In the last decade, mobile money has managed to evolve to ensure that Zimbabweans have access to financial services in a country where banking services were traditionally reserved for the formally employed minority. Many a time we have emphasised this impact but it’s important to note that over time the banks have also pulled their socks and are slowly gaining traction.
The data shows that the growth rate of mobile money accounts has been slowing down in recent years. *Part of the slowdown can be attributed to saturation, and another could be that the people experiencing financial inclusion via mobile money eventually want to move on to banks which offer more flexibility with higher transacting limits along with potential access to credit and so ultimately the gap between mobile money accounts and debit cards has been narrowing in recent years.
*It also helps that national policy is currently in favour of growth of traditional banking since their belief is that the stricter KYC requirements and their ability to oversee the activity in that domain will lead to less fraud and tampering with the economy.
Ultimately the limitations of mobile money have become most pronounced in the eCommerce space where reduced usage, restrictive transaction limits along with historically hard to come by APIs have meant that mobile money hasn’t been as widely adopted for online commerce.
How have online merchants historically interfaced with customers in Zimbabwe?
These stats are deceiving because there’s activity going unrecorded simply because of the dominance of cash transactions. I would argue that a majority of eCommerce transactions go unrecorded because they are cash-on-delivery transactions. Where the graph above with eCommerce indicators carries value is that it illustrates that eCommerce activity through formally recorded channels is low, which begs the question – why?
One of the reasons why merchants haven’t been eager to embrace eCommerce has in part been due to a lack of compelling payment gateways to facilitate the payments. Historically, on the mobile money front, hard to come by APIs were another deterrent whilst more recently the low transaction limits have discouraged integration and use.
An example of a friction-ridden payment process is one I’ve gone through (willingly) trying to buy airtime online using Innbucks as a payment option. I went through the following steps:
- Picked the product;
- Proceeded to checkout;
- Added my number;
- Choose your payment option (Innbucks in this example);
- Open up InnBucks USSD/app and enter the authorisation code from payment gateway.
Historically, Zimswitch’s V-Payments gateway wasn’t that much different as any consumer looking to make online payments through that gateway had to pre-register via email and then go through a convoluted process before making the payments. There are a lot of steps and room for error in the above processes – so merchants have to take on the burden of educating consumers how to complete transactions – additional work which disincentivises uptake.
“What about if merchants just integrate with international payment gateways?” For merchants prioritising local customers its pretty hard to justify this integration when you look at the number of prepaid US$ cards in circulation:
Cardholders able to take advantage of this specific payment method currently make up 0,0013% of the population. In other words, there is almost no reason for merchants to try and integrate to accept payments for these cards even though the card holders would be able to complete US$ over the internet (in theory) and solve the problem.
Payment providers that have solved this problem exist (think Paynow) and have integrated both local and international payments. Payment providers in this domain are mostly providing the service (or selling directly) to merchants who are targeting diasporan customers purchasing from local merchants with a view to acquire the product/service for people back home. Remember – remittances are a big deal and this is one of the many avenues within which diasporans remit funds.
Zimswitch online – the solution to finally push eCommerce forward?
ZimSwitch (which happens to have built the national payment switch) recently launched ZimSwitch Online – a payment gateway that prioritises local eCommerce. The platform is already integrated with 9 banking institutions. This is obviously a good start, but a more ideal scenario would be having all institutions integrated so that merchants aren’t having to worry about whether or not a consumer can make a purchase or not.
ZimSwitch is pretty confident that the signing up of other banks is only a matter of time so this might not be a conversation point by the end of this year. One of the things to keep in mind when it comes to integration is banks have different priorities and allocate resources to projects differently so whilst some have already joined the ZimSwitch Online bandwagon other institutions might have to update systems or finish working on other higher-priority projects before moving on to integrate.
More importantly, integrating merchants and driving up usage will be important if Zimswitch Online is going to stick. So far we’ve seen integrations with popular local payment gateway Paynow which means consumers can currently make the following payments:
- Airtime
- Broadband
- Fuel
- Insurance
- Utility bills etc.
- tuition fees payments for education institutions
Some of the potential use cases we see manifesting for existing card-holders include utility bill/insurance policy settlements. Where traditionally most citizens have had to find their way to council halls to settle payments – this will now allow people to do it from home. This means you save on time and money spent going to and from these physical locations if you opt to pay online.
Another use case that stood out was the potential to make fees payments. On the Paynow website there are a number of educational institutions that allow payment of tuition fees online and through Zimswitch, guardians will be able to settle such payments without having to go to the educational institution.
Incentivising the use of digital payments also presents positives when thinking of security. At the moment, cash on delivery and transactions settled physically are the most common but that brings with it the need to always carry the cash. You could lose the cash/card you use to transact or get stolen from (in the case of cash).
As someone also familiar with the digital landscape it’s important to acknowledge the payment process for settlement on Zimswitch Online as being more secure. When using my Payoneer card to transact online – there’s no 2FA required to transact. All transactions just go through at point of processing whilst the Zimswitch Online interface will require users to enter an one-time-password that’s generated whenever a transaction is initiated before authorising the purchase. This will help to build trust over time as users come to know that their card can’t be used without them authorising purchase.
Ultimately, ZimSwitch Online presents the possibility that both merchants and consumers interested in transacting online will now have a low-friction option that takes care of the payments side of things. All of this will ultimately depend on consumer education on the existence of these channels and how they can help of course.
Factors outside the control of ZimSwitch
Building infrastructure to encourage eCommerce experiences is great and should be encouraged but it’s important to keep in mind the populace that will have to interface with this infrastructure. Brazilian researchers concluded that low-income consumers with internet access largely had negative attitudes towards eCommerce. The context given for this makes one wonder how much overlap there is between the consumers observed in the research and those in many of Africa’s developing countries.
I have a lot of fear about the product not arriving or arriving damaged, something like that, and I won’t be able to exchange it. And, then I go online and see products, but I’m afraid that a cellphone will arrive broken, something like that, and I end up not buying anything. However, if I knew how to exchange a product, I would buy online.
“Attitudes towards online purchases by low-income consumers who have access to the internet” by Luis Gustavo Jucá Bender & Cecilia Mattoso
Friction points between consumers and eCommerce in the study included “low literacy, remote locations and insufficient consumer experience”. Many of the subjects of this particular research expressed guilt about making mistakes, fear & insecurity, along with negative influence from peers which all discouraged eCommerce activity.
You could argue this seems to tally with our own current experience which incentivises cash-on-delivery precisely because consumers only exchange money after allaying many of their fears about the state a product arrives in.
There is a possibility that eCommerce – in the way we’ve seen it in countries like the USA simply isn’t possible to replicate in Africa just yet because the consumers still need to be educated at scale…
