By Collen Jonasi
Following the abuse of mobile money platforms by illegal foreign exchange dealers which resulted in a sharp fall in value of the local currency against the US$, the Ministry of Finance through the Central Bank took drastic measures to restore sanity in the financial services sector. Within the cocktail of measures taken was the introduction of mobile money interoperability. To put that into effect, Statutory Instrument 80 of 2020 was introduced.
The statutory instrument directed all mobile network operators who provide mobile banking services to connect to the National Payment System, in this case ZIMSWITCH was designated for that purpose. According to the Statutory Instrument 80 of 2020, interoperability is defined as “a seamless transfer of money between two accounts at different payment systems or the transfer of money between mobile money accounts and bank accounts”. In other words, it’s a system that links together or integrates all banking services providers so that users of such services are able to send money or receive money easily across all platforms without challenges. Implementation of the provisions of the statutory instrument has seen more and more people being taken aboard the digitalised financial platforms, as opposed to a situation where our banking and mobile money systems were not interoperable.
Before the statutory instrument was promulgated, it was not possible for a person who holds an account with any one of the local banks to transfer money directly to mobile wallet holders and vice versa. Similarly, an Ecocash account holder was not able to send money to or receive money from holders of Telecash and One money accounts and vice versa. Ecocash being the leading mobile money platform in the country, its pole position gave it some sort of monopoly power in the mobile money sector. And as a result of such monopoly powers, those who did not have Ecocash lines were greatly disadvantaged. This jeopardised the financial inclusion agenda as a lot of people were left behind the financial digital divide.
In cases where an individual needed to send money straight from a bank account to a recipient using a mobile money wallet, it was not possible to do it directly. One had to go the longer route which involved moving the money from the bank account into his/ her own mobile wallet, for instance from a bank account to an Ecocash wallet, after which the money would then be transferred to the intended beneficiary’s mobile money wallet. Not only was this process unnecessarily long and time consuming, but it was also taxing in terms of the charges that were involved as the transaction went through each stage. The double processes involved were tantamount to saying one is being charged twice to send the same amount of money.
With the coming in of S.I 80 of 2020, a provision was made for interoperability of payments services across all member financial institutions on the Zimswitch platform. The new development meant that customers are now able to instantly send and receive funds across all Mobile Network Operators (MN0s) and banks. MNOs in Zimbabwe are increasingly recognising the benefits of interoperability and seem to be in full support of the move. Zimbabwe was actually lagging behind in joining the interoperability landscape as other countries took the move so many years ago. Tanzania and Madagascar were the first and second countries respectively to embrace interoperability in Africa. Other countries such as Kenya, Nigeria, Rwanda and Ghana later followed suit.
The major purpose of interoperability is to enable different financial service providers and payment infrastructures to allow payments to take place seamlessly among their customers. In this regard, interoperability widens accessibility to transaction accounts and payment instruments, which makes them more useful to end-users of financial services. This helps cement the financial inclusion agenda. The benefits of improved financial inclusion are not only for the consumers, but for the provider of the services too as increased transaction volumes mean more profit for them, and business opportunities will be widening too.
From the viewpoint of the government, interoperability is important for improving financial inclusion because it allows customers to easily perform their transactions. Furthermore, it contributes positively towards improving long-term financial inclusion by making it fiuid for more people to access digital payments. However, if executed poorly, it has potential to tarnish relations among various competing service providers as some may see competitive risks in opening up their networks to perceived ‘free-riders’. Furthermore, there should be firm ground rules to balance competition and coordination since competing providers are coming together.
The National Development Strategy 1 (NDS1) clearly spells out that increasing the percentage of financially included persons from 77% to 90% by 2025 is one of its key national outcomes. Financial inclusion is important for a nation as it fosters inclusive growth through provision of access to financial services such as easy transfer of money, loans and credit. Interoperability of our mobile money systems is indeed a major milestone in achieving this key national outcome.
The monetary and fiscal authorities should continue to monitor and shape the course of the interoperability landscape in order to ensure better outcomes for financial inclusion. The world today is changing faster than ever before, therefore continuously keeping an eye on the system to guard against any potential threats to the system, which may reverse the gains brought by the new development is of paramount importance. Further to that, the Zimbabwean system is still nascent, there is need for the regulatory authorities to take into consideration the impact of interoperability on digital financial inclusion, the national payment system and on the MNOs. This should help the regulators to determine the role(s) that they need to play in as far as regulation is concerned. If there are laws and other regulatory measures that need to be synchronised, then let it be. Whilst the development is welcome, it is also important to accept that it may actually result in some new risks which could not have been pre-perceived. The integration of banks and non-banks (MNOs) may pose legal, financial and operational risks. These need to be dealt with as they arise while at the same time maintaining a level playing field for all players.