Published by the government of Zimbabwe
4 October 2008
Harare — The sudden suspension of the RTGS, potentially allowing almost instant transfers between accounts at different banks, will not hurt legitimate business much so long as the banks do not try and take advantage of the change to milk their customers.
The RTGS always had its problems and it never worked as well as it was advertised; at times it came close to disaster.
From the point of view of the ordinary transacting public, RTGS was frequently far slower than the old-fashioned cheque, although it was supposed to be almost instantaneous.
Suspicion abounded, and still abounds, that some banks were taking advantage of the system and its flaws and deliberately slowing down transactions so as to retain their customers' money as part of their working capital.
The system seemed to tie high-technology with a very low-tech approach; having to stand in long queues every morning with multiple copies of forms to enter this new technology always seemed absurd.
The delays in transfer of funds, some of them the fault of the batch processing inherent when using external facilities, saw a growing use of bankers cheques.
What made the system necessary was the culture of far too many holders of current accounts to issue bad cheques, promising payment for goods when they had insufficient funds in their bank account.
This was coupled with a startling tolerance by most banks towards their defaulting customers and a total lack of legal action by anybody, banker or defrauded payee.
In many countries issuing bad cheques is a serious criminal offence. In those countries few worry that the cheque they are being paid with could bounce, since they know that the risks and penalties of writing "rubber" cheques will deter almost everyone.
It is time Zimbabwe started doing the same.
Cheques are refused payment for many reasons. People make mistakes with dates, figures (common when vast numbers of zeros had to be written) and even the spelling of a payee's name.
But those are things that a payee can, should and must check. These sort of trivial mistakes are not criminal, and should not be penalised.
The two things difficult to check are the signature and the trustworthiness of the writer of the cheque.
The RTGS overcame these problems by making the person's own banker check both signature and balance before processing the payment, and removing the required sum from the account when the payment was processed.
The other problem with cheques that the RTGS system was supposed to solve, but did so inadequately, was the extraordinary delay it took banks to clear such a simple document. Again there is strong suspicion that banks use the delay to create a pool of working capital from their customers' money.
The four days needed to clear a cheque are somewhat absurd in an era when all banks have integrated data bases and digital networks.
In fact most bank clients are aware that usually the amount on a cheque is withdrawn from their account the day the cheque is presented to another bank by the payee. But the poor payee does not receive the money for another four days, and it makes everyone wonder where the money was for those four days, and who was using it for what purpose.
The long clearing times are a relic of the days when data had to be moved physically on bad roads by slow vehicles and are totally inappropriate in the digital age.
There is some argument over giving the victims of cheque theft a modest breathing space to notice the theft, report to the bank and block the transactions of the stolen cheques. But surely 24 hour clearance would be adequate.
After all, banks already have systems in place to block transactions instantly on "swipe" cards reported stolen or lost.
These credit and debit cards are the modern answer, rather than the cumbersome RTGS system.
To make it even more flexible there is a need for the banking industry work out a way that almost all businesses can have point-of-sale machines. At the moment only four banks seem to supply these, with the rest riding on their coat tales.
All should be compelled to help pay for the system, in proportion to either the number of accounts they hold or to the amount of money their customers "swipe" in an average day.
A simple machine capable of reading all local and major international cards should be fairly cheap if produced in adequate numbers.
The RTGS is unlikely to be missed, but banks need to speed up the times it takes to clear and pay cheques, showing the same enthusiasm for paying as they do for deducting, and need to make it easier for all to make payments with debit or credit cards.
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