EcoCash has launched a self-service portal which enables agents, merchants, billers, bulk payers and payroll channel partners to submit applications without need to physically visit Econet shops.
The self-service portal is open to both existing and prospective channel partners and will allow them to enter their KYC (know your customer) documents, with applications being processed online.
Considering that EcoCash had to block 6000 agents because RBZ isn’t happy with how they are handling KYC procedures this platform could be meant to help those agents reupload their information to meet the standards required by regulation faster than it would’ve taken them to do physically.
The goal is to on-board as many channel partners as we can, virtually. We are aware that the COVID-19 pandemic has brought about various challenges to businesses in the country, limiting the mobility of our channel partners.
Natalie Jabangwe – EcoCash CEO
Agents, Merchants and other channel partners applying through this portal will also be able to track their applications & receive SMS notifications on the progress of said applications.
EcoCash CEO emphasised the fact that this platform will enable them onboard partners much quicker than before:
Through this self-service portal, our channel partners can do everything from their home or offices without the need to take physical applications to our shops. The relevant approvals for all applications will also be done virtually, which makes the process better and simpler, and much quicker than before
Hopefully, this means EcoCash will handle KYC with the necessary caution going forward.
I think it’s fair to say crowdfunding in Zimbabwe is pretty difficult if not actually dead.
The first problem you encounter when trying to run a crowdfunding campaign be it for business or for donations is that most Zimbos don’t have access to the existing platforms for crowdfunding. Most don’t have foreign currency to donate to sites like Kickstarter, IndieGoGo, and GoFundMe.
Those who do have foreign currency many times don’t want the hassle associated with going to the bank, prefunding a debit card and then making the donation to these sites.
So why hasn’t someone solved this problem locally? Well, in 2018 Steward Bank announced Kanzatu Nzatu a crowdfunding platform but they never really marketed it or devoted that many resources towards making it a thing people use.
Sometimes we miss things that are right in front of us. It wasn’t until one of my colleagues mentioned that Twitter and EcoCash are serving as de facto crowdfunding platforms locally. Well, he didn’t call them de facto anything but said this instead:
This has been one of the interesting uses of Twitter and EcoCash. Someone posts a call for help and strangers assist with small amounts – in the end a need is met.
That simple explanation really does sound like the definition of crowdfunding and after looking at some of the more popular crowdfunding campaigns on Twitter I was left convinced that it is indeed the best platform for crowdfunding locally at the moment.
Crowdfunding campaigns
Freeman Chari is one of the guys who has initiated multiple crowdfunding campaigns via Twitter. He has had enough of these to be able to determine how much a retweet is worth when crowdfunding on Twitter;
Even if you don’t donate, a simple retweet usually generates 10 cents. So please share.
Last month, Gerald Maguranyanga had one such campaign which was more spontaneous and setup with the goal to feed a family in Glen Norah, and through a simple tweet he managed to raise “ZW$2600+ in 30 minutes”.
In 2019, Kuda Musasiwa started an initiative that would pay fees for University students who had great grades but no money to continue studying. The initiative started through a simple tweet but has so far benefitted 21 students who are still being supported to this day. This story was profound to me because it showed me how a simple tweet can impact so many lives.
More memorable though is the recent campaign by Fadzayi Mahere and Doctor Lennon Gwaunza. Whilst this wasn’t the EcoCash + Twitter combo it’s still pretty important to acknowledge how Twitter played such a pivotal role and the thousands of retweets they had garnered from social media users made all of that possible.
Great but…
All this to say at the moment, I do think Twitter is the best platform for crowdfunding but that comes with a large asterisk.
We mentioned 4 individuals who have run successful crowdfunding campaigns on Twitter and 3 of them have over 43 000 followers meaning your popularity will probably determine the extent to which you get assisted.
This isn’t necessarily the case with dedicated Crowdfunding platforms that allow you to present your case or problem and those concerned simply browse through and donate or keep it moving.
The social media network has filled a gap and at times it has done so tremendously, but at the end of the day it seems to me like there is great need for a proper crowdfunding platform that allows capitalists to invest in small companies presenting their ideas, ordinary people to invest in charitable causes and so on.
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EcoCash seems to have blocked Merchant to Agent transactions though it’s not exactly clear what their reason for doing so is at the time of writing.
The first hunch would be that this is yet another directive from the RBZ but if it is it’s a bit strange that the RBZ has not shared that directive publicly as they have all other directives they’ve recently issued to EcoCash, and ZIPIT.
We reached out to EcoCash representative to better understand if they had made this decision internally or if it was dictated to them by the RBZ as we suspect and they confirmed that it was a directive from the Financial Intelligence Unit.
The blocking of this transaction type follows a directive limiting the amount agents can transact on a monthly basis to ZW$100 000 per month. The basis for RBZs directive was because EcoCash lax regulation of said platform meant their services are being used with ill-intent to drive up parallel market rates. At least that’s RBZs view of the situation.
The blocking of Merchant to agent transactions makes it harder to use mobile money services since the only transaction type left for merchants to liquidate their EcoCash balance is the wallet to bank transaction.
From the FIUs perspective, you can see what they are thinking. Merchants change money from agents and RBZ has been saying some of the agents changing money don’t have up to date KYC information. By forcing merchants to move that money to their bank accounts instead – if the money is used to buy forex the RBZ will be able to track that “transaction”.
The only problem with that is this all makes mobile money far less attractive than it was before since merchants now have to consider how they are going to move that money once customers have bought from their stores.
At the end of the day, the FIU and the RBZ by extension are making it harder for consumers to transact as articulated in a separate article and this is not the solution to the root problem – which is simply the fact that Zimbabweans will never put their money in the banks so long as its possible that they will wake up with that money gone.
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The latest POTRAZ report is out and OneMoney grew exponentially in the first quarter of 2020. 18.4% growth means NetOne’s mobile money service now has 555 225 subscribers.
This time last year they had just over three hundred thousand subscribers so it’s interesting to see the mobile money service add over quarter of a million subscribers in a year.
How have we gotten here?
NetOne’s payroll solution OnePay was a big contributor and on the back of 97% user growth between Q2 and Q3 2019, NetOne’s Head of PR mentioned the following;
The OnePay facility has been well received by several institutions including corporates mainly for salary and stipend payments, NGOs, farmers, as well as institutions that process grants and other social security payments only to mention a few.
Ultimately OnePay meant that a lot more people were receiving money into OneMoney mobile money wallets than before and NetOne had to come up with a way to ensure that these people kept the money in there. How did they do this?
Well, they announced a promotion in November of 2019 that would allow OneMoney users to transact for free until the end of the year and whilst they couldn’t replicate the 97% user growth of Q3, OneMoney still grew by a respectable just under 10% to 488k subscribers.
This move to make transactions free seemed to be popular outside of just on-boarding new users. According to NetOne, it resulted in 19 000 agents and 11 000 merchants signing up which in turn made OneMoney more usable by members of the public.
OneMoney: The popular choice for money changers
The announcement of the aforementioned promotion was great for user growth because it incentivised money changers who play a much larger role than they should in Zimbabwe’s economy. Because transacting using OneMoney was free, money changers were incentivised to use this platform more than EcoCash since their profit margins were higher when they didn’t have to pay to transact.
A trend began to develop where some money changers would altogether refuse to trade using EcoCash instead insisting on using OneMoney (and offering better rates on OneMoney) and bank transfers exclusively.
A money changer exclusively trading using OneMoney
It’s also easy to forget what was arguably one of the worst upgrades (if not outrightly the worst) we’ve ever seen from a local financial institution. The EcoCash upgrade of November 2019.
Whilst it’s not easy to quantify just how much of a boost EcoCash’s two-month upgrade was to NetOne I think it’s fair to assume that both consumers and service providers understood the importance of having a backup service provider.
Bigger picture
Whilst it’s impressive to see NetOne clearing the half a million subscriber mark for mobile money users, the harder thing will be keeping the users there in the long run and continuing to chip away at EcoCash’s dominance.
Will OneMoney continue to be an attractive channel for transacting to consumers once the promotions have been put on hold. Also, how NetOne handles growth will be one of the challenges going forward. At 555k subscribers, they have 12 times fewer subscribers than EcoCash – meaning there is far less strain on their hardware as they process fewer transactions.
Such a move would’ve resulted in NetOne gaining over a million subscribers overnight and I’m sure a significant portion of OneMoney’s growth in Q2 might be backed by this (that’s if government gets around to actually distributing the funds).
This favouritism has also been cited by the public as the reason why the government is currently targeting EcoCash and not as much scrutiny is placed on OneMoney when financial authorities are attributing the economic woes to illicit forex trade on mobile money platforms.
A number of transactions have been banned on EcoCash but to the best of our knowledge these are working just fine on OneMoney. Another advantage and incentive for people to use EcoCash right now – and OneMoney doesn’t seem to have earned that in any way.
Ultimately, it will be interesting to see if NetOne can still achieve their goal of dethroning EcoCash in 2 years. They have 15 months left, making it extremely unlikely
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Most news around EcoCash has lately been about the continuous restrictions being placed on their platform by regulators. Such restrictions have implications on the platform’s utility (usefulness). It looks as if the mobile money company wants to pre-empt any possible exodus of users off the platform.
We don’t think there is much risk of an exodus of customers really but there is some risk of the exodus of money off the platform or that there will be a reduction in the amount of money users will deposit into their EcoCash wallets. To encourage deposits onto the ecosystem, EcoCash has launched a promotion to reward bank to wallet transactions:
Bank to wallet transactions are now the most important means for feeding liquidity onto mobile money ecosystems in Zimbabwe.
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Customers have been tweeting out that they were buying airtime through EcoCash but weren’t receiving the funds. When they checked their EcoCash balance the money for the transaction was deducted.
The problem started late last night and some still haven’t received their airtime or had their money returned to their EcoCash accounts.
An Econet Spokesperson confirmed that last night there was a technical issue with Econet’s charging platform. It wasn’t an issue on EcoCash’s side of the transaction. The spokesperson also confirmed that the situation has been resolved.
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Given that EcoCash has been under severe regulatory scrutiny over the past few weeks, its no surprise that the mobile money platform has taken the step to reduce transcation thresholds for certain transactions.
The affected transactions can be found below:
Affected customer
Old Daily Limits (ZW$)
New Daily Limit (ZW$)
Old Monthly Limit (ZW$)
New Monthly Limit (ZW$)
customers linked to a bank
$25 000
$20 000
$150 000
$100 000
Farmers grade
$50 000
$20 000
$300 000
$100 000
You may be wondering what that new Farmers Grade section is. So did I. An EcoCash representative explained to me that these are actually limits for farmers who are not treated as customers linked to a bank or a debit card. The representative also made it clear that they have been part of the customer segments for a long time and in previous limit indications were just not highlighted.
The new limits are influenced by recent Financial Intelligence Unit (FIU) directives that have made it harder to transact using EcoCash. The monthly limits imposed by the FIU are woefully low and when you consider the economic devaluation taking place right now it’s easy to see how both customers linked to a bank and farmers especially will pass that threshold.
Unaffected customers
There are also a number of limits which have not changed at all and these include the following;
Affected customer
Daily limit (ZW$)
Monthly limit (ZW$)
Customers not linked to bank/debit card
$5 000
$20 000
Executive grade
$30 000
$250 000
Transaction type
Amount (ZW$)
Send Money
$5 000
Merchant payments
$10 000
Bill payments
$10 000
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In a sudden and a hugely ill advised move, the government yesterday announced that they were suspending all mobile money transactions with immediate effect. As expected, EcoCash has responded.
Here is their statement to their subscribers:
Dear Valued Customers,
We are aware of a statement purporting to have been issued by the Secretary for Information, Publicity and Broadcasting Services that purports to ban all mobile money transactions.
However, EcoCash is regulated by the Reserve Bank of Zimbabwe and would naturally expect a directive of that nature and significance to be communicated by the Reserve Bank of Zimbabwe.
We urge all Ecocash users who exceed 10 million Zimbabweans, the majority of whom do not have bank accounts, to remain calm and to continue to do your lawful transactions as usual. Should there be any changes, we shall give you adequate notice as required by law.
DIAL *151# Live life the EcoCash way Cassava
We of course expect EcoCash and possible a host of businesses and individuals to take the government to court over this madness.
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Nick Mangwana, the Permanent Secretary in the Mimnistry of Information is the one whose signature was on the ridiculous statement that announced the ban on mobile money. Here is him tripping over his words to justify the move:
Mangwana is not the first government official to bring up some argument on EcoCash and mobile money not being regulated by the central bank but by the telecoms regulator POTRAZ. This is false. EcoCash is licensed and regulated by the Reserve Bank of Zimbabwe.
It’s all besides the point even. The transaction landscape is changing globally more so in Zimbabwe where government policy has brought in cashlessness albeit unintentionally. Consumers can’t be forced to use banks that have shunned them for years when the technology they hold in their hands gives them much more choice.
Mangwana knows it’s silly
The sad reality is that Mangwana is just towing the party line. He absolutely knows this is ridiculous. He is that smart, we all know that. Perhaps the best he can do is to live with his decision to be hatchet man for government and he tries not to give explanations. His explanations are not convincing anyone, even himself.
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The government last night through Information Secretary Nick Mangwana decided to suspend all forms of mobile money. Now the reasons behind that decision aside, what does it mean for all of us who rely on EcoCash or OneMoney?
A lot of the people were unbanked before the advent of mobile money. Many relied on physical currency to buy goods and services. The cash crisis Zimbabwe endures means that physical money is hard to come by.
Mobile money brought the convenience of a transaction being couple of button presses away. In stores, on the streets, and even from home or wherever anyone might be. People were able to go beyond what they could because the facility to start it all was in their mobile phones.
The reach of banking services was extended. All it took to start a business, to receive or send money was a cellphone and a SIM card.
Now I am not saying the system doesn’t come with its problems, service gets disrupted or goes down altogether. It’s unfortunate, but it is all part of any system used by millions of people. It should be said that the operators have usually able to get the system back up, in part or completely.
The operators even made improvements on the service opening it up to all sorts of payments. Electricity, school fees, airtime and other payments could now be done from wherever.
What makes it worse is that the Government encouraged us to go cashless and to utilise facilities like mobile money to ease banknote dependency. The impression that everyone received was that this was to become one of the key facets our economy was to run on.
Ok… So what now?
Well the panic it has caused can’t be taken back. Zimbabweans are more on alert than usual. We had very little financial security to begin with. We have been standing on uncertain ground for what seems like an age. I can’t find the right metaphor or term to quite caption what it feels like.
What happens to the informal traders? The quarantine left them without a means to earn, and then after that when they get back to work they get this?
What about all those who don’t have a bank account and have all their money in a mobile wallet?
What about all the businesses who have the entire business models centred around mobile money?
These are among the things I thought would have been weighed before coming to the announcement we received last night.
I can’t even begin to imagine what other Zimbabweans in a number of different situations must be thinking or feeling.
The Reserve Bank (at the time of writing) hasn’t yet made a comment or issued any statement. All interest parties, companies and operators will be sure to contest this no matter what the RBZ says. Econet’s statement this morning alluded to that.
Now we must wait… again… Uncertain of how this will all unfold.
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Of course we will keep going to town about the most stupid decision announced by the Zimbabwean government ever. Scrutinising the statement that announced the suspension of all mobile money and the Zimbabwe Stock Exchange word for word will give us volumes upon volumes to criticise. I’ll try to pick a few words to illustrate:
Prudent
The statement starts thus:
Government has, with immediate effect, undertaken a series of prudent and coordinated interventions
I think the prudent thing for me to do is to let the dictionary respond to Nick Mangwana’s statement. Here is the definition of the word prudent:
adjective acting with or showing care and thought for the future
Well, according to statistics from the Reserve Bank of Zimbabwe, 85% of all transactions happen on mobile. Even more interesting is that in terms of the value of the transactions, mobile represents a far less percentage of 22%.
What this means is that mobile is being used for the everyday small transactions mostly by individuals. In fact when we use the fourth quarter 2019 reports from the RBZ we realise that the average transaction value on mobile was a mere ZW$98. Using the official interbank foreign currency rate at that time, this average is less than USD6.
Do you see any prudence in shutting down 85% of all transactions most of which are by individuals in the midst of a ruthless pandemic?
Shut, locked and sealed for business
Do you remember the mantra, “Zimbabwe is open for business?” I am sad to say that I was right in saying that declaring those words was not equal to a national vision. Suspending mobile money in and of itself is a definite closed for business stance. However, these guys are not doing anything in half measures, they had to shut the stock exchange as well:
Concurrently, the measures will also include the suspension of all trading on the Zimbabwe Stock Exchange.
Whenever the president talked about being open for business it was almost always in relation to attracting foreign investment into the country. What serious investor comes into a country that shuts down the major liberal capital market like the stock exchange until further notice to carry out a witch hunt?
The purpose of a thing
Mangwana’s statement says:
These measures are to subsist until such time that the mobile money platforms have been reformed to their original purpose and all the current phantom rates of exchange have converged into one genuine rate that is determined by market forces under the Foreign Currency Auction System which was launched by the Reserve Bank of Zimbabwe on 23rd June 2020.
Author’s emphasis
The first thing I will pick from this is his reference to some kind of a reformation of mobile money to its original purpose. That is ludicrous. Who determines the purpose of a thing? The purpose of EcoCash is defined by two parties. The first to define it is EcoCash itself and its creators. Their website says:
EcoCash is an innovative mobile payment solution that enables customers to complete financial transactions directly from their mobile phone! Customers can send money to loved ones, buy airtime, pay for goods and services and much more.
Second group that determines what EcoCash is is its users. Due to the failure of the government that Mangwana represents, EcoCash’s users – citizens of Zimbabwe have decided that EcoCash is cash. They didn’t want to do that. In fact they prefer cash as evidenced by long bank queues to withdraw it as well as the premiums they pay some unscrupulous but enterprising folks who sell cash. However, much as they love cash, it is not available and therefore they knighted EcoCash to be cash.
Purpose cannot be defined by the government outside of their licensing framework. Last I checked, EcoCash is licensed to carry out some of what Mangwana accuses them of doing for example this:
Acting as banks outside the purpose for which they were originally licensed, as non-banking financial institutions. This includes, in the particular case of Ecocash, holding well in excess of ZWL$8 billion…
Umm, Nick, EcoCash is licensed to take deposits.
The one, the only rate
I will use the same quote I used above and just emphasise a different portion:
These measures are to subsist until such time that the mobile money platforms have been reformed to their original purpose and all the current phantom rates of exchange have converged into one genuine rate that is determined by market forces under the Foreign Currency Auction System which was launched by the Reserve Bank of Zimbabwe on 23rd June 2020.
Author’s emphasis
Does Mangwana realise that the portion I highlighted above is self contradicting? The auction that he refers to is a ‘Dutch action‘ which allocates forex to the bidders at their bid level starting with the highest bidder.
This means by design, there is no one official rate. Last Tuesday we were told that the highest bid received was for a USD to ZW$ rate of 1:100. Those bidders were given forex by the RBZ at that rate and other bidders on the same day were give some forex at 1:25.5 (the lowest bid). When they then averaged things out the ‘official rate’ became 57. I’m not one to use big words but if I was, I would call the rate of 57 a ‘phantom rate.’
Do you see how confusing this is? If Tinashe’s supermarket bid 100 to get forex to import stuff for resale, how then can Tinashe’s supermarket be asked to price its goods based on a very low average exchange rate of 57? In primary school taiti “it can’t.” By being a Dutch auction determined rate, the official forex rate is itself self-defeating. So no, Mr. Mangwana, there is no one ‘genuine rate’ to converge to.
Market forces what art thou?
I will again take from the same portion I used twice above:
…one genuine rate that is determined by market forces under the Foreign Currency Auction System which was launched by the Reserve Bank of Zimbabwe on 23rd June 2020.
Author’s emphasis
By market forces does Mangwana mean price fixing by a handful of entities (real and imagined) that participated in the inaugural auction on Tuesday? Here is a telling image:
92 entities who bid across such a wide spectrum determine the official rate
Mangwana’s one genuine rate is determined by just 92 entities most of which did not even value the forex at the resultant rate. Above 30% (at least) of them bid higher and an equal percentage bid lower. The government should just call it the official rate and leave it at such. To call it market determined is a stretch.
The real market rate is one that exists on the streets. The street markets are open to all, not just those who can afford USD50,000 as Mangwana’s does. The players on the street market are numerous and hence their average transactions result in a truer market determination of the value of local currency than just 92 rich entities.
I’m a skeptic and I would bet on my skepticism that some of the 92 entities are non existent bidders that were added by the authorities to make sure the rate did not go ‘out of control.’ BUT let me veer out of conspiracy theories. This is a domain for Mangwana and the government he represents. You remember Mangudya talking about demons, prayers, guerrilla warfare, Sodom and Gomorrah?
We are at war?
I was worried by this phrase used by the government:
…prevent any collateral damage that these interventions may cause to the innocent…
Author’s emphasis
The phrase collateral damage is very telling. It tells me that this move sounds more military than civilian. It tells me how my government sees my life and my livelihood: both are just collateral damage. This is wrong. Civilian life should not be collateral damage but it should be the absolute responsibility for a government.
Miti- what?
The full version of the paragraph I quoted above:
Government will concurrently ensure that prudent measures are also put in place to mitigate and prevent any collateral damage that these interventions may cause to the innocent transacting public who were using these platforms.
Promises, promises. Our government is fond of making grand promises it cannot nor intends to keep. In April the government announced they would give ZW$200 per household per month to 3 million households starting in April. At the time that money was equivalent to USD4 per household. It never came and was raised (yes the promised money that never came had an increment) in May to ZW$300 still worth just below USD6. Today families have not received any of it and the promised relief has been deteriorated to USD3 per month by the crash of the local currency. Still it’s just a promise. Some have received ‘something’ though. I know of a case where a family received ZW$63 (USD0.63)!
If they failed at the above, how on earth can they mitigate against locking up people’s little monies in mobile wallets and getting business to a standstill?
A lot of words
All of the above words are from the preamble to the statement. The government goes on to level some 15 allegations against EcoCash particularly. Some of the allegations sound criminal in nature, most of them are just verbose statements that mean nothing in context. I will not go into those because those allegations are preceded by this declaration:
Government is in possession of impeccable intelligence which constitutes a prima facie case
Who am I to argue against whatever ‘prima facie’ is?
Fake counters and the Old Mutual Implied Rate
This bit is worrying in how it reveals the levels of misinformation the government suffers from:
The impact is exacerbated by the existence of fake counters on the Zimbabwe Stock Exchange, which is epitomized by the so-called Old Mutual Implied Exchange Rate (OMIR).
I had a conversation with some government guy, political guy just over a month ago. I was trying to explain to him how the restrictions on transactions were hurting businesses especially small ones and the average person. The guy then said to me that the real problem was Old Mutual. I was like ‘huh?’
Guy said, “If only you understood what the Old Mutual Implied Rate is…” Well I do understand what it is and I told him what it is:
Old Mutual is a multinational company traded on the Zimbabwe Stock Exchange as well as the Johannesburg Stock Exchnage in South Africa and the London Stock Exchange. When you buy one share of this company on any of the markets it is perfectly equal to a share bought on any of the others. Old Mutual is Old Mutual.
Because there is a lot of interference in the way local Zim currency is valued, clever people just started to estimate the true value of the local currency using how much Old Mutual shares are worth on the different exchanges. Simple example: If a piece of gold sells for ZW$100 locally and for USD1 in New York. You can use that to imply an exchange rate between the USD and ZW$ of 1:100.
So you see, the OMIR is not a real thing, it is just the market’s attempt to place a value on the local currency. This rate was officially used quite a lot in 2008. Old Mutual does not control this in any way. Targeting Old Mutual is pitifully ill informed.
On whose authority?
Mangwana’s statement ends this way:
Statement issued by N Mangwana Secretary for Information, Publicity and Broadcasting Services
Mangwana’s statement doesn’t specify in any part the authority under which it was issued. No wonder EcoCash has told its customers to keep calm and keep transacting. The document has no legal basis. Mangwana has no authority to issue executive orders of this nature.
Even the president doesn’t. When the president does stuff like that he has to site the Act of Parliament under which he is deriving power to act. He conveniently uses the all purposes Presidential Temporary Powers Act but still at least its an Act of Parliament.
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NetOne and MyCash have followed up Econet’s response to the announcement made by Information Secretary Nick Mangwana last night.
NetOne
Dear Valued Customer,
We would like to advise that OneMoney services are still operating normally. Do not hesitate to contact us on the numbers provided below, for any queries and enquiries.
MyCash continues to operate as normal, we are regulated by the Reserve Bank of Zimbabwe and we have received no such directives to stop operating. MyCash customer funds are guaranteed and all platforms are fully operational.
Telecel has completed the set. Now all three of the country’s telecommunications companies have all responded to the announcement by Nick Mangwana last night.
Their statement reads:
“To our valued customers
Please be advised that the Telecash mobile money service is operating as normal.
For all inquiries SMS or send a WhatsApp message to 0732150150. Call 150 for any inquiries.”
Yesterday the government through Nick Mangwana issued a statement declaring that mobile money was suspended with immediate effect. Naturally the public wasn’t happy and all threemobiletelecommunications companies released statements to the effect that they would wait for a directive from the relevant authority.
It seems like they have revised the original plan, probably because of public outcry. The original was honestly ridiculous, it was too far-reaching and would have absolutely decimated the fragile economy. The following is the statement released by the Reserve Bank:
PRESS STATEMENT
On the Suspension of Monetary Transactions on Phone Based Mobile Money Platforms
Following the Government Press Release on the Suspension of Monetary Transactions on Mobile Based Money Platforms (One Money, MyCash, Ecocash and Telecash) dated 26 June 2020, the Reserve Bank of Zimbabwe (the Bank) wishes to advise the public as follows:
a) All mobile money agents are suspended from facilitating mobile financial transactions with immediate effect.
b) All merchant transactions are suspended except for receiving payments for goods and services as well as payment of utilities (water, power and airtime), which have been limited up to ZW$5000 per day for the convenience of the transacting public.
c) All mobile money liquidations should be done through the banking system.
d) All bulk payer transactions have been suspended with immediate effect.
These unprecedented measures have been necessitated by the need to protect consumers on mobile money platforms which have been abused by unscrupulous and unpartisan individuals and entities to create instability and inefficiencies in the economy.
Members of the public are assured that their bona-fide transactions will be processed normally.
Yesterday the Reserve Bank followed up a statement made by Nick Mangwana on Friday night. The original statement looked to totally ban mobile money platforms. The government was planning to take a:
“Series of prudent and coordinated interventions to deal with malpractices, criminality and economic sabotage perpetrated by the “wolves in sheep skins amongst our population””
The overwhelming consensus was that the fallout from the original plan was going to adversely affect the millions of people who rely on mobile money. After observing the public’s displeasure and maybe realising that they shouldn’t throw the baby out with the bath water, the Reserve Bank came out with a more muted version of Information Secretary Nick Mangwana’s announcement.
So… What did the RBZ statement mean for mobile money wallets?
These are the press releases from EcoCash to subscribers and other partners respectively concerning the matter:
NOTICE TO CUSTOMERS Dear Valued Customers,
Following communication from the Reserve Bank of Zimbabwe, please be advised that with immediate effect the following changes apply:
• All Agent and Bulk Payer lines are suspended This therefore means that Cash in and Cash out services have been suspended until further notice. However, please be advised that all other EcoCash services continue and are operating normally.
We would like to thank you our customers for all your continued support. Live Life The EcoCash Way! DIAL *1 51 #
This means that any business that used bulk payment to distribute salaries or make any large money transfers are no longer able to do that on the EcoCash or any other mobile money platform.
Merchants
Merchants are no longer able to move money out of their mobile wallets except sending money to the bank. Effectively businesses will no longer be able to pay employees or other businesses using EcoCash. Money has to go to the bank first. If one’s employees have no bank accounts then it’s going to be a tricky one.
Unlike the original release by Nick Mangwana, pay merchants will not be affected by the ban. Which means purchases from stores, ecommerce businesses, utilities and other goods or services will not be affected.
The statement from the Reserve Bank also said that all mobile money liquidations should be done through the bank. This means the only way money will move out of the overall EcoCash platform is through banks. An individual can send money to others, pay for stuff in stores etc but cannot ‘cash-out.’ Businesses can only receive money through EcoCash but can not utilise it directly through EcoCash. All they can do is to move their money to bank accounts.
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Yesterday a colleague mentioned that they were denied using EcoCash at a service station. All other forms of payment were acceptable except EcoCash. This didn’t surprise me. First let’s make sure those who have been living under a rock are caught up:
On Friday the 26th of June 2020, the Government of Zimbabwe declared that all mobile money (of which EcoCash has 98% share of market) was suspended with immediate effect. The government then made a face saving ‘clarification’ which was that all agents had been suspended but all transactions could proceed as normal except that merchants have no other way to move money out of their merchant wallets besides transferring it into linked bank accounts.
This is a problem for EcoCash
If merchants start discouraging the use of EcoCash for purchases it’s a serious threat to EcoCash. It makes sense though that merchants would do this because of the limited flexibility they are now offered on the platform.
Suddenly EcoCash is in a position where their utility to users is now less than it was. The payments company has gone into overdrive promoting their service. They are particularly promoting liquidations unto their platform which currently due to agent suspension can only happen through moving money from bank accounts unto the mobile wallet. Here is an example of EcoCash promotional material:
EcoCash is now forced to campaign for bank account opening, this is something that they never would have done.
Sadly for EcoCash, money can now only come on to their platform through banks and therefore they now need to have as many people as possible opening bank accounts. The government really handed them one this time.
The gvt is not the biggest problem
Ultimately what poses a threat to EcoCash is EcoCash itself and the organisational culture into which the fintech was born. The Econet group (Yea Econet Wireless, Cassava…) sucks at customer service and more importantly at customer centred product design. This is what makes EcoCash vulnerable. Let’s try to trace that one out a bit:
How EcoCash won in the first place
We have documented EcoCash’s excellent strategy from the time it was founded in a write up we did two years ago. What they did well was to copy MPesa in Kenya really well and more than that, they were able to translate what they saw in Kenya to their context in Zimbabwe for example by choosing to base their service on USSD and not via SIM Toolkit.
The decisive factor however, was that Econet (at that time this was just an Econet product) understood that mobile money was a two sided market which requires figuring out the chicken and egg problem effectively. They went all out to recruit agents that would facilitate liquidations onto and off the mobile money platform. At launch, the service already had a very strong network of agents which gave it utility for internal remittances immediately.
EcoCash never rested on their laurels, they kept expanding their agent footprint. They started recruiting merchants too: businesses that would receive payments via the mobile money service. As users saw utility in the services, they signed up in droves. The more users signed up, the more merchants and agents were attracted to the service creating a vicious cycle. That, ladies and gentlemen is what they call network effects.
Markets with network effects are generally ‘winner takes all’ kind of markets. Indeed, EcoCash took it all. They dominate the space. Their dominance made them refuse to compromise when they dictated negotiated terms with banks to integrate with their system. Some banks held out for a bit but the service was just too dominant in the retail and peer to peer payments space that literally all banks capitulated and accepted the EcoCash terms.
Customer as a trapped victim
In the USA Facebook is a bigger deal than it is here. The social networking site is used by everyone and their dog kind of. Facebook the company is hated though. I have heard a lot of folks from the USA saying they were going to leave Facebook but then they never do. Reason: network effects. When everyone is on there, moving away means you are cut off.
That is the beauty of network effects but that is also the problem. Network effects make customers stick with a business because they can’t leave not because they want to stay. I believe that is the case with EcoCash and Econet in general. Their customers really love to hate them but they feel they need them.
It sounds like an enviable position right? To be needed, not just wanted. On the internet though where competition is unlimited, the only solid way to win is to be wanted. This is why Econet has always struggled with products that inherently need to have internet assumptions. The group is excellent at leveraging licenses and such but they are not at all good at actually building products.
What happens when they fall out of favour with the guy who dishes out licenses as has happened with EcoCash? They need to fall on customer choice, customers that are fans who believe that EcoCash just works. Do they have such customers though? I do not know if they do.
The reason why some merchants are declining EcoCash is evidence that the EcoCash customers themselves are not raving fans that will go to the next store if they can’t pay using their beloved EcoCash.
Put another way: if the only way one can fund their EcoCash wallet besides being sent money by someone else is through the bank, why should they move money to EcoCash since they can just make payments directly from their bank account? Is EcoCash cheaper? Is it faster? Is it simpler? No. No. No. There lies the problem.
Where is the evidence?
What’s the evidence that EcoCash is not customer centric? Well, their user experience sucks. It sucked and then they did an upgrade in November last year and it sucked even more!
Another example? Customers have been asking for an easy way to get statements for a very long time. EcoCash never thought it important to make this a feature even on their mobile app (supposing that USSD is too constrained). Worse: when an entrepreneur developed Ecoledger, an app that made it possible for EcoCash customers to have statements and other pecks, EcoCash tried to tarnish the guy’s name by some unfortunate social media campaign.
Business users of EcoCash have to request a statement whenever they want. In fact, no, not whenever they want! We are one such business that was told that we had requested our statement too frequently at some point. Recently, after emailing the same place we used to get statements, we were told to visit an Econet shop. Meanwhile, EcoCash is running a campaign where they are telling people to stay at home and transact remotely to keep from COVID 19! This is the problem: the business is not inherently designed with the customer at the centre.
This is why merchants are quick to say no to EcoCash. To merchants, if transacting on EcoCash directly is no longer possible and they have to send money to the bank first why should they accept money into EcoCash in the first place? They don’t want to keep begging to get their statement. There are zero tools for businesses. Why? Because Econet is not a builder of products, they are a leverager of network effects and licences.
Why the suspension of agents is affecting EcoCash
Yes the government has suspended mobile money agent transactions but that this has affected EcoCash is EcoCash’s fault. The fact of the matter is that for a long time now whenever a ‘cash-in’ or ‘cash-out’ transaction happened at an agent generally there wasn’t any cash that changed hands except for the few instances where the agents were selling cash. What was happening is that people were ‘hacking’ agent transactions to do business to business, business to consumer and consumer to business transactions.
If EcoCash had a product development culture that should have been a signal to them. They would have designed appropriate tools that served their customers specifically. When you find a big portion of your customers hacking your product to make it more useful it should tell you what to build for them.
Had EcoCash looked at this from a product builder perspective, they would have created new channels that served their customers separately from agent transactions that justifiably raised suspicion with regulators. As far as regulators could see, there were a lot of cash-in and cash-out transaction in an environment where there is no cash! So the authorities banned agent transactions.
This could have been different if business to business, business to consumer and consumer to business tools had been built from the ground up. EcoCash’s attempt at such was introducing what they called bulk payer lines which were not a good product at all because the lines were essentially just agent lines. That is the problem when there is no imagination for product evolution. EcoCash was happy to get their imposed tax for every transaction on their platform without thinking about improving the experience of their users.
What does all this mean?
If the moves by the government are going to affect EcoCash in any way, it’s going to be because EcoCash has not made their customers into fans. Those customers have no reason to keep on the platform if there are no network effects to keep them locked in.
EcoCash is pushing for people to open bank accounts. However, once people have bank accounts, what is the distinct thing that will make them need to move money from those accounts into EcoCash? An agent footprint is no longer a selling point and not because the government banned agents. It’s because agents don’t matter much in a cashless economy.
Right now the more important selling point is the availability of EcoCash even to the smallest merchants. Some of these very small merchants don’t have merchant accounts but use their personal wallets to accept payments. EcoCash needs to quickly build appropriate tools for these users if they want to remain relevant.
The easier thing is for them is to focus on the pain of unfair treatment from government (yes it is unfair) and to conclude that it is the source of their woes. However, if they will be humble to realise that they could have preempted this predicament by proper product development and a laser focus on the customer then they can get out of this stronger.
This is not easy though. Culture is the devil.
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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.
John P Mangudya Governor 9 July 2020
The threat has come it seems
There has been talk of having one national switch for all transactions for a very long time. Such conversations started intensifying last year and it looks like the central bank has taken a definitive position. What this means is that all payments facilitators in Zimbabwe like banks, EcoCash and other mobile money wallets can now ‘talk to each other’ through Zimswitch.
The business that is affected by this the most is EcoCash because essentially everyone else is on Zimswitch. The mobile money service is a platform in itself with its own ecosystem that banks connect to on EcoCash’s terms.
Designating Zimswitch as the primitive platform that everyone else must connect to takes away incredible chunks of EcoCash’s market power. For example, nothing stops a NetOne customer from merely sticking to NetOne’s OneMoney and not open an account with EcoCash. From their OneMoney such a customer will now be able to send money to or receive it from EcoCash. OneMoney and EcoCash will thus compete on service, innovation and pricing. Of course the interconnection fees will also determine how far this becomes a reality.
We will look at this more closely as we get more details. Some questions to ask are around the fact that Zimswitch itself is a private company owned by some of the banks and a few other private owners. Is this the ideal set up?
Given all this, I thought it might be worth looking at how this decision should be a wake-up call or worse a call-to-arms for EcoCash.
Goodbye network effects
The important thing to note from all this is the era of network effects is over. The national switch requires EcoCash to be interoperable with the new switch. What does this mean for the laymen? Well, where you normally needed an agent to send money from EcoCash to OneMoney/Telecash you can now do so directly.
Not only is that super convenient, it also removes the need for everyone to have EcoCash which in and of itself is a big deal. You no longer need to have EcoCash because everyone else has EcoCash. We all know of at least 1 if not more people who have an Econet line because they need EcoCash.
How big of a deal with this be? Well, in the Kenyan mobile money market it didn’t bring about earth shattering change. M-Pesa who were the dominant player in that market went from 71.9% market share to 63.5% (-8.4%) in a year and a half. Devastating? Far from it, I think.
But that repeated decline is enough to wake up and force any organisation into action – worse more one that reports back to investors from time to time.
Who’s got a bad rep?
It’s hard to imagine that Econet and everything associated used to have public buy-in. Between Strive Masiyiwa saying “he believed ED is sincere” (something I believe he takes way too much stick for), EcoCash’s nightmare upgrade last year and a host of other issues, that goodwill is long gone and the underdog tag no longer applies to EcoCash.
It’s lonely at the top and at times it feels like everyone is rooting against Econet which could mean more people transitioning to OneMoney and Telecash just to spite the much maligned Econet group.
What advantages does EcoCash still have?
These two factors are enough to suggest that EcoCash will need to make their product more compelling than OneMoney and Telecash. The advantage they have is that they control the platform where their rivals are sitting on an existing platform.
Why is that important? Well, ZIPIT which enables most of the functionality is not controlled by Neither OneMoney nor Telecash. This presents a problem in that if either of the two wants to build a killer feature they are less flexible than EcoCash is.
EcoCash also has a gigantic headstart vs other mobile money operators -they have over 90% market share and volume of transactions- which I think affords them time to go to the drawing board.
Finally, the last advantage is simply the fact that EcoCash’s competitors are not notorious for innovating or coming up with compelling products. In fact many of the times, they’ve followed in EcoCash’s footsteps which makes for a pretty boring mobile money market where fierce competition is the stuff we relegate to our dreams.
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The Reserve Bank this afternoon issued a statement that made Zimswitch the national payment switch. This means that EcoCash will be relegated to just being wallet and will have to use Zimswitch as the universal transaction hub. Now, as more information about this comes out, and we see how EcoCash responds to this. Let’s have a little refresher on what Zimswitch is, how it came about and what they do.
I’m sure many of you are already familiar with Zimswitch and their services. But with every new directive issued, we seem to have to brush up on what the new thing that will be talked about, is all about.
What is ZIMSWITCH?
Founded in 1994 as a collaboration between Beverley, Barclays, CABS, Founder’s Building Society, Stanbic, and ZimBank (ZB Bank) (CBZ and Time Bank joined in 1995 and 1997 respectively). Zimswitch Technologies Private Limited is Zimbabwe’s sole electronic funds switch and clearing house.
They process domestic card based ATM (Automated Teller Machine), POS (Point of Sale) and EFT (Electronic Funds Transfer).
Timeline:
1994 Founding of Zimswitch
1995 Processing of the first Zimswitch transaction
1996 The first Zimswitch POS transaction is processed
2001 Incorporated as Zimswitch Technologies Private Limited
2006 Zimswitch makes the move to Postilion switch for greater efficiency
2012 Introduced credit push to bank and credit push to mobile also known as ZIPIT
On Friday, the Magistrate’s court issued a search and seizure warrant giving the ZRP permission to raid Econet Wireless offices.
The Criminal Investigation Department sought the warrant on the basis that they suspect Econet Wireless to be “involved in money laundering”. In fact, the allegations are that Econet Wireless and subsidiaries created and issued “non-attributable and non-auditable individual subscribers merchants billers and agent which they credited with huge sums of money and distributed to the runners through their trust accounts. The runners would, in turn, buy foreign currency from the black before being externalized.”
Essentially Econet, Cassava and EcoCash are being accused of creating fake digital money and then using said money to buy foreign currency. The warrant was issued and a number of influential Zimbabweans have cried out against what they describe as a breach of privacy.
Fadzayi Mahere – MDCA spokesperson- was amongst those to speak out calling the warrant an “unconstitutional breach to the right of privacy”;
In a sweeping, unconstitutional breach of the right to privacy, a search warrant has been granted against @econetzimbabwe permitting @PoliceZimbabwe to obtain every single e-money transaction pertaining to every customer for the period 2 Jan 2020 to 30 Jun 2020. This isn’t right.
“Full subscriber details” of each user means they have your name, cellphone number, address and all EcoCash records for the relevant period. This is a far-reaching breach of privacy. Imagine what @PoliceZimbabwe can do in this authoritarian environment with such extensive data.
Mahere’s opinion is similar to my colleague who wrote the following on Friday night;
The fact that a court can issue a warrant against Econet (EcoCash really which is actually an entity on its own) which instructs police to get personal data concerning you and me is worrying. Zimbabwe really is a Banana Republic.
