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Achieving an inclusive cash-lite society


A KEY component of the financial exclusion conundrum is access to financial services.

Clive Mphambela

However, mobile phone-based services have now offered financial institutions the ability to electronically “include” a wider cross section of the previously unbanked market.

Mobile money also brings other benefits to the economy such as lessening the dependence on overall use of cash as a payment instrument.

A vast amount of transactions can be done via mobile payments systems,quickly and securely, sometimes eliminating the need for people to carry cash around.

This is especially important in Zimbabwe, where banks have to import cash into the country at great expense.

Mobile money also goes some way in alleviating the transactional problems caused by the critical shortage of small denomination notes as well as coins since in the multi-currency era, we are reliant on mint that comes from abroad.

Efficiency of mobile payment systems in addressing both the financial inclusion objective and the achievement of a “cash-lite economy” requires broadening and deepening access to mobile banking platforms by both providers and users.

Like a lot of other countries pursuing financial inclusion, Zimbabwe also has such objectives: greater financial inclusion and a reduction in the use of cash for business and personal payments.

Both objectives can be combined in one objective that can be called an “inclusive cash-lite society”, where cash is still used, but not pervasively.

In this regard, the interoperability of retail payment instruments and platforms becomes not an objective in its own right; but rather a means of achieving the other desirable economic objectives.

We discuss briefly in this article, how policy objectives for and provider benefits from interoperability need to come together to realise that vision of an inclusive cash-lite economy.

Adopting the objective interoperability not an end in itself, but as a strategic objective tool to be used by policy-makers is critical. Interoperability of infrastructure is critical in driving financial inclusion to the desired level in the economy particularly in retail (person to person) payments.

The sharing of mobile payments infrastructure promotes what is known as productive efficiency (avoiding duplicative infrastructure) and leads to dynamic efficiency (promoting competition and product diversity).

Regulators and government and market players therefore need to prioritise and promote interoperability of platforms in order for the mobile revolution the country is experiencing to provide maximum benefits at least the least economic cost.

Presently in Zimbabwe, we have Zimswitch which is a good example of how sharing front-end infrastructure can reduce costs of financial services delivery.

Put together by a network comprising 21 member banks, with over 4 000 Zimswitch enabled point-of-sale machines nationwide found in the major regional and local retail outlets and close to 400 Zimswitch compliant ATMs, some of them located in remote areas, financial services are within the reach of many.

However, with mobile penetration projected to exceed 100% in Zimbabwe shortly, mobile payment systems become a logical extension of any national strategy to meet the financial inclusion challenge.

Interoperability will change the trajectory of mobile money growth in Zimbabwe, lower delivery costs and even greater interoperability could unlock a pathway to cash-lite financial inclusion but it would have to be in defined-use cases and it would have to be handled with great care.

For instance, agent-level interoperability, where mobile money agents representing various network operators and banks, are also able to deliver services of other operators or banks.

This could help rationalise the large investment that is needed in developing agent networks.

However, care is still needed in implementation by the regulators so that policies do not depress the economic incentives for institutions to put up infrastructure.

On the other hand, Interoperability can be engineered at the platform level, focusing on the full interconnectivity in specific payment systems. This kind of interoperability is desirable as it enables efficiencies in transmitting payment instructions across networks also lowering costs and improving service delivery.

Experiences in other jurisdictions have shown that regulators can encourage funds transfers between bank accounts and mobile wallets, the regulators in Zimbabwe could also help the local industry take a step towards creating similar network efficiencies.

While sharing branchless banking channels just might lower total investment, it will not resolve all the business issues associated with the delivery of efficient mobile money services.

For instance, the industry will need to resolve an important mobile money paradox which is that: There is need for a massive build out of infrastructure where people can cash-in and cash-out of their accounts but the need for that infrastructure declines as the need for carrying cash declines.

This leads to a concomitant decline of the revenues earned by agents and owners of the infrastructure, as more and more people make payments electronically via mobile phones.

Fortunately, the paradox suggests that there is a time when interoperability is economically attractive to all providers.

We, therefore, do have a basic business case for the development of a robust framework for interoperability of systems within our mobile payments industry.

l Clive Mphambela is a banker and financial advisor. He writes in his capacity as advocacy officer for the Bankers’ Association of Zimbabwe. He can be reached on 04-744686, 0772 206 913 or clive@baz.org.zw

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