Cassava Smartech -EcoCash’s parent company- issued a trading update outlining the the first half of the year and what investors and the general public can expect going forward.
In the update there are a number of interesting points to harp over and one of the key talking points will be the regression of EcoCash due to the more aggressive policies put in place by the RBZ earlier this year.
Speaking on the revenue trends of the business here are Cassava’s key takeaways.
The impact of regulatory pressure
RBZs regulatory directives negatively impacted EcoCash and the mobile money service’s revenue contribution is expected to fall by as much as 10% (from 72% to 62%) in the first half of 2021.
Cassava mentions 7 pieces of regulation as being the catalyst for this downward slide:
- 21st April 2020 – Reduction in daily, monthly and transactional limits,
- 4th May 2020 – Suspension of Agents with transactions above ZW$100,000 and requirement for their re-registration,
- 4th June 2020 – Suspension of Agent to Agent transactions,
- 26th June 2020 – Directive to integrate to Zimswitch, in line with SI 80, by 30 September 2020,
- 27th June 2020 – Suspension of some Ecocash User Categories and Functions,
- 25th August 2020 – Revision of mobile money limits and permissible transactions,
- 25th August 2020 – Ban of use of multiple wallets by individuals effective 8 September 2020.
Cassava made just over ZW$500 million in the first half of the year which means EcoCash contributed around ZW$360 million.
Growth of insurtech
Interestingly, Insurtech has grown exponentially since the beginning of 2019 (4% contribution). At the halfway point of 2020, Insurtech had contributed 8% (around ZW$40 million). Cassava says this is on the back of EcoSure Moovah;
The Insurtech business has recorded significant growth during the period, stirred mainly by the growth in Moovah revenues. Growth prospects for this business unit are high, as we continue to introduce new products under the short term insurance line.
Cassava didn’t share specific figures regarding EcoSure Moovah but did with Life insurance which was on a COVID-19 induced slide;
Life insurance has remained firm, with a steady growth in life policies being recorded in FY20. However, the COVID-19 induced economic pressures have also affected this business and a slight decrease was recorded in the number of life policies held, to close at 1,3 million customers covered, down from 1,6 million customers in the previous period.
Cassava’s bank didn’t see much growth in revenue terms – just over ZW$100 million- in the first half of the year and Cassava says the revenue growth was actually “driven by higher transactional terms due to inflation”. So in actual terms revenue growth is probably on the decline which matches up with other metrics shared;
- POS transactions fell from around 210 000 and drew closer to the 200 000 mark
More interesting though, is the fact that Steward Bank is working on upgrade;
Steward Bank’s contribution has remained fairly stable and is expected to maintain that revenue share once the system upgrade project underway is completed. The project is expected to improve customer experience while opening up new revenue streams.Cassava Smartech update
Being a Steward customer/client I’m looking forward to this update as their application and mobile banking experience has been feeling LONG in the tooth for a while now.
This upgrade is what Steward expects to nearly triple their revenues closer to ZW$400 in the second half of the year. It won’t change Steward’s fortunes on the POS front as they still expect a slump in POS transactions. My assumption would have been that the launch of ZimSwitch Smart would come with a boost in POS transactions for banks but maybe the difference won’t be as noticeable in the short term.