In the recent past weeks, Ecocash added yet another product to its array of Peer-2-Peer payments family. The ‘smart‘ Swipe into Ecocash offering has served to show the relentlessness of the Mobile Financial Services industry with Econet definitely edging ahead of the competition with this one. You can expect a hefty budget together with a vigorous campaign to follow. Looking at the product singularly will not excite many as they have already been moving their money to-and-fro their wallets and bank accounts without major drawbacks outside of the still inhibitive charges and the laborious USSD method. However; a more detailed analysis will reveal the move as a direct attack on the bank’s positions in terms of deposits and their hold on customers in terms of numbers.
I would like to posit that we have a similar situation with banks (excluding Steward Bank) versus Ecocash fighting for value and numbers as we do with the fight for dominance between Apple and Samsung (or by loose extension IOS versus Android). It is ultimately about profits; after all, from the number of unit sales, at the end of the day. Apple will borrow some technology here and there from Samsung to assemble their phones as banks would “lease” USSD codes to use on Econet’s mobile network. Fanatically techies will defend their brands tenaciously and the argument never ceases as would English Premier League discussion.
Econet launched its disruptive Mobile Money services in September of 2011 supported by Steward Bank (then TN Bank). From the onset, and to avoid the Kenyan scenario where MNO Safaricom has become a defacto bank through its M-Pesa Mobile Money, the Reserve bank issued a license to operate that classified Ecocash as a banking product offered by a bank with the virtual accounts reflecting a mirror trust account residing at a registerd commercial bank. Naturally, to satisfy this requirement, the resource-rich Econet acquired TN Bank and again added it to its ever-growing geneology.
Why is this important?
It is key from the beginning to understand that the feud between Ecocash and banks is simply about controlling the largest chunk of bank deposits and or money in circulation i.e. process the most number and value of transactions. Ecocash has approached this bout on two fronts by owning and controlling both the technology in the form of their Econet Wireless Mobile Network and the banking instruments in the form of Steward Bank, giving them a superior advantage and consequently virtual monopoly in mobile P2P transfers.
By numbers, Ecocash accounted for a 98% (3,294,659 active mobile subscribers) market share and $290,786,238 worth of Cash-In transactions YTD as of June 2017(See Potraz Abridged Sector Performance Report). In contrast, the National Payment Systems (RBZ) which also covers transactions via Ecocash records a total of 3,353,916 active subscribers in its Second Quarter Activity Report 2017. In a matter of speaking, Ecocash has more than 3 million more active subscribers than all the banks and MNOs combined.
When Ecocash launched its disruptive Mobile Money services, banks failed to react decisively to embrace or to thwart the threat that was. Individual banks came up with their own versions of mobile money to try and ring-fence their customers from Ecocash but failed to create the traction necessary to dislodge Ecocash’s instant monopoly. This is largely due to the fact that from the start Ecocash targeted and was convenient as a solution to the informal sector which arguably at some stage had more than $7 billion circulating in the informal sector. The IMF estimates Zimbabwe’s Informal Sector as the 6th largest in Africa after Nigeria, Tanzania, Benin, Angola and Gabon. Clearly, this was (and is) fertile ground, consisting of the type of customers that banks would normally refuse to accommodate.
To their advantage, despite the fact that they infringed on common anti-monopoly ethics, was the reality that they solved several of the government’s fiscal challenges, that of accounting for a large portion of money in the informal sector, revenue generation through taxes such as 5% airtime levy, 0.5% transaction tax, import duty on equipment and devices and lastly that it was in tandem with the Government Financial Inclusion drive. The banks complained, of course, but their wallowing did not bring relief for the reasons stated above and coincidentally, for the fact that at that point in time the authorities had not crafted far-reaching legislation to deal with both the disruptive new Mobile Money technology and its effect on the Financial Services playing field already dominated by age-old but overregulated Financial Institutions. This advantage cannot be overstated as a lot of what Ecocash was able to do was leveraged on the absence of these controls, whilst at the same time banks had their hands tied behind their backs.
Financial Crisis and failing economy
The post-2013 liquidity and cash crisis struck a major blow to Financial Institutions, almost crippling the non-Funded revenue streams that came from over-the-counter cash-based transactions. The RBZ responded to the cash shortages by a revamped campaign for the increased use of plastic money, albeit, as a stop-gap measure. This was a blessing in disguise for Ecocash in that even though they could not perform as many Cash-Outs as customers required, the platform became the preferred mode of transacting alongside the traditional Card-based bank transactions. Consequently and while banks offer a blend of traditional and contemporary channels, the appetite for the convenient Ecocash services increased.
Banks failed to coalesce and come up with one product that has one face across all banks and instead settled for a consortium of sorts via Zimswitch taking advantage of the already popular card-based transactions offered to the banked population. The simple aggregation of numbers, however, will show that the number of Mobile Money accounts within the banks is numerically belittled by the Ecocash Mobile money accounts multiple times over.
So whats the fuss about if Ecocash has all these numbers?
Simple really. While Ecocash has the numbers in terms of individual “accounts” the value of those accounts does not match that held by the banks, including that of corporate accounts. By virtue of being Mobile Money, the Ecocash accounts act more as a medium for transfer of money from Point to Point rather than a lure of deposits.
Banks had the traditional advantage of having existed for eons and having created a culture of banking (saving) amongst Zimbabweans, like any normal economy. Even though this culture has tended to wither with the current economic challenges and backlash of the bank failures in the late 90s, there is still sufficient control within Monetary Authorities to ensure most transactions are conducted through the banks. We will discuss this argument with statistics in the future as it is a topic on its own and also becasue the statistics are not easily available.
Another look at the numerous Ecocash products reveals the thrust in trying to lure balances and transactions:
Table: Ecocash possible strategy per product
|BEAR (Bank Electronic Airtime Retail). The first method used to connect to banks originally intended for banks to sell Econet airtime||Joining banks to Ecocash under skewed terms and conditions|
|Refusal of wholesale link with banks e.g. via Zimswitch||Ringfense Ecocash deposits and maintain one-way traffic|
|Reluctance to share enabling infrastructue||Ringfence Ecocash deposits by denying banks ability to compete|
|Swipe into to Ecocash||Draw money out of banks through retail customer initiated transactions using Zimswitch|
|Ecocash Payroll||Draw money out of corporate accounts by offering alternative for Paynet|
|Ecocash Debit card (Express and Ta!)||Directly compete with Zimswitch enabled bank cards|
|Ecocash Diaspora||Offer direct alternative to Telegraphic Transfers offered by banks|
|Ecocash Save||Maintain healthy balances in Ecocash and deter withdrawals|
Enter One Wallet and Telecash
Well, the numbers don’t lie. Though proving to be some of the best product offerings in terms of integration and interoperability with banks and financial instituions both Telecash and the ever reinventing One Money (One Wallet, Skwama) do not pose a real threat to Ecocash largely because Econet as an MNO has already gained so much in terms of customer base and loyalty arising from superior service and switching costs for customers from one MNO to another.
In summary, we can draw inferences that Ecocash will keep launching and trying out new products and transactions technology to maintain the balances pulled out of the informal sector and banks. Of notable importance are NFC (Ecocash ta) tests underway, Ecocash in Kombis, the new retail initiated POS payment that shortened the laborious USSD, the USSD and Data mobile apps, cross-border partnerships like World Remit (Ecocash diaspora) and so on.
The possible products in the making may include mini-POS retail devices to elimite USSD, Actual payments Switch integrating Zimswitch, Visa and Regional Payments all tied into the ZETSS system or circumventing ZETSS altogether to create a new alternative like the defunct SIRESS, Afrocoin and so on. The reader will also note the deficiency of the current settlement system offerd by Zimswitch (STP or overnight accomodation) and the dubious RTGS. Again, we will dwell on these in future articles.
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