Current challenges with the availability of cash in the economy have opened up a very hot debate about the future of the business environment. Zimbabweans have, over the last few years, operated in a cash economy.
BY CLIVE MPHAMBELA
Following dollarisation in 2009, Zimbabweans developed a culture of carrying hard cash and using hard cash for almost all transactions, large and small.
Whether one is buying groceries for $20 or paying for a car worth $30 000, there has been a tendency to use cash in settling all manner of transactions.
This is in spite of the existence of so many alternative platforms available for people to avoid queuing in banking halls or carrying large amounts of cash, which in itself poses a high personal security risk.
Indeed, there are significant risks of using hard cash or carrying large sums of cash on one’s person. The cash economy has also imposed various other hidden costs of doing business, besides the high risk of loss, in the intervening period before cash is finally banked.
Small-and-medium enterprise (SME) businesses and those in the informal sector have been hardest hit in the new economy, where transactions are moving to electronic platforms.
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It is for this reason that players in the SME sector and informal sector must now take the leap of faith and embrace plastic money and other electronic payment technologies.
What are the plastic money options currently available to SMEs?
The generic term “plastic money” predominantly refers to the hard plastic bank cards that are issued to account holders for their everyday use, in place of hard cash (bank notes or coins) or cheques.
In Zimbabwe, these cards which we generally call “ATM [automated teller machine] cards” because of their predominant use for making withdrawals at ATMs, have been available for quite some time. They come in various forms.
Is it easy for an SME business to take advantage of plastic money?
To take advantage of the growing usage of plastic cards, an SME business must apply to its bank for a point-of-sale terminal to be installed on their premises. This will enable the business to accept various types of cards.
Debit cards — There is now a drive by banks to ensure that all customers have debit cards. These cards do not have a loan facility tied to them but allow customers to directly debit money from their bank account when they used it to purchase goods and services.
They are linked to a customer’s available credit bank account balance. Using a debit card, a customer cannot transact beyond balance that is marked as “available” on their account.
They are normally linked to a savings account and in rare cases, where a customer has an overdraft facility, the card will also allow transactions to the extent of the overdraft.
Credit cards — This type card will permit the card holder to withdraw cash from an ATM or purchase goods and services directly from stores that accept the type of card up to the “credit limit” of the card. The money withdrawn from this type of card is basically a form of short-term loan to the card holder.
Most credit card facilities carry no direct interest charge for the amount “borrowed”, but a fee is payable to the bank for accessing the facility. Interest normally becomes due after a certain cutoff date provided the balance is still outstanding on the credit card.
The card holder can avoid any interest charges by paying the balance off in full each month before this date.
Pre-paid cash cards — These are a form of debit card, except that they may not be linked to a bank account but for example be linked to a mobile banking wallet.
As the name suggests the user will upload a cash credit balance to the card either by themselves at an ATM through a bank or other authorised agent, and expenditures or withdrawals from the card will not exceed the amount stored on the card.
All the details about the customer and the amounts and details of transactions are stored on a magnetic strip or micro-chip on the card. These are usually re-useable in that they can be “topped up”. Typical issuers of such cards are banks and large stores.
What are the benefits of plastic money for SME business?
Ready convenience — For the SMEs’ customers, credit and debit cards offer hassle-free shopping. There is usually no need for carrying cash, no additional credit checks, although additional identification requirements are usually required in addition to the private personalised identity number (PIN).
This increases the security of funds and limits the use of the card to its rightful owner although it is sometimes viewed as a small inconvenience of the cardholder in undertaking his shopping.
There is however great convenience in that customers do not need to first go to the bank or to an ATM to withdraw cash before doing their shopping. When customers pay for your goods and services, the money goes directly into your business bank account.
Widespread access through the ZimSwitch network
The ZimSwitch network comprises 16 member banks, which have deployed over 6 000 ZimSwitch enabled point-of-sale devices nationwide in all the major regional and local retail outlets. In addition, there are close to 440 Zimswitch compliant ATMs, some of which are located in remote areas so that banking services are within the reach of many people.
Security — Cash carries a big risk of loss. One can easily drop a wallet and once it is lost, it is usually lost forever. On the other hand, if you lose your credit or debit card and quickly report it to your bank, the unauthorised use of your card will be stopped quickly without any loss.
Flexibility — there is flexibility associated with using plastic money. Plastic cards give access to ones money at many different access points such as point of sale machines and also at any time of the day.
The bank does not need to be open, and one can access their money sometimes even when they are away from the home country, if the card is issued for international use.
Reputation and status — Sometimes a credit card can be a measure of your credit worthiness It can tell a story about how you handle your finances. When lenders want proof of your credit worthiness, they can consult your credit history for a black-and-white snapshot of your ability to repay facilities granted to you.
A credit card can also be regarded as a status symbol. As an SME business, your transactions will go straight into your bank, creating a permanent audit trail and record of your sales.
Why every SME business must apply for a point-of-sale device
With a point-of-sale device on your business premises, your staff also wont handle any cash, minimising the risk of loss from employee theft and errors.
Payments go straight into your bank. And should you wish, your account can be also be configured to give you periodic notifications of transactions, in real time.
Clive Mphambela is a banker. He writes in his capacity as the Advocacy Officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772206913
