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Technology you can bank on

The adoption of multiple currencies gave companies an opportunity to grow their businesses, a situation which had become increasingly impossible in the Zimbabwe dollar days.

Kumbirai Makwembere

Companies could, for once, shift their strategies from those of mere survival and focus on improving product quality, among other things.

For telecoms companies, the dollarised environment ushered in an opportunity to increase the number of subscribers and broaden their product offering. The past five years alone have seen these companies become aggressive in rolling out data products.

An innovation that is welcome and that has the potential to change the way business is done is the aggressive roll-out of mobile money transfer services. Econet has been at the forefront with EcoCash, which allows customers to transfer money, buy airtime and pay for goods and services.

Telecel offers similar services through partnering banks on Zimswitch. NetOne, on the other hand, is riding on its OneWallet product, which has almost identical functions.

Banking institutions have also followed suit by giving priority to E-Commerce in their business strategies. This has resulted in the launch of several debit cards as well as the increased use of internet banking.

Among all these products, EcoCash appears to be leading the pack. It is estimated that the platform is moving approximately US$100 million per month.

EcoCash was not the first mobile money transfer product on the market.

It however rapidly gained mileage because Econet already had a captive market in the form of eight million subscribers. The company recently improved this platform by launching a “cellphone” debit card that will make use of point of sale (POS) machines. The POS machines will have Econet Sim cards that will be able to communicate with those using cellphones.

Econet officials indicated the company had rolled out 10 000 terminals that can accept Visa, Mastercard and other cards from local banks.

It would appear that Econet’s strategy going forward, in addition to telecoms, is also biased towards energy and financial services. This is understandable, considering the mobile market in Zimbabwe is almost saturated.

The country’s population is approximately 12 million and Econet already has eight million subscribers. This represents 72% of mobile market subscribers. Further growth in subscribers will only result in the average revenue per service provider going down.

Econet has been penetrating the energy sector through the aggressive sale of solar lamps, in response to power shortages in the country.

Focus on financial services will undoubtedly increase competition for banking institutions. Media reports indicate that at one point the Bankers Association of Zimbabwe was against EcoCash. This is to be expected. Anticipating a quick, favourable response from bankers was like asking chickens to vote for Christmas.

Financial statements for most banks show that income from transaction fees on withdrawals, ledger fees and electronic transfer fees make up the bulk of their non-funded income.

EcoCash charges are relatively lower and customers can transact from any location and hence the new facility offered was viewed as direct competition by bankers.

However, banks may eventually be forced to join the platform so as to give their customers the additional convenience they demand. Banks may need to view EcoCash as a complementary product rather than direct competition since, by joining the EcoCash platform, they will also get some fee income.

The next step for Econet to retain customers on the EcoCash platform is to offer more value-added products. Subscribers need to be assured that money held in the EcoCash wallets does not lose value through paying interest on balances held in wallet accounts.

Lessons can be drawn from the success of Safaricom’s M-Pesa in Kenya. Safaricom partnered with Equity Bank and introduced M-Kesho which allows clients to transfer excess cash from their wallets into Equity Bank accounts and earn interest on them.

M-Kesho also offers micro loans and insurance cover to subscribers on the M-Pesa platform. If Econet goes this route it will undoubtedly acquire a critical mass in both the loans and insurance businesses.

Potential to grow both revenues and profits through the EcoCash platform is huge. M-Pesa is one success story for Safaricom. The product now accounts for 16% of the company’s topline.

Furthermore, Econet is offering devices such as smart phones and tablets on hire purchase and the underwriter of those loans is most likely TN Bank, a wholly-owned subsidiary of Econet. These devices encourage consumers to make more use of data products, which will impact positively on the company’s profitability.

These advances in technology are welcome and will go a long way in changing the face of local banking services. If anything, they have enabled the country to catch up with technological advances that have been taking place across the globe.

Use of technology will lower the cost of doing business while enabling companies to reach a wider target market through cheaper and faster channels.

Afre recently hinted that it is working on plans to introduce mobile insurance life cover.

This will be the second time the company will be offering the product after Ecolife, which they terminated in 2010 following contractual disagreements with Trust Co of Namibia.

Technology continues to advance and Econet has strategically positioned itself to spearhead the new innovations. As it stands EcoCash subscribers can pay their bills, transfer money and buy airtime using their phones. The company now has to constantly come up with more innovations to continuously leverage on its large customer base of subscribers.

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