The move by the central bank to have banks slash bank charges to between 1% and 1.25% of amounts withdrawn on ATMs and Over the Counter has come a time when the world over, economies have moved way deep into providing banking convenience for their citizens.
Technology’s main objective is to make lives easier and less costly and the moment a technology fails to provide the aforementioned solutions, then it defeats the whole purpose of its invention in the first place.
By Deputy Editor
The prevailing cash crisis is has seen most Zimbabweans frequenting banking halls more than often than before while some had to literally spend all nights queuing waiting their monies. Since April, Zimbabwe has been experiencing an excruciating cash squeeze reminiscent of the 2007/2008 hyper-inflationary era.
To cushion depositors from the scourge of high bank charges, government made its first move in June to reduce the bank charges to reduce charges on electronic transactions in order to promote and encourage usage of electronic banking services.
Monthly administration or service fees for account holders were reduced to a ceiling of US$5 from as much as US$50. Automated teller machine transactions however remained at $2.50 while electronic funds transfer attracted a minimum fee of 33 cents and a maximum of $2,10. Point of Sale (POS) transactions of up to $10 were pegged at a charge of 10 cents, and transactions above $10 were being charged 45 cents from $2.50.
The reduction in withdrawal limits saw depositors spending long hours in queues while some had to literally sleep by banking halls in anticipation of getting money the following morning. The move also saw depositors frequenting banking halls on numerous occasions to make withdrawals on a daily or weekly basis.
The decision to slash withdrawal limits however overlooked the issue of bank charges that most local and foreign owned banks were levying per transaction regardless of how many times one would make withdrawals. Depositors would incur between $1,50 and $2,50 in bank withdrawal charges. Some went up to $5,50 depending on the banking institution.
Meanwhile, the new banking charges regime which became effective on Monday will see depositors being charged 20 cents for withdrawing an amount of $20 and 25 cents if one is withdrawing the same amount over the counter; 50 cents for a $50 amount withdrawn through ATM and 63 cents over the counter.
Even though it might not be one of the best models to write home about, the new bank charges schedule seem to be a step in the right direction for the ailing financial services sector as it gives more room for the usage of paperless or plastic money owing to the flexible ATM charges.
It is however imperative for the apex bank to embark on a rigorous campaign for the use and embracing of plastic money under the prevailing cash crisis. Globally, economies have moved away from transacting in hard currency after experiencing the convenience and simplicity plastic money offers.
To protect depositors from exploitation however, the apex bank should work towards protecting depositors from further exploitation by banks on POS transactions. Some banks charge additional fees when you choose “Debit” at checkout and use your PIN. Banks earn less revenue when you do this, so they try to make up the difference by charging a fee.
Ever since the cash challenges being experienced in the country, the banking sector has reportedly registered growth in new accounts. This implies that companies which were paying employees in cash are now finding it difficult as they are also receiving payments through plastic money and transfers.
In turn, employees who receive their salaries through transfers are turning to making purchases through swiping at POS machines. Such employees are now involuntarily “financially included”.
Regrettably, Zimbabwe has a high unemployment rate and such employees constitute a small fraction of the unbanked. When a country looks at the broad picture of financial inclusion, emphasis is on the unbanked majority who include unbanked SMEs in the informal sector who largely fail to open bank accounts due to lack of documentation among other issues.
Experts have always recommended that a drive for plastic money be coupled by a drive for adequate infrastructure so as to improve usage of the electronic cards. However, unless there are new accounts being opened, increased use of electronic cards does not translate to financial inclusion in as much as it does to mere customer convenience to the already banked public.