BANKERS have allayed fears the industry will increase bank charges and fees after the expiry of an agreement putting a cap on interest rates and fees banks could charge on services, saying players are more likely to focus on improving efficiency in the face of growing competition.
Last year, banks signed a Memorandum of Understanding (MoU) with the Reserve Bank of Zimbabwe effectively pegging lending rates at 12,5%, while cash withdrawal fees were set at a maximum of 5% with a minimum of US$2,50 and ledger fees, maintenance and service fees of US$4 per account.
During the tenure of the MoU, banks through the Bankers Association of Zimbabwe, warned the industry stood to collectively lose US$73 million in potential income as a result of the MoU.
Analysts see banks reporting modest profits for the full year to December 2013 due to the full impact of the MoU coupled with a host of macroeconomic challenges largely stemming from uncertainty that characterised the election year, a development that could see some players revising their charges upwards.
However, top bankers say banks will maintain the current rates.
NMB Bank CEO James Mushore said scrapping the MoU, which acted as a form of price control targeting the banking industry, was welcome but unlikely to impact on prevailing rates going forward.
“I don’t think that removing the MoU will result in banking charges going up significantly. I think each bank will look at its own situation and decide what it needs to do to remain competitive.”
“It should be up to the market to dictate what prices should prevail. If I go into the market and I have silly pricing, I am not going to get the business, but if I have competitive pricing I will be considered,” Mushore told businessdigest in an interview last week.
Speaking on the possible impact of competition coming from mobile banking platforms, Mushore said his bank was well positioned to remain competitive as mobile banking grows.
“We are a member of EcoCash and I am sure we are going to join Telecash and we have our own mobile banking platform,” he said.
“Our concern as NMB and as banks is that EcoCash crowded us out and wouldn’t allow us in until very late and that’s an unfair business practice, but we welcome competition.”
Barclays Bank Zimbabwe Ltd MD George Guvamatanga recently said he did not foresee bank charges going up due to growing competition particularly from mobile banking platforms. Guvamatanga is also the president of Bankers Association of Zimbabwe.
He said banks would risk pricing themselves out of business if they increased charges.
Guvamatanga said his bank was making significant investment towards improving e-channels after witnessing a growth in Zimswitch transaction on the banks ATMs. He said the bank would install more than 20 ATMs in the current year after a similar number was installed last year.
Last month, the country’s second largest mobile phone network provider Telecel Zimbabwe (Telecel) unveiled its mobile banking and electronic wallet service, Telecash, turning the heat on the already established mobile money services-Econet Wireless’ Ecocash and NetOne’s One Wallet.
Econet is the country’s largest mobile network, with more than 8 million subscribers followed by Telecel with more than 2 million subscribers, while NetOne has 1,5 million subscribers.
In 2011, Econet launched Ecocash which has more than 3 million subscribers and has handled more than US$2 billion worth of transactions since its launch through a network of more than 7 000 agents.
Telecel chief commercial officer Ashraf El Guindy said the company targets to have 60% of its subscribers on the Telecash platform in the first six months of operation.
The mobile banking products are a major form of competition to banks particularly in terms of tapping into the unbanked population.
Business Columnist Brett Chulu recently said EcoCash was a disruptive innovation.
A disruptive innovation is a product or service that enables masses who at one time were denied access to a product or service because it was either too expensive or too complex to be used by the majority of people, Chulu said.
“Thus a disruptive innovation either lowers the price point of a service/product and/or eliminates the complexity associated with accessing or using the product/service. How that is achieved is through reducing or eliminating unnecessary standards or functionalities such that only the most basic features of a product or service are made available,” said Chulu.
“High bank charges (including the ongoing cost of maintaining a bank account) and the complexity of the process of opening a bank account has seen less than 900 000 people operating
a formal bank account in Zimbabwe.”
Banks are not only facing competition from mobile phone network operators, but retailers who have introduced in store debit cards and loyalty cards in which customers transfer their cash for future shopping at promotional discounts.
Last year, the country’s largest retailer — OK Zimbabwe — said it was pursuing growing opportunities in the financial services sector and has launched a money transfer and product purchase facility in partnership with a South African company targeting Zimbabweans based in South Africa.
OK Zimbabwe CEO Willard Zireva last year said at least 10 000 Zimbabweans in South Africa had signed on for the OK/Kawena venture, but admitted the company had been slow on the marketing front with only 5 000 people signing on in Zimbabwe.
OK Zim is also working with FNB (SA), Standard Bank (SA), Mukuru, Cabs and Ecocash on the financial services side.