From NFC stickers at retail stores to casual workers foregoing cash as remuneration, mobile payment has become a big thing in Zimbabwe. So big, in fact, that the Reserve Bank of Zimbabwe says that mobile payments accounted for almost 88 percent of all monetary transactions in 2015. As mobile phone penetration increases and even informal retailers move to electronic point-of-sale devices, Zimbabwe is increasingly becoming a cashless society, joining Kenya and other African markets in leading the world when it comes to digital money.
Only 30 percent of adult Zimbabweans have formal bank accounts, which means that there is still room for massive growth as new customers come online. In a country where there are still impossibly long queues of people waiting to withdraw cash from banks, mobile money is expected to significantly change the financial structure.
Depending on who you choose to believe, unemployment in Zimbabwe varies from as low as four percent to as high as 95 percent. Couple this with an over-reliance on the US dollar and the country is in a prime position to lead the African charge in converting low-value mobile money payments driven by individuals to something that even corporations can benefit from.
For its part, the government has been looking at alternative solutions. On a regulatory side, for example, the Reserve Bank is compelling businesses to bank their money in a move designed to improve cash circulation in the formal system. Section 11 of the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24) in Zimbabwe requires all traders and parastatals to bank their money at the close of business.
Additionally, it has reduced point-of-sale and Real Time Gross Settlement charges (a specialist fund transfer from one bank to another) to encourage cashless transactions. Unfortunately, this has seen businesses often charging two prices for goods – one for cash payment and another for plastic or cardless transactions – something which the Reserve Bank has made it clear it will crack down on.
Installation of point-of-sale machines has almost doubled last year from approximately 18 000 to 30 000. Again, legislation sees the likes of retailers, wholesalers, businesses, universities, and those in the informal sector being required to install and make use of these machines as efforts intensify to reduce demand for cash.
An environment is being created that is ripe for mobile money to gain a foothold and grow not only in terms of transaction volume but in value as well.
EcoCash, the mobile financial services subsidiary of local mobile operator Econet Wireless, handled transactions valued at $6.6 billion in its 12 months to February 2016, a 20 percent year-on-year increase. With total subscribers of 5.8 million and almost 27 000 agents spread across the country, EcoCash is the largest financial services provider in Zimbabwe.
A report published by Potraz, the telecoms industry regulator there, 98 percent of mobile money values for the period were transacted on the EcoCash platform leaving very little room for competitors. Billed as an ‘innovative mobile payment solutions for customers to complete simple financial transactions such as sending money to loved ones, buying prepaid airtime, or paying for goods and services’, the similarities to the likes of Kenya’s M-Pesa and South Africa’s Mobile Money, Pebble and Pocket Pos are clear.
Yet, while mobile payments have been growing significantly in Zimbabwe and several other African countries, it is still slow on the uptake in South Africa where there is less cash scarcity and legacy systems challenge the rise of mobile payment solutions. With a hybrid economy that straddles both the developed and emerging world, South Africa sees mobile payments growing in pockets with simple solutions like Snapscan and Zapper not penetrating the mass market to extent of an EcoCash or M-Pesa.
Cash is still considered king in many countries, and cards are a predominant payment mechanism for consumers that have them. But as can be seen by what is happening in Zimbabwe, this is not guaranteed to be the case in years to come.
The rise of cryptocurrencies like Bitcoin also offer an interesting alternative with even fewer barriers to entry for unbanked Africans or those looking to alternatives to the traditional - and expensive - banking system. In a country like Zimbabwe where citizens are already familiar and comfortable with mobile payments, a transition to a blockchain-backed currency could be easier than in developed markets where consumers are still addicted to plastic rectangles issued by a bank.
The enabling environment for the likes of EcoCash in Zimbabwe is not that unlike the informal sector in South Africa, even if the M-Pesas of the world are yet to take off in the latter country. That said, Zimbabwe offers strong suggestions of where the world is moving to, even if it will take longer to get there as we transition from traditional payment methods.