7 April 2017

Zimbabwe: Mobile Money to Define the Future of Banking

opinion

The increasing popularity of mobile money is notwithstanding the fact that it continues to lag behind RTGS in terms of transactional value, having only handled US$5,82 billion or 9,4% worth of payments compared to US$48,11 billion or 77% of all payment values by RTGS. However, the increasing popularity of ZIPIT mobile banking solution is threatening to whittle down the dominance of RTGS transactions.

The current cash crunch is worsening the confidence crisis in the country's banking system. This crisis comes at a time memories of the traumatic hyperinflation era are still fresh in the minds of ordinary citizens.

Ubiquity of mobile money whilst growing discomfort with cash queues will see more customers sign up for mobile financial services.

The financial losses and physiological traumas suffered at the height of the country's economic crisis are so deeply embedded in the people's minds that no amount of pedantic argument would shift their opinion about banks.

More so, failure by most banks to respond positively to their unfavourable market perception has intensified the distrust in the country's banking system.

In most cases, their quality of services is compromised and does not justify the cost of accessing them. As such, the banking public bemoans the limited banking options, which saw them succumb to the whims of unrepentant bankers, whose financial mismanagement has always cost the ordinary person. Desperation for alternative financial solutions will lend credence to the current efforts to grow mobile financial services in Zimbabwe.

With the promise of superior customer experience, mobile money is a formidable force that will transform banking in Zimbabwe. Its biggest attraction lies in the convenience, speed and security that it offers to users. By bringing banking to the customers' doorstep, mobile financial services will provide convenience to banking. This will be made possible by increased network coverage and, therefore, the ubiquity of mobile money whilst growing discomfort with cash queues will see more customers sign up for mobile financial services.

According to the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz), the total number of active mobile telephone subscribers increased by 1,4% to 12 878 926 during the quarter ending December 31 2016 from 12 696 303 recorded the previous quarter. The futility increased sign up is supported by statistics from the Finscope survey which revealed that 45% of adult population (3,25 million) was registered with mobile money platforms in 2014, which compares favourably with 2,08 million or 30% of adult population with bank accounts.

The efforts by mobile financial services providers to penetrate the traditional banking space will be aided by the central bank's drive for increased financial inclusion as well as the need to come up with a permanent solution to the cash crunch.

RBZ hopes that the targeted increase in financial inclusion from 69% in 2016 to 90% by 2020 would be supported by growth in mobile money. As such, one can only anticipate favourable regulation in respect of mobile money from the apex bank.

Equally, elsewhere in the world, the uptake of mobile financial services is increasing at an advanced pace that some protagonist are beginning to see it as the future of banking. The emergency of a new generation of techies in our youths largely support the assertion that technology will form the next industrial revolution supported by the demographic advantage of youths.

The statistics show that about half of the world population owns a cellphone.

Clearly, the high mobile penetration rate will drive the uptake of mobile money. At 93,4%, Zimbabwe has respectable mobile penetration rate in the region, which has occasioned the growth in mobile transactions. Techzim reports that in 2016 mobile money payments accounted for 81,2% of all electronic transactions as this payment platform maintains its dominance in transaction volumes. Other transactions namely POS, ATMs (3,4%), RTGS (0,8%), internet transactions (0,3%) and cheque transactions (0,1%) handled the balance.

The increasing popularity of mobile money is notwithstanding the fact that it continues to lag behind RTGS in terms of transactional value, having only handled US$5,82 billion or 9,4% worth of payments compared to US$48,11 billion or 77% of all payment values by RTGS. However, the increasing popularity of ZIPIT mobile banking solution is threatening to whittle down the dominance of RTGS transactions.

In the face of this new competition, banks are increasingly seeking ways to cooperate with mobile financial services providers.

This has seen the birth of innovative banking solutions such as Textacash (CABS), Mobile Banking (CBZ), GetCash Wallet (GetCash) and Mobile Moola (FBC).

These innovative products come at a time when the popularity of Visa and MasterCard is waning due to nostro funding challenges.

Quite clearly, the competitive advantage that will be gained from co-operation with mobile financial services providers would inspire the other banks to dip their toes in mobile application development.

One benefit from co-operation with banks is that mobile financial services providers may not have to abide by capital, liquidity and other prudential measures.

As mobile operators seek new sources of revenue to counter the effects of the rise in over-the-top services like WhatsApp, Skype and Facebook on revenue from voice call, mobile financial services are increasingly getting into the traditional banking space. Econet recently launched a number of mobile applications with superior benefits to customers which include improved design and are easy to operate. The new Ecocash app is clearly a fantastic application. It is believed that the relaunch of the One Wallet product by the NetOne together with increased take up of OneFusion product will come with increased benefits to customers.

These innovations are also happening at bank level. The CBZ Touch App is well respected by its customers for convenience.

These innovations will undoubtedly lead to increased interest in mobile financial services and those banks that will lag behind will be left out of the competition.

Whilst mobile money is a real threat to banking, it is not immune to the classic innovator's dilemma that any change would not sit well with risk averse customers. Quite often, we technophobes are not comfortable with technological change.

However, the forces behind the growth of mobile money are too strong to resist over time. Therefore, we should brace for change in the financial services system.

Gwanyanya is an economist and banker. He is the founder and CEO of PerconAdvisory, head of financial advisory portfolio of Zimbabwe Business Arts and Hub (ZIBAH) and executive member of the Zimbabwe Economic Society.

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