Banks under siege from mobile money adoption

BANKS are under threat from a surge in mobile money adoption, as telecommunication firms behind them are pushing more financial products on the market, a new report has shown.

BY TATIRA ZWINOIRA

A detailed report on mobile money trends titled Mobile Money Practices in Zimbabwe prepared by research consulting firm, Studio D Radiodurans for the Bill and Melinda Gates Foundation, said telecom firms behind mobile money platforms were now competing with banks.

“The surge in mobile money adoption has stimulated competition between banks and mobile money providers. Each side is wary of the other taking its customer base, and the banks particularly have good reason to be worried,” the report said.

“Zimbabwe is one of the few countries where banking penetration has declined, while mobile money adoption has increased.

“Based on recent experience, Zimbabwe has a relatively low-trust environment. Mobile money offers a higher-trust option than traditional financial services.”

In the central bank’s recent economic reports, the volumes of mobile money usage, compared to other banking platforms, have grown compared to point-of-sale transactions, real time gross settlement system, cheque transactions and usage of automated teller machines platforms.

Traditionally, mobile money has focused on remittances and banks on financial products, the report said.

But in Zimbabwe, this is changing as telecom firms offer more financial products and services or value-added services. These services cover insurance, savings, loans (EcoCash), and bill payments, which have helped entice clients.

Out of the country’s three major mobile money platforms, Econet’s EcoCash, Telecel’s TeleCash and NetOne’s OneWallet, the report found EcoCash to be “the leader in value-added services, which it offers on top of its EcoCash payment platform”.

The report found that nationally, an average of $50 was being transacted on a daily basis.

“As one of the fastest-growing sectors in Zimbabwe, mobile money could be a step towards the formalisation of the informal economy by delivering revenue to a fiscally constrained government. It also delivers a data trail that has hitherto been off the books, and which may be exploited by the government in the future,” the report said.

On why the trends were showing the 70% unbanked adult population moving to mobile money, interviewees cited a number of reasons such as low trust in banks post-hyperinflation, a large section of Diasporans sending money home, minimal regulation of mobile money and no fee to maintain account.

Others include a higher perception of people see the platform as an alternate saving mechanism to banks, better networking, and the interoperability, which allows transfers across mobile money, and services and banking products.

In the third quarter Postal and Telecommunications Regulatory Authority of Zimbabwe 2016 report, mobile money growth was the main reason behind total revenue by telecom firms increasing to 14,5% to $262,02 million.

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