out licenses as has happened with EcoCash? They need to fall on customer choice, customers that are fans who believe that EcoCash just works. Do they have such customers though? I do not know if they do.
The reason why some merchants are declining EcoCash is evidence that the EcoCash customers themselves are not raving fans that will go to the next store if they can’t pay using their beloved EcoCash.
Put another way: if the only way one can fund their EcoCash wallet besides being sent money by someone else is through the bank, why should they move money to EcoCash since they can just make payments directly from their bank account? Is EcoCash cheaper? Is it faster? Is it simpler? No. No. No. There lies the problem.
Where is the evidence?
What’s the evidence that EcoCash is not customer centric? Well, their user experience sucks. It sucked and then they did an upgrade in November last year and it sucked even more!
Another example? Customers have been asking for an easy way to get statements for a very long time. EcoCash never thought it important to make this a feature even on their mobile app (supposing that USSD is too constrained). Worse: when an entrepreneur developed Ecoledger, an app that made it possible for EcoCash customers to have statements and other pecks, EcoCash tried to tarnish the guy’s name by some unfortunate social media campaign.
Business users of EcoCash have to request a statement whenever they want. In fact, no, not whenever they want! We are one such business that was told that we had requested our statement too frequently at some point. Recently, after emailing the same place we used to get statements, we were told to visit an Econet shop. Meanwhile, EcoCash is running a campaign where they are telling people to stay at home and transact remotely to keep from COVID 19! This is the problem: the business is not inherently designed with the customer at the centre.
This is why merchants are quick to say no to EcoCash. To merchants, if transacting on EcoCash directly is no longer possible and they have to send money to the bank first why should they accept money into EcoCash in the first place? They don’t want to keep begging to get their statement. There are zero tools for businesses. Why? Because Econet is not a builder of products, they are a leverager of network effects and licences.
Why the suspension of agents is affecting EcoCash
Yes the government has suspended mobile money agent transactions but that this has affected EcoCash is EcoCash’s fault. The fact of the matter is that for a long time now whenever a ‘cash-in’ or ‘cash-out’ transaction happened at an agent generally there wasn’t any cash that changed hands except for the few instances where the agents were selling cash. What was happening is that people were ‘hacking’ agent transactions to do business to business, business to consumer and consumer to business transactions.
If EcoCash had a product development culture that should have been a signal to them. They would have designed appropriate tools that served their customers specifically. When you find a big portion of your customers hacking your product to make it more useful it should tell you what to build for them.
Had EcoCash looked at this from a product builder perspective, they would have created new channels that served their customers separately from agent transactions that justifiably raised suspicion with regulators. As far as regulators could see, there were a lot of cash-in and cash-out transactions in an environment where there is no cash! So the authorities banned agent transactions.
This could have been different if business to business, business to consumer and consumer to business tools had been built from the ground up. EcoCash’s attempt at such was introducing what they called bulk payer lines which were not a good product at all because the lines were essentially just agent lines. That is the problem when there is no imagination for product evolution. EcoCash was happy to get their imposed tax for every transaction on their platform without thinking about improving the experience of their users.
What does all this mean?
If the moves by the government are going to affect EcoCash in any way, it’s going to be because EcoCash has not made their customers into fans. Those customers have no reason to keep on the platform if there are no network effects to keep them locked in.
EcoCash is pushing for people to open bank accounts. However, once people have bank accounts, what is the distinct thing that will make them need to move money from those accounts into EcoCash? An agent footprint is no longer a selling point and not because the government banned agents. It’s because agents don’t matter much in a cashless economy.
Right now the more important selling point is the availability of EcoCash even to the smallest merchants. Some of these very small merchants don’t have merchant accounts but use their personal wallets to accept payments. EcoCash needs to quickly build appropriate tools for these users if they want to remain relevant.
The easier thing is for them to focus on the pain of unfair treatment from government (yes it is unfair) and to conclude that it is the source of their woes. However, if they will be humble to realise that they could have preempted this predicament by proper product development and a laser focus on the customer then they can get out of this stronger.
This is not easy though. Culture is the devil.