digital financial services

Zimbabwe Posts (Pvt) Ltd Leveraging technology to achieve socio – economic transformation

Presented by Mr N. Moyo – Sales and Marketing Manager

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Effective Liquidity and Float management strategies to adequately serve the needs of multiple Digital Financial service providers

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Presentation Outline• Definitions• Global Trends• Local Trends• Zimpost Role• Factors for Effective Strategies• Proposed Strategies• Experienced Challenges• Way Forward

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DefinitionsDigital Financial services – this is delivery of financial services to the unbanked groups through innovative technologies like mobile – phone enabled solutions, point – of – sale devices, etc. The model is meant to reduce costs of service provision to allow participation of low income groups that were previously excluded from banking, and is part of the broader vision and strategy of financial inclusion

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Definitions cont’dThe Reserve Bank of Zimbabwe (RBZ) has classified the DFS into two broad categories

Agent Banking – this is extension of the banking services through an agent who is not in a brick and mortar set – up.

Agent banking include services such as deposits, withdrawals and account opening.

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Definitions cont’d

Mobile payment agent – these are mobile network operators that offer financial services which include money transfers, airtime top – up, merchant payments, etc.

Money transfers remain the largest component of mobile financial services.

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Global Trends on Money Transfer

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• According to World Bank report on Migration and development (2016 ) growth of the global MT industry slowed in 2015 to $581. 6 billion from $592 billion in 2014 due to weakened economies and currencies vis-à-vis USD.

• Main uses of remittances are subsistence (70%), Education (8%)and donations (5%)

• 47% of total remittances occur at brick and mortar establishments, but majority are moving towards internet based services

• Cost of sending reduced to 7,5% from 8.9% and is likely to continue due to cheaper internet based services.

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Global Trends on Money Transfer cont’d.

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• MT users deem 2.4% as a fair fee for the service yet operators normally charge between 8-10% with some corridors incurring a 20% fee charge.

• MT operators are exploring the use of social media to send and receive remittances- e.g. Xpress Money using Face book and Web Chat

• 40% of migrants still prefer cash collections, 40% prefer collecting money from banks and only 5% to mobile wallet

• SOURCE INFOSYS MONEY TRANSFER INDUSTRY 2016 REPORT

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Local Banking Trends

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• Approximately 1,1 million people in Zimbabwe have a bank account, which is about 9% of the total population

• Under its five-year financial inclusion strategy, the central bank is targeting to improve access to formal financial services from around 69-90%

• 40 000 agents providing financial services • 35 000 mobile payment agents • 3 000 bank agents

• SOURCE: RBZ Quarterly Report 2016

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Mobile agent payments

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Year Volume

(m)Value ($bn)

Growth (Value)

2013 119.14 2.1  2014 178.51 3.6 71%

2015  228.2 4.6 28%Source: RBZ January 2016 Monetary policy

Role of Zimpost in DFS

• Role for Zimpost is drawn from article 5.10 in the FIS document.

• 226 outlets, 66% are in the rural market.

• 155 networked

• 52 are to host Community Information Centres

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Role of Zimpost– Digital Financial services

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- International Money Transfer Operators

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Role of Zimpost– Digital Financial services

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• Agent banking

• Mobile agent payments

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Zimpost role - Agent banking

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Year 2013 2014 2015Volume (000) 635 657 449Value ($m) 171 158 110% Change (value) (8%) (30%)

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Zimpost role - Mobile agent payments

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Year 2013 2014 2015Volume (000) 298 446 534

Value ($m) 63 178 201% change (value) 183% 13%

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Factors for effective strategies

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• Business trends – monthly and seasonal

fluctuations

• Potential business – population size, new socio –

economic development initiatives in the locality

• Location

• Regulatory Framework

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Proposed Strategies

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•Funding – a single float requirement that can then be shared by all DFS providers.

•Agents also need to complement outflows from cash-outs/withdrawals with cash – generating transactions.

•Agents can also play the role of a super – agent, which generates liquidity when they act as deposit – takers for micro or

individual agents.

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Proposed Strategies cont’d

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• Liquidity – the “bottom of the pyramid” needs to be financially included; Finscope survey 2012 shows that 66% of MSMEs are found in rural markets, and if all included, liquidity can be generated. RBZ estimated that about $3bn is circulating in the informal sector.

• Demand for cash can also be reduced through plastic money, by increasing numbers of point – of – sale machines. According to RBZ there are 16 000 point – of – sale machines in Zimbabwe which is equivalent to 300 per million people is far below international

standard of 1300 per million

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Experienced Challenges

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• Funding – each principal requires a certain level of float funding, resulting in large cash – outlay for an agent with multi – digital financial services provider.

• Liquidity challenges – most unbanked areas are generally cash-out/withdrawal prone markets.

• Removal of Human intervention for float management(results delays that inconvenience clients)

• Risk of theft – conversion of funds to personal use by agents.

• Multiple operational gadgets (cellphones and point – of – sale machines) due to lack of infrastructure sharing policy.

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Way Forward

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• Inter – operable and seamless digital financial solutions

• One – float for agents handling multiple digital financial solutions providers, probably to be managed by the Reserve Bank.

• Sharing of infrastructure, i,e., point of sale machines• Proactively managing convergence of markets due to

developments in ICTs.• Participation of consumers for product developments

to address market needs.• Address high costs of service provision

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Conclusion

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Disruptive technologies call upon consumers, operators, regulators, financiers and any other stakeholder to expect changes in the way we do things today. In the face of disruption from new technologies, it is important to continue cooperating for the common good, i.e., the socio – economic development of our nation.

I thank you!