Cash vs digital: Why Zimbabwe needs both for a thriving financial future

Jacqueline Ntaka

IN the wake of Zimbabwe’s new currency, the ZiG, the Reserve Bank of Zimbabwe (RBZ) has a critical opportunity to continue promoting electronic transactions.  Abandoning electronic transactions to traditional paper money is not ideal as paperless money offers a multitude of benefits for the nation’s economy.

Electronic transactions are far faster than cash.  Funds move instantly, benefiting businesses that rely on quick transactions and individuals who need to pay for everyday needs.  For example, a bakery can accept mobile payments from customers, expediting the checkout process and allowing them to serve more customers.  Consumers can instantly pay for groceries or utilities without the need to carry cash or wait in line for change.

Electronic transactions can also significantly reduce costs.  Banks spend a great deal of money on security, transportation, and storage of physical cash.  By encouraging the use of digital payments, the RBZ can help cut these overhead costs.  These savings can then be passed on to consumers and businesses, benefiting the economy as a whole.

Security is another major advantage of electronic money.  Digital platforms offer encryption and other security measures that are constantly updated to protect against fraud.  This makes transactions much safer than carrying cash, which can be lost or stolen.  For instance, a mobile money service might use two-factor authentication to verify a user’s identity before a transaction is complete, adding an extra layer of security.

Financial inclusion is another key benefit.  Electronic transactions can bring people who are unbanked into the formal economy.  Mobile money services, for example, allow these individuals to participate in the economy without needing a traditional bank account.  This fosters inclusive growth, ensuring that everyone has the opportunity to participate in financial activities.

Electronic transactions also provide a clear audit trail.  These digital records can be used to track spending and identify suspicious activity.  This transparency is essential for combating corruption and improving fiscal policy.  For example, the government can track tax payments more effectively with a digital record of transactions, allowing them to allocate resources more efficiently.

Finally, electronic transactions have a positive environmental impact.  Less paper money in circulation means a reduced need for paper, ink, and other materials used in currency production.  This aligns with global efforts to promote sustainability.

That said, cash remains a crucial player in the financial world.  For many, access to technology remains a hurdle.  Smartphones and reliable internet connections, often required for digital payments, are scarce in rural areas and low-income communities.  Cash offers a convenient and accessible alternative for these individuals.  Technology itself isn’t foolproof.  Power outages and technical glitches can disrupt electronic payment systems, leaving people without the ability to make purchases.  Cash provides a reliable backup during such times, ensuring people can still acquire essential goods and services.

Privacy concerns also play a role.  Some people value anonymity in their spending habits, and electronic transactions leave a digital footprint.  For these individuals, cash offers a way to maintain their financial privacy.  Cash is also often the most practical option for small, informal transactions.  Street vendors and informal markets might not have the infrastructure for electronic payments, and fees or technical limitations associated with digital transactions can make them impractical for low-value exchanges.  Finally, not everyone trusts the security of electronic systems.  Concerns about fraud and data breaches can lead people to prefer the familiarity and perceived safety of physical cash.

While electronic transactions offer undeniable advantages, cash’s continued relevance highlights the need for a multifaceted financial ecosystem.  The ideal scenario is what the RBZ is trying to implement – a development where both physical and digital currencies co-exist, each fulfilling a specific role and ensuring financial inclusion for all.

Jacqueline Ntaka is the CEO of Mviyo Technologies, a local tech company that provides custom software development, mobile applications and data analytics solutions. She can be contacted on [email protected].