“Dear customer, FBC is now linked to Ecocash. Move money from bank to wallet …” That is the message I received last week on my mobile phone. They say, “if you cannot beat them, join them” as banks in Zimbabwe have finally resolved to do the inevitable, that is transferring their services to phones.
Financial Matters by Tinashe Kaduwo
The current cash crisis has brought in new challenges for the banking sector which is at the same time struggling to survive the onslaught from both mobile money transfer services and microfinance institutions.
Ceilings on lending rates, floors on deposits rates, continuous downward review on bank charges, cash crisis and lack of quality borrowing clients has eaten into banks profit margins. Most banks over the years have been resisting partnering services from mobile network operators such as EcoCash preferring to introduce their own rival products. However, there has been lower uptake of these products by the banking public as shown by lower penetration rate when compared to money transfer services such as EcoCash, Telecash and even OneWallet.
Mobile money transfer services further cemented their positions by allowing services such bill payments, school fees payments, payments to DStv, Zesa, insurance, churches and other various products. Even given the foreign payments challenges, mobile services providers have also been very innovative. “Do you know that you can pay DStv via EcoCash? All you need is to cash in rands into your EcoCash Rand Wallet at any EcoCash shop,” another message from the largest mobile transfer EcoCash.
Before the advent of mobile money transfer services, banking halls would be jam-packed with long queues of people paying for various bills, including rent, school fees, water, telephone or electricity. For those who wanted to shop without cash, the only available options were debit cards. All these services would attract fees that would in turn swell banks’ profits. Last year, banks that had invested in transactional channels such as point of sale devices enjoyed huge swell in profits due to cash crisis. Debits cards played huge role in necessitating these payments. However, it is worth noting that mobile phones may play much more significant role than debit cards in a drive towards cash-lite society. Individuals may forget to carry their debit cards but there is no way they may forget to carry mobile phones.
This highlights the convenience provided by mobile services and the role being played by these services providers such as EcoCash. By resisting to partner mobile services providers, banks have lost out and these mobile services providers are slowly detecting the pace in banking landscape. In some markets such as Kenya, mobile services providers are offering services such as stock trading on their platforms. Besides, convenience, they are promoting financial inclusion and savings in the economy. The same can be said of EcoCash, which is now allowing foreign payments (rand DStv payments) which was traditionally reserved for banks.
Other savings products are also being provided together with micro-insurance products. This has been a wakeup call for banks which have revised their stance on mobile transfer services. If you cannot beat them, join them.
When EcoCash was launched back in 2011, banks did not see it as a threat. I remember some bankers used to say that “those who want to transact through EcoCash are those with money. And those with money have bank accounts. So as a bank why integrate with EcoCash”. At times they sought to tame EcoCash by seeking regulations from government and introducing internally rival products that would thwart the rapid growth and development of the service. Unfortunately banks efforts were never fruitful and the importance of EcoCash given the cash crisis cannot undermined.
Some banks have capitalised on mobile services, moving away from their traditional and costly brick-and-mortar facilities and introducing more efficient and sophisticated banking platforms. Agency banking model, a successful model adopted by banks from EcoCash expansion has resulted in cost savings lower head counts and increased client convenience. In this cash-lite environment, mobile phones plays a much more significant role than traditional banking products.
Kaduwo is an economist at Equity Axis. — email@example.comfirstname.lastname@example.org