According to an article in today’s Herald, The Bankers Association of Zimbabwe has taken its ongoing battle with Econet to the state legislature.
While addressing a parliament portfolio committee on youth indigenisation and economic empowerment, BAZ President George Guvamatanga asked for regulation that gives all people access to bank services. He mentioned how unhindered access and interoperability could lower the cost of banking.
Guvamatanga demanded legislative redress to deal with the monopolistic tendencies of some mobile network operators arguing that interoperability would make it easier for people to get access to banking services.
While this call for legislative intervention was made for “all mobile network operators” it was definitely aimed at Econet which, for a long time, refused to give banks full access to their USSD platform. Bankers have indicated that NetOne and Telecel have already allowed access to their USSD platforms.
In January 2014 we got the information that Econet was now opening up full USSD functionality to all banks through the ZimSwitch mobile money transfer services. This move seemed to address the interoperability issue but the fact that BAZ is still harping on about this would suggest that they were not happy with the offer Econet made.
BAZ’s argument appears to based on the unfair conditions attached to Econet’s access to the USSD gateway. These included a US0.30 USSD charge on every transaction, tariffs that are adjustable on short notice and the right to unilaterally terminate services.
While Econet/EcoCash may have opened up their gateway, these conditions make it really hard to offer a fair price for mobile money services outside the EcoCash channel. A US$0.30 charge added to ZimSwitch charges and the bank’s own charges would make any transaction very expensive.
However if all transactions are routed through EcoCash it becomes cheaper. In such a case any subscriber would opt to use the EcoCash services if they are cheaper.
For the banks this whole EcoCash-USSD Platform arrangement that Econet is using is monopolistic and unethical. It forces banks wishing to provide financial services to Econet subscribers to deal with EcoCash as a middleman. The problem is EcoCash as a financial services entity is also a competitor to these banks. Your middleman cannot be your competitor.
It’s easy to see that Econet is playing the first mover’s advantage here. They are doing what any profit focused establishment in a capitalist environment would do. For EcoCash it would seem that with the arrival of Telecash and OneWallet on the scene any strategy that gives them an advantage should be exploited.
The reality though is that for now the scales are tipped in Econet’s favour. With a much larger mobile money subscriber base it will take a lot of lobbying from BAZ or any other interested party to cause a huge shift in the market.
BAZ has opted for the most logical route, but perhaps they need to look at more innovative services that can retain clients and grow their revenue model. Will this inclusion from Econet really lower the service charges as they have claimed or are they using this war with the network as an excuse for their poor business model?
While it’s justifiable to call out Econet/EcoCash for “monopolistic” tendencies the truth is Zimbabwean banking services have not been adaptive to the demands of the local environment. The poor services, challenges to be part of the banking system (try opening an account) and the steep charges that were referenced by the same legislative committee all need to be addressed before they identify exclusion as their biggest problem.
If these issues had been tackled, perhaps mobile money would not have grown into the juggernaut it has become.
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9 comments
These banks should shape up or ship out. A week ago I went to three banks wanting to open a savings account. Their requirements for opening an account are really ridiculous, the list of requirement includes, passport size photos, payslip (in a country where 80% are unemployed, proof of residence. After I had the requirements I brought a copy of my ID, payslip and my landlord water bill statement. But this was not enough, they told me to go to the POLICE and get a stamped letter proving that I am a tenant. Wow. Surely banks cant complain when ecocash simplifies opening an account. in the 21st century opening a bank account should be one of the simplest thing to do, this pre-colonial requirements for opening bank accounts by banks are some of the things they are losing out to Ecocash. Banks must be innovative and must not just want to be cry babies
I agree. Zim banks need a reality check. People still needing to come with a book of paperwork to open a bank account is very archaic. Though I do not agree with Econet’s stance, their money service has “vibrated” the banking sector. 😛
Couldn’t have said it better.
They deserve the pit they dig themselves into.
They grew an arrogant culture during the time of “burning” and hyperinflation. Those days passed by and yet they clung on to their new traits which doesn’t quite work in today’s economy of a larger informal workforce who transact outside banking channels.
Crying wolf won’t help. They should sort out themselves first, encourage savings and even assist with reasonable rates for business.
I feel no pity for them and I believe the disdain I have for them is shared by many.
Today we mainly need banks to transact and to receive funds Not for savings or assisting businesses with affordable capital
I agree with you @Telfika on the part that banks should shape up. Banking sector has not innovated in the past 50. I’ll give an example: banks today are talking about credit cards as if they are something hi-tech but that technology was invented in the 1930s. It also amazes me how they try to use legislation to fight competition, and although I hope I am wrong on this, I think it’s going to work. Im saying this because we are living in a country where we have seen multiple financial institutions get shut down (in our lifetime alone) for failing to meet their statutory reserve requirements and for abusing depositors funds but we haven’t seen anyone going to jail. I wouln’t be surprised to see the regulator taking sides with the banks – it has happened before – it’s not a free market.
About the KYC requirements (requirements for opening an account), it’s really the banks fault bcoz those policies are put by the Central Bank to combat Money Laundering. Even EcoCash is required to follow those KYC restrictions but bcoz they have much smaller transaction limits they have negotiated lower KYC restrictions with the Central Bank.
Great article
Indeed, great article Nigel
These banks are crying foul yet I am forced to look at what really went wrong with Go Mulla. The banks were not cooperating with Econet to offer support to their product and Go Mulla could not operate without that support from banks, it died a natural death. Econet went back to the drawing board and came up with Ecocash and the same guys who gave them cold shoulder treatment are making noise in parly. Maybe they should have read “What goes around comes back round” clearly and understood it before ill treating Econet in the first place.
You are spot on! I bet 90% of pple here don’t remember what Go Mula was!!
Banks are regulated by the Reserve Bank. Who regulates EcoCash? As for the requirements that banks have to give out when opening an account, it’s known as KYC – Know your customer – another requirement from the RBZ in an effort to limit money laundering and terrorism. There are definitely many areas in which the banks have failed Zim but Econet is not a saint either. In any market we have a competition and tariffs commission that works to establish fairness and anti monopolistic prices. I look forward to the day when things really open up and the financial services field is open to everyone with the right regulations and security.