I once discussed the Paynet saga some time not too long ago. In that article, I did give allusion to the fact that an alternative to Paynet was on the cards. At the time it wasn’t clear whether the alternative did exist or it was just grandstanding. Now it’s quite clear that there is an alternative and it’s currently being tested. This substitute for Paynet has been indicated to officially go online next week – on the 21st. However, it has emerged that during the time Paynet shut off its system certain undesirable things happened. I’ll discuss that and more in this article so that you get the clear picture.
A Recap Of The Paynet Saga
The bulk payments system that banks and other financial institutions have been using locally belongs to a company called Cambria. Paynet is licensed by Cambria to provide the system to clients willing to outsource such as system as has been the case with Zimbabwe. When banks entered agreements with Paynet from the onset the working arrangement was that they would pay for the service in US dollar dollars. Then came February when the central bank gave directives for US Dollar bank balances to be converted to the RTGS$ at 1:1. Then, later on, foreign currencies were banned as legal tender and the Zimbabwe dollar (at par with the RTGS$) became legal tender.
From February banks flatly refused to pay the Paynet service in US Dollars. That’s where the fallout between banking institutions and Paynet started to escalate. Cambria indicated that approximately USD200 000 had been lost in the period from February to April this year. It also emerged that banks refused to pay off USD470 000 in arrears, coupled with further arrears that accrued from February when they started to refuse to pay in US Dollars. Recently Paynet even pointed out that they have just started legal action in claiming damages amounting to USD100 million from the banks owing to breach of the initial contract.
Paynet (upon directives from Cambria) had no option but to shut down their service. You must understand that despite the changes in local monetary policies banks are still reported to have continued making very high profits. Which means banks could still afford to pay for the Paynet service in US Dollars. After all, the very same banks have continued paying in US Dollars for other outsourced software that they use in their operations. So the refusal to pay Paynet in US Dollars was somehow deliberate and not based on valid reasons. The shutting off of the Paynet service left banking and financial institutions in a frenzy. It has since emerged that bulk payments ended up being done using very porous alternatives that jeopardized clients’ privileged data. You can imagine how insecure it can be to use manual spreadsheets and USB drives which is what ended up happening. This implies that there was weak or no data encryption involved at all.
The New Alternative Bulk Payments System – BFIS
The new system called Bank File Interchange System (BFIS) has been said will go online starting on the 21st of this month. Trial runs already started last week with 4 banks being used to test out the system before being rolled out to all the other banks. It also emerged that 3 banks had been readmitted to the Paynet system.
Re-admittance Of The 3 Banks Onto The Paynet System
There are a lot of unclear details regarding this as so many questions come to mind. Have they agreed to honour their outstanding debt to Paynet? Will they also be included in the USD100 million lawsuit? Based on the fact that Paynet had been in correspondence with banks individually it’s possible they could have reached an understanding. I say this because I remember that during the time friction started between banks and Paynet there are some banks that had indicated that they could pay the Paynet service in US Dollars as per the contractual agreement. Those banks had been directed not to by the Interbank Operations Committee (IOC) so that the decision to refuse to pay in US Dollar would come off as a collective decision by all banks. So those 3 banks being re-admitted could somehow mean they reached some form of working agreement which might be involving them having paid their dues.
A lot still remains to be seen as far as what will happen is concerned. For starters, what’s going to happen concerning the USD100 million damages claim? Will all banks want to be on this new BFIS? This question arises from the issue of those 3 banks that have been re-admitted on the Paynet system. Essentially it might mean willing banks can be re-admitted onto the Paynet system. Besides, what working agreement was reached between those 3 banks and Paynet. Will the new BFIS be as good as Paynet or even better? Whatever the answers to these questions are the ironic thing is that it’s the ordinary Zimbabwean who usually gets affected the most.