ANALYSIS: NCHIMUNYA MUVWENDE
IMAGINE working so hard to earn some cash and after getting the pay, you suddenly lose it through theft, a fire or even dropping it? Well, this imagination is not strange to many people that have regretted having lost money, wishing they had thought of a smarter way of keeping it and using it wisely. However, this is one of the many challenges being faced by economies that have not taken advantage of technology by maximising the benefits of using digital platforms and enhancing economic activities that will improve the nation.
Significant measures have been put in place across the globe to help in the reduction of the spread of the coronavirus, which has so far infected more than one million people and caused catastrophic economic impacts for countries. A Nairobi-based research scientist, Dr Abdhalah Ziraba, contends that it is very plausible that banknotes handled by a COVID-19 infected person can get contaminated and become a potential source of infection for the persons receiving cash and, as such, the need to nurture a cashless economy cannot be overlooked in the fight against this pandemic.
A cashless economy describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information between the transacting parties. This is where there is the use of mobile money payments, electronic payments and the general transfer of transactions done without the use of physical money.
Public health experts are raising the need to shift towards cashless payments to help prevent the spread of coronavirus, and this has been supported by World Health Organisation, which has warned that the virus can be transmitted to customers via banknotes and coins.
Bank of Zambia’s efforts
In the wake of the COVID-19, the Bank of Zambia (BoZ), in consultation with commercial banks and payment service providers, announced measures that will promote the usage of digital platforms. This is aimed at reducing cash transactions and facilitating increased use of mobile money transactions. Some of the measures include the removal of transaction and balance limits on agents and corporate wallets while limits for individuals and small-scale farmers have been adjusted upwards. In addition, BoZ has reduced processing fees for the Zambia Interbank Payment and Settlement System and this incentive is expected to be passed on to the consumers. These measures are commendable as they are a step in the right direction towards ensuring that restrictions on the use of physical cash lead people to the usage of electronic platforms without hindrance. Despite these measures having been put in place as a temporary measure due to the emergence of the COVID-19, they should be taken on a long-term basis such that after this health crisis, we do not revert to the status quo of using cash. Further, the banks should be open to ideas from the cooperating partners and individuals that can have innovations to develop such platforms that encourage cashless transactions.
Developing a cashless mindset
It was interesting to learn from a random survey carried out by a journalist who interviewed bus conductors on their willingness to accept payment through mobile money. This idea was supported by most of the respondents, but one conductor argued that if payment was to be done through mobile money, how will they be able to give tips to those that aid in finding customers? The main challenge is that paper money and electronic money are viewed to be different and people feel they have money only when they hold it in their hands, and this mindset ought to be changed. The fact that mobile money operators do not charge any amount for mobile transfers and deposits is an incentive enough to encourage the use of this platform.
Looking at history, the use of cashless transactions is not new to our society in that in times past, during the barter payment system, trade was done through the exchange of goods and services and no physical money exchanged hands, and in this digital era, the cashless transactions use digital platforms and this is just an evolution. It is high time that all financial service providers put the sensitisation on the use of electronic platforms as a priority as the achievement of this target requires the efforts of all. To help shape this mindset, some companies in various countries no longer accept cash payments, and if this approach is adopted in Zambia, significant progress can be recorded earlier.
Development of electronic platforms
It is one thing to change people’s mindset to increase acceptability of e-payment, but it is another to have these platforms readily available. Companies such as Zamtel should be commended and emulated for the introduction of the QR code payment platform in Zambia, which is a payment method where customers make payments by scanning a QR code and have the amount transferred directly from their account to the merchant, using a mobile app. In countries like China, this is a common payment method and they use mobile apps such as WeChat and Alipay, and payment is acceptable by almost all individuals, marketeers, taxi drivers, shop owners and a wide range of companies.
This is a challenge to all companies, not just those in the financial sector, to develop and accept payment platforms that support cashless transactions. This is time for ICT personnel to show their capabilities to take a lead in developing payment platforms that will change the Zambian financial narrative for good. For the transport sector, they can consider introducing prepaid cards where a person can recharge like airtime and begin to draw down as they use buses.
It should be noted that having a fully digitalised system would eradicate tax evasion and money laundering, reduce transaction costs and enable the stimulation of economic growth as transactions are easily tracked.
It is therefore a matter of urgency that should be taken seriously to maximise the benefits for all and also help in our fight against the global pandemic, coronavirus. It’s time to think and Act Smart.
The author is an economist.