Recently, a tweet from Zimbabwean stockbroking firm EFE Securities broke the news that InnBucks was being integrated into the national switch – ZimSwitch.
Simbisa Brands’ mobile money service, Innbucks is now included on Zimswitch. The inclusion, long advocated for by users, facilitates smoother interactions with other mobile money operators and banks.
EFE Securities [Twitter]
Whilst the development is a big piece of news that will have a considerable impact on Zimbabwe’s local financial landscape, it is also in fairness a formality.
From the moment InnBucks returned to market as a banking institution in 2022, the writing for this integration was on the wall as they were required under national regulation to join the national switch. I surmise that they have been on the switch for a while now but only missing the ability to send money across different service providers. This ability was always a matter of when not if as not complying would lead to regulatory backlash – something InnBucks is well aware of.
Back in 2020 when ZimSwitch was made the national switch, RBZ basically demanded that all banking and mobile money providers be connected to ZimSwitch:
DESIGNATION OF ZIMSWITCH TECHNOLOGIES (PRIVATE) LIMITED (ZIMSWITCH) AS A NATIONAL PAYMENT SWITCH
In accordance with the provisions of the National Payment Systems Act [Chapter 24:23] and the Banking (Money Transmission, Mobile Banking and Mobile Money Interoperability) Regulations, Statutory Instrument 80 of 2020 (the Regulations), the Reserve Bank of Zimbabwe (the Bank) wishes to advise the public that it has designated Zimswitch as a national payment switch with immediate effect.
All mobile money transmission providers and mobile banking providers are hereby directed to be connected to Zimswitch as provided for by section 4 of the Regulations. To ensure seamless integration, all money transmission providers and mobile money providers must complete the necessary Installation or deployment or commissioning of Infrastructure and connection protocols, credentials and documentation for connection to Zimswitch by no later than 15 August 2020.
Mangudya John – Former Reserve Bank Governor
In effect, the same regulation that was used to get EcoCash to become interoperable with the banks, subsequently applies to all mobile money or banking providers in the country.This was done in order to avoid a repeat situation of what occurred with EcoCash where negotiations over integration went on for years without any progress being made.
It’s important to note that at the time of writing InnBucks’ USSD doesn’t reflect any changes yet. Users aren’t able to send money from their wallet to other banks and mobile money providers just yet but it is in the pipeline.
What problems does this solve?
InnBucks users will soon be able to send/receive money to and from other local banking & mobile money institutions. At a later stage, one also imagines that customers holding funds in their InnBucks wallet will be able to transact from that wallet in supermarkets and other retail settings.
It’s also important to note that InnBucks has been expanding from its initial focus which was remittance to pursue microbanking. The InnBucks website notes the personal, business and international banking services as part of their core offerings. In order to fully offer services as a microbank it goes without saying that InnBucks had to deepen their integration with ZimSwitch.
It will be interesting to see what this kind of integration translates to on the business’ balance sheet. In Simbisa (InnBucks’ parent company) annual results we can deduce that their profits from the companies that make up their non-controlling interests ( InnBucks is a part of these) jumped from US$100,194 in 2022 to US$408,475 in 2023. During the same period, the net income for these companies went from US$94,712 to $399,315.
Whilst it’s hard to know exactly how much of that is attributable to InnBucks directly it will be interesting to see how these figures swing following the shift in strategy and the numbers will serve as a starting point for further extrapolation.
Why does interoperability have to be forced in the first place?
Any time news breaks that a significant financial service provider has become interoperable – a few things come to the fore. Consumers are always excited because a pain point is being solved. They can now send or receive money from a platform to most other financial institutions. That ease of use is always cause for celebration.
For the service providers their view on interoperability depends on where they are on the totem pole. Dominant providers are sometimes hesitant to become interoperable whilst their competitors clamour for it as it will somewhat negate the network effects built by dominant providers.
On the part of dominant providers who would have spent considerable resources acquiring customers – their dominant position in and of itself means that more users are compelled to join them instead of another competing provider. In a world where interoperability is enforced they don’t have this leverage as their service is forced to play nicely with other institutions. When systems are interoperable, customers gain more flexibility to choose between providers and services. This can erode the grip dominant players have on their customer base and potentially reduce their profits.
Interoperability is also an irritant for dominant players because it means if money is being sent from their service to the service of other providers they get to miss out on a few things. The first are transaction fees. Whilst there is a charge for sending the money across different providers, InnBucks (or any other institution) would prefer you keep the money in your wallet and spend it from there. This point is even more pronounced since InnBucks issues out credit (i.e they are in the loan business). A consumer keeping their money in the wallet and then using their wallet to transact also provides value in the form of data as consumer transaction patterns can also be used to model what kind of loans wallet holders qualify for.
Why do regulators insist on interoperability then?
Well, regulators exist to protect normal people like you and I. They understand that if left to their own devices, businesses would take things too far and use their power in unfair ways to protect or further their monopolies.
Interoperability in banking is meant to encourage competition among service providers. If an InnBucks, CBZ or EcoCash can’t purely rely on the fact that they have many subscribers, they have to innovate in other areas. Usually this results in lower transaction fees and increased market competition, all pluses for consumers.
Sometimes even the service providers themselves benefit from interoperability as they can share infrastructure, access economies of scale and have to do less consumer education for customers who may have already interfaced with the technology from their time with another service provider.
The end goal of interoperability in most cases is to have financial service providers able to communicate with other entities such as telecoms providers or retailers, so the standardisation enforced by interoperability encourages individuals and businesses to build a history of preferences, reliability and connections. The end goal of all this is to eventually simplify transactions and allow for tailor-made service provision.
A worthy goal, all things considered…
