Zimbabwe’s transition to a cashless society

A CASHLESS society is an environment where purchases of goods and services are made electronically with minimum use of cash.

This normally results in electronic currency which comes in various forms, for instance internet banking, mobile banking and the use of plastic money. In Southern Africa, there has been an undeniable trend towards a cashless society with South Africa taking the lead.
Comparatively, in Zimbabwe, competition for the adoption of the latest technology in the Information Communication Technology (ICT) sector has increased, albeit from a small base, since the introduction of multiple currencies. Recently several telecoms players such as Econet, Powertel and Africom rolled out broadband services to the public heralding the a new era in technology. The squeeze in margins and its resultant threat to profitability has compelled some service providers to partner with financial service firms to develop new e-commerce products. For example, the launch of EcoLife by Econet and First Mutual Life, FlexiPay by Moonlight Funeral Assurance and Netone and a debit card ­ by the Cross Border Traders’ Association. This current trend shows an appreciation that Zimbabwe is not immune to the current global trend to paperless banking.
While notable progress is being made on the electronic card system by banks, post Zimbabwean dollar, its use by the general public in transacting is significantly behind. The banking model in Zimbabwe poses stringent conditions in account opening, for example a high initial deposit, a payslip and proof of residence, which are stumbling blocks to the development of e-payment systems given that about 70% of the economy is informal. This has resulted in a low level of user adoption and people continuing to be more comfortable with cash transactions. The call for retailers to acquire coins to alleviate the change shortages has not been welcomed by the players in the sector as they viewed this as a addition to selling costs while the Consumer Council of Zimbabwe inexplicably gave little or no support for the move.
The benefits of a cashless society to the transacting public go beyond convenience and safety associated with the payment system. The present tight liquidity, coin shortages and the need for financial transparency can be solved through the adoption of plastic money as financial transactions can be completed without the involvement of tangible cash. This also has the potential to contribute to GDP growth as the majority of the populace is brought into the banking system in addition to gaining reduced transaction costs. A significant percentage of GDP can be realized in the form of savings if Zimbabwe is able to shift from cash to an electronic-based transaction system. Mobile phones and other ICT applications can replace current dependency on brick and mortar structures in offering financial services to the general public. Points of sale (POS) machines across retailers in Zimbabwe represent open banking halls for the public if there is full co-operation between retailers, network service providers and banking firms.
Despite the aforementioned benefits, there has been a multitude of challenges to get into the full mode of paperless banking in Zimbabwe, for example, the high growth of the informal sector. The lost trust and confidence in making online transactions after the Zimbabwean dollar’s demise remains a permanent stain to be cleansed. 
Without this essential ingredient of trust, the effort to promote a cashless society in this country will be fruitless as most transactions will continue to be settled in cash. Zimbabwe has four telecoms providers, namely, Netone, Econet, Telecel and Telone.
While poor or inadequate infrastructure remains a challenge, the failure of co-operation or partnership between these network providers and the financial sector has also delayed the full implementation of paperless banking in Zimbabwe.  The sooner these players co-operate with banks and other corporate entities, the faster they will take hold and bring benefits to all involved in the value chain.
An improvement in the current status of Zimbabwe’s ICT and the national payment infrastructure is essential for the development of a cashless economy. In addition, the government has a role to play in making this a success through creating a legal and regulatory framework that is supportive to e-commerce. This enables the achievement of trust and confidence throughout the whole system. The country is not immune to the globalization trend which has been the major catalyst for the emergence of electronic payment systems. A change in mindset is also essential to enable full migration to e-commerce.
Considering the current multicurrency system, where the country has no authority over currency issued, it is imperative for the central bank and National Treasury to consider creating an enabling environment to use e-commerce payment methods. Potraz statistics indicate that more than five million people subscribe to various network service providers. This figure does not equate to the number of people who have bank accounts in Zimbabwe.
The quest to extend financial services to the marginalized is fulfilled if an e-commerce environment is fostered thus contributing to savings growth. With the change in technology and emergence of mobile phones, the world is slowly moving into a cashless society where electronic currency will replace tangible currency. The Zimbabwean economy needs to be prepared as the transition is inevitable.

 

Jealous Chishamba

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