Zim leaps into the cashless future
ON a normal day scores of Zimbabweans queue and mill around outside the banks as they wait patiently in the hope that this will be the day they can withdraw cash from their accounts.
In 2009 the country abandoned its hyper-inflationary currency and adopted the US dollar, along with eight other international currencies deemed legal tender by the central bank.
Since then, it has endured an acute liquidity shortage, unable to print any money. Every week, Zimbabwe’s central bank and commercial banks fly millions of US dollars in cash into the country, but because it is absorbed by traders, very little of it ends up at the highstreet banks.
One bank manager tells Euromoney that he can’t remember the last time his ATMs or tills were stocked with cash.
At Standard Chartered’s branch on Samora Machel Avenue, opposite the Reserve Bank of Zimbabwe, its ATM screen seems to be functioning normally, albeit inaccessibly inside a padlocked cubicle and under armed guard.
Just a kilometre away in one of the capital’s busier eateries, it is business as usual, because the diners at the outlet have two things the downtown crowds lack: an account with Ecocash, Zimbabwe’s leading mobile payments platform; and confidence that the balance of their Ecocash e-wallet is as good as wielding physical notes.
Mobile payments are nothing new in Africa. The technology was pioneered in 2007 by Kenya’s telco-led M-Pesa, with variations rolled out across the continent and beyond. But where most countries have arrived at a cashless future through technological innovation and evolution, Zimbabwe got there through crisis. Enter the Ecocash platform, which, just six years from its launch, now processes most of the daily commercial transactions in the country.
“I don’t know what we would’ve done without Ecocash, it has saved us,” says Finance Minister Patrick Chinamasa. “Yes, you can see the queues outside the banks, but the economy is functioning because of mobile transfers. If it wasn’t for mobile money, we would’ve come to our knees.”
Dollarisation may have tamed inflation, but it has created other issues, such as a black market for cash. The limited notes in circulation are aged and scruffy. Small change is virtually non-existent, so a virtual favour bank has emerged, as storekeepers and customers keep a log of everyday consumer items transacted in lieu of change. It will take time and a lot of education and awareness. In the absence of a Zimbabwean currency, mobile money has filled a gap.
“It’s become synonymous with cash and national payments,” says Natalie Jabangwe, chief executive of Ecocash. “It’s basically saved the day. We have become a steward of people’s money.”
John Mangudya, governor of the Reserve Bank of Zimbabwe, tells Euromoney that as much as 70 percent of the country’s day-to-day commercial transactions are made through Ecocash. In June last year, parent company Econet Wireless revealed that the Ecocash platform had handled $23 billion in transactions since its launch.
The commoditisation of cheap mobile handsets has also brought costs down for merchants.
“A $15 handset can replace a $500 point-of-sale machine,” says Jabangwe, and “with less waiting time for the transaction to be approved.”
Supermarkets, for example OK Zimbabwe, Spar and Pick n Pay, Ecocash PIN pads have also been integrated into the checkouts. “The solution is what is practically available and accessible to get things done,” says Jabangwe. “The mobile immediately becomes the viable channel by which services are distributed and delivered. Africa can leapfrog, and the phone is the enabler.”
Ecocash was launched in Zimbabwe in October 2011 and is an offshoot of Econet Wireless, the country’s first mobile phone operator, which is owned by Strive Masiyiwa, a Zimbabwean tycoon based mostly in Johannesburg. Zimbabweans were ripe for a solution to their cash crisis.
“There was low deposittaking in the banks, national deposits were low, there was no trust in the banking sector,” Ecocash’s Jabangwe recalls.
Within six months of its launch, Ecocash had around one million registered customers. Today, Ecocash claims to have more than 7.5 million registered accounts, with 4.2 million deemed active every month. By comparison, there are 1.5 million conventional bank accounts in Zimbabwe, according to the Reserve Bank of Zimbabwe.
Another revealing phenomenon of the rise of Ecocash, says Jabangwe, is the trust its customers have developed for it over traditional banks. We are arriving in a cashless economy much faster than anywhere else because we simply didn’t have a choice.
Designed to facilitate trade and encourage liquidity, bond notes have been marked down by as much as 40 percent to 50 percent from their US dollar face value in the black market. In reality, people have few other options; Ecocash is so dominant it is effectively a monopoly. The platform’s market domination gives it enormous power in this stricken economy, and great responsibility.
Ecocash has acquired a physical banking presence in Zimbabwe as well. In 2013, Econet Wireless bought control of the 12-year-old TN Bank and rebranded it as Steward Bank.
As an RBZ-approved or registered bank, Steward in turn holds Ecocash’s trading licence. Zimbabweans have been pushed to use mobile money and plastic money “much, much faster than Kenya, South Africa or anywhere else because of the crisis,” says Steward Bank’s chief executive, Lance Mambondiani.
“They haven’t so much embraced it but been forced into it. People have had to change by necessity. We are arriving in a cashless economy much faster than anywhere else because we simply didn’t have a choice.”
That has had implications for the bank too. Steward Bank used to have 38 branches around Zimbabwe, but today it only has eight. As for the crowds milling around in front of Zimbabwe’s money-less banks, Jabangwe thinks the queues will disappear, as more people migrate to mobile money.
Zimbabweans “have money, they have their electronic money,” says Mangudya. Those queueing for cash “want to go and get money (cash) to sell” on the black market, he says. — euromoney.com