The last 18 months have seen the near total conversion of the Zimbabwean economy from one where the majority of transactions, especially smaller transactions, were made with banknotes and coins to one where almost everyone, at least in urban areas, now routinely uses Zimswitch cards, Zipit mobile applications created by banks, or mobile money platforms created by the phone companies.
Indeed it is now practically possible to live a normal life without carrying banknotes, especially if you do not use public transport. Even most sidewalk vendors are willing to accept mobile money, although not everyone is completely willing to hand out their phone numbers to every sidewalk vendor, and the police have succumbed to modern requirements and most roadblock teams carry a point-of-sale machine with them so they can continue to collect their fines.
The financial results from banks show a mixed set of results. Those that have invested in the necessary hardware and software, who have brought in PoS machines for their customers, and who have made a full set of connections to the mobile money networks have seen fee income rise, in some cases quite sharply. This is despite the loss of fee income from ATMs and the general reduction in fees ordered by the Reserve Bank of Zimbabwe, admittedly after consultations with the banks. The sheer volumes have created the extra income.
Other banks appear to be riding on the systems owned and created by others, investing in just the minimum of hardware and software to connect to these systems, without providing their share.
We now need to have another look at fees.
There may well be good grounds to retain present levels to fund the investments into hardware and software, but there could also be very good grounds to reduce them further.
Fees need to be set at levels that minimise the cost of transactions yet ensure that the platforms are viable. But they do not have to be high enough to keep in luxury the directors of banks that have little interest in adding to the infrastructure.
This would also include the taxation on transactions. It seems iniquitous that the Treasury should take a fee for each and every transaction, especially when the taxman picks up the VAT on the good or service being sold via an electronic transaction. So Zimra, to a growing extent, double dips collecting a transaction fee, paid by the buyer, and VAT, collected by the seller. Yet the growth of electronic transactions also ensure far more compliance with tax regimes since it is now far harder to hide sales and income.
When banknotes are used there is just the one tax and one fee when the ATM gives out the money, but all subsequent transactions have no more costs or taxes, at least to the purchaser, although the seller frequently has hidden costs involved in the need to bank money.
Other improvements have been made. Almost all banks have now set up systems that allow their customers to connect to all mobile money networks and almost all also have extended their Zimswitch network to the associated Zipit, although one major bank is still off that network and another was still struggling a month ago to change systems so that it could effect its adherence.
Mobile money is increasingly used, but the range of technologies on phones means that it is still set for the lowest technology, the ultimate basic phone, and that can cause queues in shops where records have to be generated.
But even here some major retailers have upgraded their systems so that a phone number can be punched into the till-connected swipe machine to create the record within the shop owner’s systems.
But with the growth in ownership of smart phones there seems to be an opening for a two-tier mobile platform plus additional software that makes it easy to create and transmit a permanent record of the transaction, something that auditors and tax departments will accept as proof of the transaction.
The growth of electronic transactions also helps those authorities anxious to curtail money laundering and other criminal activity, to the extent that the RBZ has noticed loopholes in its “know-your-customer” regulations, loopholes that were probably hidden in the days when banknotes could be used to keep these dubious transactions record-free.
But basically the platforms, interconnections and other technologies are now in place, although some could be upgraded, and investments have been made to make these more secure and more stable 24 hours a day, seven days a week.
The shortage of banknotes and subsequent conversion of even the most technology shy to electronic transfers has created the volumes to make systems viable.