As technology the world over has been moving at an accelerated pace, as a country Zimbabwe has also been evolving. The banking landscape in particular has altered vastly, as a result of the exponential advancement of technology. Over the last few years, banks in Zimbabwe have gradually moved away from the traditional brick and mortar branches to embrace new technologies that offer convenient, safe and reliable banking solutions to their customers. World Finance spoke with Solomon Nyanhongo, CFO of Stanbic Bank Zimbabwe, to discuss the country’s current mobile banking situation.
Branches have now been complemented and in some cases replaced by self-service channels such as ATMs, point of sale terminals, and the introduction of internet and mobile banking. Mobile banking has been facilitated by the growth of Mobile Network Operators (MNOs), whose service now covers the whole country including areas that were previously deemed inaccessible.
MNOs are running mobile wallets with retail and individual agents acting as cash-in (deposit) and cash-out (withdrawal) points. All this has aided the process of financial inclusion, though it is also disruptive to banks that were not offering mobile money as a payments platform. The country has also seen a significant increase in transaction volumes going through electronic banking channels, as customers now want easier and instant transactions.
There has been a strong growth in ATM usage as Zimbabweans now have confidence in the banking structure after adopting a multi-currency system in 2009. The introduction of self-service channels – which operate 24-hours a day – has helped to enhance the quality of service delivery in the banking industry, as banks strive to remain relevant to the public that have now come to expect quicker, more reliable services.
The road ahead
Failure to contain credit risk, especially during a time when the country is experiencing a slowdown in economic activity, has resulted in the cancellation of some financial institutions’ banking licences. This slowdown has been manifested in terms of tightening liquidity, increased number of company closures and job losses, as well as declining levels of profitability.
Arguably the biggest factor holding back the banking industry is the lack of government support
The level of Non Performing Loans (NPLs) in Zimbabwe had reached an average of 15 percent at the end of the Q1 2015. NPLs are due to a host of issues adversely impacting business viability, including high cost of borrowing. “There is currently growing pressure on banks from [Zimbabwe’s] central bank to lower interest rates and bank charges [further], which are perceived to be unsustainable to the productive sector, in spite of an escalating cost base with most banks recording decreases in profitability”, explained Nyanhongo (see Fig. 1). “There is also stiff competition from MNOs, which are now providing financial services. These were traditionally provided by banks.”
Telecommunication companies are now offering mobile wallets, but these have low-levels of regulation, which serves to only raise settlement, KYC and CFT concerns. Opportunities also exist in the growing informal sector, where banks have not been effective in mobilising liquidity and have failed to provide relevant banking solutions.
“The nature of the informal sector is such that transactions are largely conducted on a cash basis and we think there are opportunities to provide convenient, low cost and safe transactions platforms to enable efficient payment system for goods and services”, continued Nyanhongo. “In addition, Zimbabwe has vast untapped natural resources mainly in the mining sector, which present opportunities for growth of the banking industry in Zimbabwe.” The country also has one of the highest literacy rates in Africa and boasts highly skilled personnel who are ready and waiting to work, but sadly, many will have to wait for the economy to pick up before enough jobs become available for them to do so.
In the last three years, a number of financial institutions in Zimbabwe had to close down their business operations on account of growing business costs, liquidity challenges and inadequate capital. Some banks actually failed to honour customers’ payment instructions, but according to Nyanhongo that has not been the case for Stanbic Bank Zimbabwe, which has ensured that customer transactions are processed efficiently.
“We have remained focused on driving our channel strategy which has seen us opening branches in the resort town of Victoria Falls, Beitbridge border town, and most recently in Hwange, the bank was previously not represented in these places”, maintained Nyanhongo. “This strategy has contributed positively to financial inclusion at a time when other financial institutions have closed down a number of their country branches.”
The bank has continually searched for opportunities to grow its branch and ATM network, introducing mobile banking and smart apps to provide its customers with convenience and easy access to banking services. It has increased its support of SMEs and other local businesses through lending and has introduced mortgage loans, which will provide qualifying customers the chance to become homeowners.
Keeping pace
Despite the massive strides taken by the national banking sector, it still falls short when compared to banking systems in more developed nations around the world. Electronic banking, for example, is an area that is still far less technologically advanced and in order to improve it, huge capital investment is required.
The rise of internet and mobile banking in the country has been stifled slightly by high data costs, which are negatively impacting the rate of usage of these technologies. As is the case throughout the African continent, there is lower financial inclusion than in many developed countries, with a large percentage of citizens, especially in remote rural areas, simply not having access to banking services. The time it takes to process transactions is also far slower than in developed nations, as many banks use old systems that require extensive upgrades, or in some cases a complete overhaul in order to accommodate the huge transaction volumes that they are now required to process. But arguably the biggest factor holding back the banking industry is the lack of government support.
“In times of crisis, governments in developed countries have the capacity to intervene, bailing out their banks’ financial crises, but Zimbabwe’s central bank is yet to be fully capitalised, so it is unable to assume its critical role of being the ‘lender of last resort’”, said Nyanhongo.
The country’s economy at the moment is largely cash-based and, therefore, the use of plastic money for settlement is still low. Due to the high credit risk and the lack of a central credit reference bureau, there is minimal issuance and use of credit cards to customers. Such products are awash in developed markets and make transacting for the banking public easier.
The banking sector has seen the greatest advancements and progress in technology use, with most banks now offering internet and mobile banking, along with POS machines being rolled out to more retailers and ATMs at more sites across the country. Mortgage financing is also on the increase following the removal of government taxes on income from mortgage business.
New technologies also reduce the cost of operations for banks. A visit to a bank’s web page can be done easily and much faster than a visit to a physical branch. Such virtual branches, as they are commonly called, can even serve more customers per day than a physical setup allows.
The strong support that Stanbic Bank Zimbabwe has received from its parent company, Standard Bank Group, has contributed significantly to the viability of the agricultural and mining sectors in Zimbabwe, which form part of the major economic pillars of the economy.
“Over the years, Standard Bank Group has helped the country by facilitating lines of credit worth over $300m per annum, which is a welcome development in a country going through severe liquidity challenges”, said Nyanhongo.
“The focus is on Africa as the main market. We invest in the potential that Africa has and we see growth opportunities”, he added. This has resulted in a deep understanding of Africa and the various markets the group operates in.
Standard Bank Group has a rich history in the continent, spanning more than 150 years, which has resulted in it possessing a very strong brand in the markets that it operates in. This strong brand image has immensely benefited Stanbic Bank Zimbabwe through flight-to-quality as depositors are increasingly looking for safe havens for their hard-earned wealth.
The bank’s cautious approach to lending has seen it remaining profitable at a time when other banks performance has waned as a result of growing credit impairments. Its continued focus on digital and electronic banking platforms will help it stay ahead of the competition. Currently Standard Bank Group is in the process of modernising its core banking system with many functionalities, which is why it is likely to remain at the forefront of banking in Africa for the foreseeable future.
