Who wants to move the banks’ cheese?

In the previous article, we saw that during the six-months from January 2014 to June 2014, 36 new product initiatives were recorded – an average of six per month.

Financial Sector Spotlight with Omen Muza

The banking sub-sector provided the bulk of these initiatives (17), followed closely by non-bank players with 10 initiatives, while the telecommunications sector was third at seven and the insurance sub-sector came last with two product initiatives. This installment focuses on some of the initiatives of non-bank technology companies which position them to move some of the banks’ cheese.

While the telecommunications companies (telcos) are often seen as the biggest source of competition for mainstream banking, based on these findings, the combined effect of non-bank players on banking sector competitiveness cannot be taken for granted, especially in the payments space where they promise to become a formidable force.

Flocash, a Pan-African payment gateway or provider of electronic payment services, started offering its online merchant processing service in Zimbabwe commencing February 1 2014, enabling online merchants to accept local mobile and card payment methods. Other local Internet payments platforms include Webdev’s Paynow and Zimswitch’s VPayments.

In the same month of February 2014 Content Connect launched a virtual bill payment facility called Payway, which it said allows customers to purchase airtime, make payments for utility bills, hospital fees, subscriptions, retail accounts and tuition fees using mobile devices or point-of-sale (POS) machines and kiosks.

Technology firm Cash Application Universal in May 2014 announced the release of its first version of wholly Zimbabwean Windows-based mobile money management software called CAPU which enables systematic management of mobile money usage. The company said CAPU is a “click and go” system, which allows one to create multiple accounts depending on one’s needs for example wages, petty cash, and cash disbursement, thereby enabling separation and tracking of transactions.

By systematically maintaining records of the user’s mobile money usage, the software seeks to provide a consistent means of managing money matters. PayPal entered Zimbabwe in June 2014, providing online payment alternatives for consumers via mobile phones or PCs. Customers with access to the Web and a bank card authorised for Internet transactions can register for a PayPal account and make payments to millions of sites worldwide.

Paypal said it would initially offer “send money” services for consumers to pay for goods and services at PayPal-enabled merchant sites at no cost to consumers since fees would be covered by charges to merchants.

PayPal does not yet cover peer-to-peer transactions, which allow consumers to send money to other consumers and has not yet enabled local merchants in the new markets to receive payments, nor is it offering other forms of banking services.

Zimpost revealed in June 2014 that it was working on a new financial service platform called Financial Switch to be connected to all banks as well as other service providers, bringing more convenience to banking and payment services in Zimbabwe. The postal company said it had already gone to tender for a partner and the project was now at evaluation stage for the service which will enable anyone to use their bank card, Visa and MasterCard at any Zimpost branch to swipe and access their money.

In June 2014, Kuronda Venture Partners (KVP) unveiled a platform called wiPlatform that allows real time mobile transacting at the Point of Sale (POS) and also allows retailers to accept withdrawals and deposits on behalf of banks. Developed in partnership with wiGroup International – a global mobile money service provider – wiPlatform allows for real time transactions, saving retailers from tedious reconciliation processes at close of business.
KVP said before wiPlatform there was no application that could integrate all networks, which had seen some banks incurring huge costs in setting up in-store ATM points which motivated the company to develop “a simple and ever-evolving ecosystem that brings together customers, retailers, brands, agencies, banks, mobile networks, as well as local and global app developers through the one interoperable platform.”

While some of these initiatives actually complement banks, the overall impact of the new products is that transactional activity will gradually migrate from banking halls onto more convenient – and in most cases more affordable – online channels.

At a time when banks are adopting more conservative lending approaches due to the high levels of NPLs resulting in constrained interest income, commission and fee income from transaction or payment activity assumes much greater importance at a time it is actively threatened by the arrival of non-bank technology players and their offerings. The biggest undoing of some of these platforms is, however, their lack of scale and in some cases staying power. You hear about them upon their launch and thereafter you hardly hear anything about them again.

Feedback: omen.muza@gmail.com. Omen N Muza writes in his personal capacity. You can view his LinkedIn profile at zw.linkedin.com/pub/omen-n-muza/30/641/3b8

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3 Comments

  1. this is a well reseached Mr Omen Muza i learnt a lot on this article .

  2. Thank you Atsiziba, your feedback is most appreciated.

  3. Quite a mouthful, Mr Muza for those of us who are not ICT literate. What should most of us go for given that we do not have much disposable incomes? If many of these platforms are flight by night arrangements, how can one tell which ones to do business with?

    It would have been better for most us to stay with banks for all our transactions. But then these guys just want to milk you to the bone. So you can understand the dilemma.

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