M-Banking Services Launch Chart a New Era for Financial Services in Zimbabwe
script: reginald sherekete

 

THE launch last week of mobile banking services by Econet Wireless
Zimbabwe and Telecel Zimbabwe has charted a new era in delivery of
banking products to the public, analysts have observed.

Zimbabwe, which has for long lagged behind in terms of ICT
development, seems to have turned a new corner, with new forms of
banking anticipated to foster financial inclusion of the unbanked
population.

In the region, Botswana has the highest mobile penetration rate of
125%, followed by South Africa at 102%, Zimbabwe stands at 66% and
compares higher to Kenya at 50%.

The use of mobile phones has increased in developing countries, but
judging by Zimbabwe's mobile penetration rate, there is still a huge
gap compared to first world countries which are generations ahead in
terms of ICT.

In the banking sector, Kingdom Bank and Tetrad Investment Bank were
the first innovators with their virtual mobile-banking packages. Both
the Kingdom CellCard and Tetrad's E-Mali offered customers a platform
to transact using mobile phones.

But because of the banks' small branch network in the country and
market presence, there was a huge gap to be filled as the majority of
the population did not have access to these products and did not know
about them. But as pioneers, Kingdom and Tetrad laid a foundation for
others to follow suit.

Interfin Bank marketing boss Palmer Mugavha sees the platform growing
fast."The adoption of mobile technology is viral and the use of mobile
banking services will quickly spread," he said.

With EcoCash from Econet Wireless, subscribers can now send and
receive money quickly and easily through mobile phones. TN Bank
partnered Econet where they will register agents who will able to
facilitate transacting using the platform.

The Telecel system, which is technically different from Econet's
EcoCash, has the advantage of offering a wide range of products to its
users due to its strategic partnership with ZimSwitch participating
banks.

"It's like an ecosystem, where we are exploiting the core competencies
of our partners. ZimSwitch is competent at handling financial
transactions and us as banks are competent in delivery cash and
managing liquidity," said Kevin Terry the MD of CABS Building Society.

ZimSwitch is a financial platform that is used to connect and carry
out transactions amongst banks and has been operational for the past
15 years with 19 financial institutions connected through it.

"Together we have more than half a million customers, which is almost
half the number of banked individuals in Zimbabwe. We expect that by
year-end about 85% of banks will be ZimSwitch ready," said Obert
Mandimika, the marketing director of Telecel Zimbabwe during the
launch.

The greatest advantage of connecting through ZimSwitch for the mobile
banking service is that the banks will enjoy synergies of being
already connected to a web of institutions where users are able to
send and receive money through any ZimSwitch-ready outlet, be it a
bank or an agent.

The cost of transacting under these mobile innovations is an area of
concern since bank charges are relatively high in Zimbabwe. However,
ZimSwitch is expected to lower the costs of transacting.

EcoCash transaction fees are well above normal banking charges.
Analysts say the high charges might be stemming from the cost of going
solo where the mobile phone operator incurs high IT infrastructure
costs to setup the whole platform.

Analysts say the high transaction fees will not help a new business
trying to get as many clients on the platform, especially in the face
of a relatively cheaper alternative in the competition's financially
inclusive ZimSwitch platform.

But the cost of transacting is expected to go down as competition sets in.
Just as in Kenya, one of Africa's fastest growing mobile banking
markets, mobile-cellular tariffs have come down considerably due to
increasing competition between providers in Kenya.

New entrant Airtel sparked a price war and initiated fierce
competition in the Kenyan market last year by reducing voice-call
rates by half and cutting prices of Short Message Service charges (in
local currency) from KES 3 to KES 1 (US$ 0,03 to US$ 0,01).

Other operators, such as Safaricom and Telkom Kenya, expectedly
followed suit, making further cuts to their mobile rates. The cheaper
calling rates captured new subscribers in under-penetrated market
segments and made mobile banking services more affordable.

A recent halt to any further tariff reductions was announced in May
2011 by the Communications Commission of Kenya (CCK) and President
Mwai Kibaki in order to evaluate the impact and economic profitability
of the price wars.

Analysts say Zimbabwe should have this kind of competition, adding
that it is healthy as service providers will always look at offering a
low-cost product which is affordable to the low-end market.

For instance, a charge of US$7 for withdrawing US$100 is relatively
costly to rural folk, who are struggling to earn any meaningful income
from their subsistence farming activities.

But these mobile banking platforms also need to address the issue of
security as electronic means of transacting have been subject to
hacking by fraudsters, analysts added.

Financial institutions and mobile operators need to keep their eyes on
the ball so that they continually develop security systems and
features to prohibit such occurrences.

There is no need for users to hold accounts with financial
institutions for them to be able to transact using the mobile banking
facilities, but the Know Your Customer (KYC) requirements need to be
fully addressed through relevant regulatory authorities.

Since this is a banking product, use of mobile phones makes it even
easier for money launderers to conceal their identity. Banking experts
say the Postal and Telecommunications Regulatory Authority of Zimbabwe
(POTRAZ) and the Reserve Bank of Zimbabwe need to work together to
fight against possible money laundering activities.

POTRAZ this year reined-in on mobile operators to start disconnecting
unregistered subscribers. This move saw many subscribers providing
their personal details so that they are traceable.
Culled from Zimbabwe Independent