ECONET Wireless Zimbabwe Ltd (Econet), through its mobile money service EcoCash, unveiled a mobile savings account which analysts say will offer strong direct competition to conventional banks.
The EcoCash Save product, which is offered in partnership with Steward Bank, is a paperless banking service which enables subscribers to operate a savings account through their mobile phone and on the EcoCash platform. Steward Bank is a bank controlled by Zimbawe’s mobile phone operator.
Economic analyst John Robertson said banks should take the competition seriously and devise new technology to remain competitive.
“Business is all about competition, therefore Econet has brought stiff competition to the Zimbabwean banks which should try harder to work effectively against competition,” he said.
Robertson said the new product was better placed to tap into the informal sector because of its flexibility compared to the more stringent requirements for opening traditional bank accounts.
Economist Takunda Mugaga also said banks will feel the heat as Econet has already created a natural monopoly and has less costs of doing business due to its modern technology.
He, however, said the innovation was necessary as it filled a gap in the financial services sector.
“Econet’s new product cannot be necessarily said to be unfair to the banks as banks have failed to be innovative and in the process will suffer the consequences. Econet was a 10% shareholder in Kingdom Meikles Africa Limited which makes their appetite for banking business well documented,” said Mugaga.
At the launch of the EcoCash Save account, EcoCash CEO Cuthbert Tembedza said the new product gave customers an opportunity to earn a 4% interest on as little as a US dollar deposit made for more than 30 days.
He also said the service was targeting customers without the required pay slips for opening bank accounts. He added the company would tap into the informal sector which constitutes over 80% of the country’s economy.
Tembedza said the new product was expected to foster a savings culture among customers at little cost and boost financial inclusion from the current situation where only 853 000 people have bank accounts out of the country’s estimated 13 million population.
“Your phone number is your account number and the money will be banked in at Steward Bank and sitting on an EcoCash account, implying that you are your own administrator and can make transactions at any time and anywhere,” he said.
Tembedza said there are no ledger fees, no limit on the frequency of withdrawals, no minimum operating balance and no charge on deposits on the EcoCash to EcoCash save account.
Banks do not levy fees on deposits of less than US$800 and they give 4% interest on deposits of at least US$1 000 held over 30 days, however, the EcoCash Save deposit account will give interest on a US dollar for as long as the money has been there for 30 days.
Steward Bank CEO Kwanele Ngwenya said the bank was excited to have partnered with Econet, he however emphasised that the EcoCash save account is only accessible through one’s mobile phone via EcoCash menu and not at any Steward Bank Branch.
“This is an excellent product as we are approaching the farming season and the small scale farmers can now afford to save their money after harvesting for the next farming season,” he said.