Mobile money, Zim’s wild, wild West

GOVERNMENT’S directive to suspend key operational features of mobile money transfer (MMT) platforms took many Zimbabweans by surprise. Authorities ordered MMTs to suspend agent lines and convert all merchant lines into one-way channels where only payments can be made and suspend withdrawals.

“Cashing out” would be done through banks, ostensibly to stop large sums of money from being offloaded onto the black market.

Government has argued that it has “impeccable evidence” that MMTs have become prominent platforms for “malpractices, criminality and economic sabotage”.

Authorities have blamed the weakening of the Zimbabwe dollar against major trading currencies on illicit trading of the currency via electronic transfers.

The order inadvertently fomented confusion in the market as it was initially interpreted to mean that all mobile money transactions had been suspended indefinitely.

Millions of Zimbabweans are dependent on mobile money for their daily transactions.

Physical cash remains scarce, while alternative payment platforms such as point of sale (POS) machines remain uncommon for most small traders.

Latest figures from the Reserve Bank of Zimbabwe (RBZ) show that over 82 percent of all payments in the country go through mobile phones, accounting for over 29 million transactions every week.

There are over 7,6 million active mobile money accounts, according to POTRAZ.

Over $12,1 billion worth of transactions were processed through mobile money platforms during the first three months of this year, official data shows.

It came as no surprise then that many were taken aback by the latest order.

Authorities have always had a love-hate relationship with MMT platforms since they first went online some nine years ago.

Telecel’s Telecash and NetOne’s One Money were introduced in January 2011 quickly followed by Econet’s Ecocash (which has since grown to become the dominant operator, accounting for over 90 percent of the market share) in September 2011.

Regulating an industry as dynamic and extensive as mobile money transfer has always been a thorn in the flesh for regulators.

Mobile money brings a nexus between sectors that only two decades ago were divergent. Operations of mobile money platform operators now cut across sectors that include banking, payment systems, telecommunications, insurance, agriculture and health, to name just a few.

Co-ordinating regulation has thus become muddled and problematic.

Only in September last year, the RBZ was involved in a war of words with mobile money platforms after banning the withdrawal and deposit of cash as a response to high premiums which were being charged by agents taking advantage of cash shortages.

The suspension was later lifted after Econet threatened to go to court.

At the centre of these recurrent fights between authorities and mobile money operators is weak regulation.

Owing to the novelty of these platforms, they have flourished in an environment resembling the “Wild Wild West”, where the service provider is both judge and jury.

Mobile money operators have prospered, creating thousands of jobs and bringing convenience to transacting, but this has come at a cost of collateral damage to the economy in the absence of an independent Ombudsman built for purpose.

Last week the RBZ alleged that one of the operators had flagrantly refused to comply with a directive from its Financial Intelligence Unit to observe the “Know Your Customer” rules, which enable authorities to isolate rogue accounts.

This and the fact that authorities for years failed to impose interoperability between the three platforms speaks of weak regulation and an overbearing attitude on the part of the operators.

The ground rules are murky and do not provide for adequate sanctions for errant operators, which is why Zimbabwe needs a fully developed regulatory framework for mobile money operators.

Seven years ago the then Governor of the RBZ, Dr Gideon Gono, mooted such a framework. This was before some of the operators had become behemoths which are “too big to fail”.

“As monetary authorities, we are currently seized with the drafting of appropriate guidelines and policies,” said Dr Gono.

He said authorities would introduce a “payment systems oversight guideline”, an “e-money and electronic payments guideline” and an “agency banking guideline”.

He spoke of the need for mobile money platforms to remain as “merely a payment system or delivery channel which does not amount to deposit taking”.

A Memorandum of Understanding between the RBZ and POTRAZ was agreed to, we were told. Today, these guidelines are yet to see the light of day.

This is probably why we remain with these perpetual fights between monetary authorities and mobile money operators.

A law to regulate these platforms is long overdue and it came as a breath of fresh air when it was announced last week that the recent directive to curtail mobile money operators will also come with a new regulatory framework.

Our African peers have developed modern frameworks from which we can borrow ideas from.

In Malawi, for example, a number of government bodies and regulators led by the Reserve Bank of Malawi have developed a useful framework to respond to the growing phenomenon of mobile money.

The RBM, the Finance Ministry and regulators from sectors that include the telecommunications, competition, consumer protection, anti-money laundering and countering the financing of terrorism, are involved in coordinating and maintaining discipline in the sector.

We cannot afford these perpetual disruptions to commerce and our daily lives.

We need regulation now.