Rwanda: Central Bank Speaks Out on Prohibitive 'Push' and 'Pull' Charges

Concerns by members of the public on the cost of transferring funds from one's bank account to their mobile money wallets are likely to be addressed in coming days with the Central Bank convening players to find amicable price points.

In response to growing concerns by members of the public, the Central Bank has convened stakeholders, banks and telcos to find an agreeable price point that is not prohibitive for users.

Commenting on the public debate, Central Bank Governor John Rwangombwa said that the ideal price points should be optimal to support the recouping of investments by service providers but not too high to discourage uptake.

"It is not easy to strike that balance. We understand where both parties are coming from," he said.

To ensure that the concerns do not erode gains made in uptake of cashless payments in recent months, he said that they are engaged in discussion with service providers and have also commissioned a study on the digital financial services pricing and challenges.

The study findings should be out in the second half of the year and will inform the way forward.

"We are currently engaged in discussions with service providers. We have also commissioned a study on the digital financial services pricing and challenges and when it comes out by the second half of the year, we should be able to have more informed discussions with the service providers," he said.

Noting that the Central Bank cannot regulate the prices for the transactions, he said that they can engage players to ensure that cashless payments costs are not prohibitive.

"We may not have a solution as the Central Bank or direct service providers on how to price. It is in everyone's interest to grow the cashless business, it's not only an objective by the government but also of benefit to financial sector players," he said.

The discussions will feature aspects such as what costs players can forego in the meantime to allow increased uptake and usage.

"In that context, we are looking at what we can do, what can service providers fore-go for now to drive the systems and later benefit from economies of scale when there are more users? These are the lines around which we are engaging the players at the moment," he said.

Among aspects, banks have said influence the costs is the investments to acquire the mobile banking systems where The New Times has established that some used up to $250,000 to set up the system and incur over $25,000 annually for maintenance.

Banks also factor in costs incurred in the transactions, third party costs, recovering investments made in setting up the systems while others factor in convenience fees.

Convenience fees factor in what one would have otherwise paid to physically walk into a bank to make a withdrawal or an Automated Teller Machine.

During the pull transactions, banks also pay interest when funds are moved from the client's bank accounts to a Trust account held by the telco sitting in the same bank.

Banks pay interest on the funds held in the trust account at a rate of about 6 per cent. Some banks told this paper that if the key costs elements were revised downward, they would be in position to also review the costs.

Some banks have also argued that they should also be allowed to cut costs incurred in running physical branches as they divert their clients to digital platforms. This they said would be through ways such as reducing the number of physical branches.

The concerns come at a time when digital financial services have been on the rise but widespread concerns on sustainability.

Mobile payment transactions increased by 92 per cent from 116 million transactions in March 2020 with a value of Rwf736 billion to Rwf3950 billion as at March 2021.

As a result, the trust account balance in local banks saw balance grow from Rwf46.3 billion in March 2020 to Rwf66.6 billion as of March 2021. Trust accounts are accounts held by telcos in various banks where funds move during a pull transaction. Banks pay interest on funds held in the trust account.

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