Electronic payment system needs strengthening
AS consumers warm up to electronic payments, it’s sad that most platforms are beginning to experience challenges.
THE increase in system down time, transaction errors, duplications and reversals has become worrying. Well, this could be an indication of the failure of the system to cope with increased transaction volumes as the cash crunch continues to take a toll on the market.
But, given its drive to promote a cashless society, the Reserve Bank of Zimbabwe (RBZ) should have anticipated these challenges as the available infrastructure was archaic and would very well easily fail to cope with increased volumes.
In the same vein, the central bank should have proactively joined the chorus to try to persuade mobile telecommunication companies to share infrastructure to enhance the efficiency and convenience of electronic payments systems.
Likewise, RBZ should have pushed for the strengthening of the legal and regulatory framework for electronic payment systems to support infrastructure sharing, promote system interoperability as well as manage attendant risks.
As the country evolves into a cashless society, there has been a phenomenal increase in the uptake of electronic money.
Statistics from the central bank show that electronic transactions increased by 714 percent to US$57 billion by the end of 2015 from US$7 billion in 2009.
Sadly, this growth was not commensurate to investment in supporting infrastructure despite growing profits in the banking sector.
This sector could probably be the most profitable in the country, having recorded net profit of US$181 million in 2016, which is a 42 percent increase from US$127 million a year earlier.
Thus, the emerging challenges on electronic money platforms should compel the RBZ to intervene by facilitating, co-ordinating, persuading, encouraging and even regulating system operators to act collectively in addressing these challenges.
One way of doing this would be to co-ordinate the players in the banking sector to pool their resources together and invest in more efficient, fast and reliable electronic payment systems through infrastructure sharing.
The increase in system down time, occasioned by the poor network connectivity, negates the efforts to transform the economy into a cashless society.
The unavailability of Point of Sale (PoS) machines, particularly in rural areas, is a big inconvenience to the transacting public.
The increase in transaction reversals and duplications has also added to their woes.
Electronic money transactions, it seems, have become riskier, which threatens to reverse the traction gained on these platforms so far.
It is therefore unsurprising that this payment platform is attracting a huge discount of around 20 percent per transaction.
This could well be another reason why we are beginning to realise the increase in the demand for cash as well as its reduced supply into the formal banking system.
Suffice to say the RBZ should be more proactive in strengthening the legal framework that regulates electronic payment systems.
Currently electronic money is being regulated under National Payment System Act, which regulates all other national payments.
Given the dominance of electronic money in the transactions space, where 70 percent of transactions are now being done electronically, it makes sense to have a separate legal framework for this payment platform.
As such, banks and the transaction public should be wary of increased risk of card cloning, which are presently prevalent in developed countries.
This calls for a more proactive approach by the banking fraternity to raise awareness and security around electronic money.
It is always important to note that while strengthening the electronic payment system is necessary, it is not a lasting solution to the country’s cash crunch.
The permanent solution to our challenges lies in re-industrialisation, which would be supported by reduction in consumption.
However, re-industrialisation requires appropriate policies that attract and retain both local and foreign capital. Needless to mention that if corruption is left unchecked, it will weigh down all efforts to rebuild. Persistence Gwanyanya is the founder of Percycon Advisory. For feedback use: percygwa@gmail.com or Whatsapp on +263 773 030 691.