MOBILE MONEY vs THE BANKS

THE Reserve Bank of Zimbabwe (RBZ), banks and mobile telecommunication companies will soon meet in the capital to define and smoothen the legal parameters governing money transfers.

Burgeoning growth of mobile money payments, which has been spurred by mobile money transfers and mobile cash savings, has recently led to fierce clashes between mobile phone companies and banks, especially over overlapping services.

Banks argue that mobile telecommunication firms cannot perform deposit-taking functions while avoiding the regulatory burden of statutory capital requirements and risk management capabilities that are required of financial institutions.

Handling in excess of US$1,44 billion in transactions last year and boasting of more than 25 000 mobile money agents, mobile firms now eclipse banks, which have an estimated 500 Automated Teller Machines (ATMs) countrywide.

The bank account penetration has not kept pace with mobile penetration rate.

It has become an existential threat to banks. The playing field, it is claimed, is not fair.

Experts say it costs only US$200 to open agency with some of the mobile money companies, while opening a physical bank branch ranges from US$78 000 to US$120 000, with a single ATM requiring a capital outlay of $22 000.

Resultantly, mobile money, although still pricey, is crowding out and suffocating the local banking sector because of its convenience, ready accessibility, ease of use and less stringent registration requirements.

In November 2013, the former advisor to ex-RBZ Governor Dr Gideon Gono, Dr Munyaradzi Kereke, caused a stir when he circulated an advisory among legislators claiming that Econet’s mobile money service EcoSave – an adaptation of EcoCash – was illegal as it violated the country’s Constitution and banking laws.

Besides flagging the service for allegedly stripping the public of the protection offered by the Banking Act, the legislator indicated that country’s banking laws restricted the acceptance of deposits strictly to licenced banking institutions.

“Econet Wireless therefore cannot legally accept deposits from the public, even in electronic money form. The advice to the RBZ, Econet Wireless and Steward Bank is that they must quickly realign the provisions of the Terms and Conditions of the EcocashSave product to be consistent with the provisions of the law or needlessly risk penal applications of the law,” noted the advisory.

At the time, the Reserve Bank and Econet Wireless did not comment on Dr Kereke’s assertions.

It is precisely to brainstorm over this conundrum that the Mobile Money and Digital Payments Conference will be convened on July 27 at the behest of Oxlink Capital.

The Minister of ICT, Postal and Courier Services, Mr Supa Mandiwanzira; RBZ Governor Dr John Mangudya and representatives from banks and telecommunication companies are expected to attend.

Economist Mr Brains Muchemwa, who is also the managing director of Oxlink Capital, said last week much of the discomfort that is in the financial services sector is caused by the fact that mobile money revolution has been a game changer.

“Mobile money has indeed revolutionalised the way people conduct business and banking in Zimbabwe. With an estimated number of banks’ ATMs around only 500 versus over 25 000 mobile money agents dotted across the country, even in the remotest of all locations, it is undeniable that mobile money has been the biggest game changer in the financial services industry in this country.

“As with global trends, where person-to-person transfers constitute around 73 percent of transfers, the mobile money industry in Zimbabwe mirrors more or less the same and with the possibility of cross-network transfers in the offing, we expect the mobile money industry volumes and values to surge much further from the $1,44 billion transacted in 2014,” he said.

The conference outcomes are largely expected to shape progressive regulation, enable interoperability among players and create a very competitive play field that will eventually lower costs for the consumers and spur the industry towards growth.

Despite being implored by policy makers to create a seamless ecosystem where consumers can readily move cash between services, mobile phone companies have been reluctant to open up their platforms to rivals.

Econet’s service EcoCash, which is the biggest on the local market, does not allow subscribers to move cash to other platforms such as Telecash, which is offered by Telecel and One Wallet, a service offered by parastatal NetOne.

Also, the ease of moving money between banks and mobile platforms is still a challenge.