The Reserve Bank of Zimbabwe issued a statement late into the business day on Thursday (9 July) informing that Zimswitch will now be used as a national payments switch which all transactions, including mobile money, will run through. This caused considerable chatter on all platforms as people grappled with the meaning of the announcements and its repercussions. There was a variety of reactions including celebrating the demise of Ecocash’s monopoly, calling Ecocash just another wallet (which I don’t quite agree with) and questioning the disruption of one private monopoly by creating another.
Zimswitch is the system through which Banks process ATM and POS transactions. To explain it simply a card from one bank can transact in another Banks ATM or Point of Sale machine through Zimswitch they facilitate the handshake. Zimswitch is, of course, the party responsible for ZIPIT transactions which is for simplicity’s sake the mobile money version of Zimswitch’s card transaction processing. Zimswitch is a private company started by a group of banks and other private investors. Many view the move by the RBZ as a way to take away Ecocash’s market dominance in mobile money but also questioned giving dominance over the transacting system to another private company.
What the idea enables
A quick look at how transactions are currently can help us to examine what the future should (more on this in a bit) look like. Paying someone from a bank account, you had the option of either using the slow (in many cases) RTGS or moving the money to your mobile wallet and paying through it if they had the same wallet. The use of Zimswitch as a national switch puts all Bank like platforms including mobile money on a par. Thus facilitating a direct transaction from bank to mobile money avoiding multiple transaction costs along the way. This works if the cost of transacting through Zimswitch is lower than or at least equal to the existing solution. We sincerely hope that one transaction will cost less than 2 or more.
Ecocash and its system have been a thorn in the side of the Reserve Bank and its dominance in mobile has led the Apex bank into a protracted battle with Ecocash in which they have gone after mobile money agents, trust accounts, CEOs of both Ecocash and Cassava and that statement by The Ministry of Information that informed the nation that mobile money was to be banned before clarification from the RBZ. The mobile money platform has been blamed for a lot of activity on the parallel market.
The end of Ecocash dominance? Far from it!
Many have started singing this is the end of Ecocash’s dominance. Ecocash lest we forget invested heavily in their network and there will certainly be some losses to consider. For one revenue from Bank to wallet movements will be missed. However, let us look at the landscape. Level playing fields tend to favour elephants, not ants with all due respect to the players in the game. And if anything this will further cement the Ecocash near-monopoly. While the individual may now freely use their One Money to pay for services, the merchant no longer needs to sign up with One Money. Of course, Ecocash will certainly have to innovate more in terms of service to customers but a quick look through history will tell you which of our mobile money providers has shown the ability to innovate. Unless, of course, there is more to it and with our Reserve Bank there may well be.
The opening up of the payments ecosystem will certainly have effects. Without further clarity on the rules, I wouldn’t sing the blues for Ecocash and Cassava just yet. The idea should bring convenience to customers and that is always a plus.