Why Ecocash will fail in the current Zimbabwean cash crisis

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Ecocash was set up during a time when cash was abundant and the ATM machines were spewing out almost infinite amounts of cold hard American currency. The very idea of Ecocash is a throwback to an era that no longer bears any resemblance to the current reality on the ground. Zimbabwe has been hit by an almost unprecedented cash crisis. This cash crisis has changed the rules of the game and as such very inconvenient questions are being asked of Econet’s money transfer service.

Every story has a beginning and to find Ecocash’s beginning one has to look at the nature of financial inclusion in the Zimbabwean economy. The vast majority of Zimbabweans live in rural areas and this therefore means that they do not have access to brick and mortar traditional banking services. This factor along with wide mobile phone usage is the only prerequisite for a mobile money transfer service to be implemented. Ecocash sought to replicate what Mpesa had done with Kenyan market. Introducing those folks living in what Joseph Conrad imagined to be the heart of darkness to basic banking services is what led Ecocash to be successful in Zimbabwe. This eventually saw it move cash volumes north of a billion dollars.

At the heart of the narrative of Ecocash was the promise to move money instantly across the length and breadth of the country with minor impediments. This is what the service was based on. The ensuing cash crisis basically means that Ecocash is failing to deliver on this fundamental promise. This is simply because agents do not have cash to dispense to those wanting to cash out. Ecocash agents are now being forced to close shop because of the lack of business. What this essentially means is that the service that Ecocash was built around is no longer being provided. Ecocash therefore becomes useless to the vast majority of its customers. This will lead Ecocash to fail in this cashless Zimbabwean environment.ecocash-agent

The cash crisis will be the immediate reason for the demise of Ecocash. However there are other deeper reasons in the rabbit hole that explain why Ecocash will fail. The Zimbabwean economy is in a comatose state. The cash crisis is just one symptom of this. Ecocash needs a strong and vibrant economy to sustain it. Zimbabwe’s economy is the antithesis of such an economy. People cannot send money when they are unemployed. People cannot send money when they do not have enough to feed their own families in the city let alone the rural folk. Heck, People cannot send money when they are in a bank queue to withdraw money to cash into Ecocash. At this point the absurdity becomes clear and Ecocash’s days become numbered.

In addition to this, the cash crisis means that the RBZ will continually seek to gain greater control over all the cash flows available within the country. This will ultimately mean greater regulation and maybe even fatal over regulation for Ecocash. If you throw into the mix the current hostilities that Econet is engaged in with POTRAZ and the ministry the room for expansion and innovation for Ecocash becomes stifled. 1-ecocash-ceo-cuthbert-tembedza-introduces-the-new-ecocash-debit-card-together-with-econet-wireless-ceo-douglas-mboweni-and-mastercard-worldwide-vice-pres-area-business-head-southern-afr-ind

However Econet wisely made Ecocash more than just a money transfer service. Bill payments and airtime purchases were added by somebody who deserves a promotion. The ability to pay bills in the comfort of one’s lavish and plush abode became a secondary selling point for the service. In addition to this Ecocash introduced a card with the MasterCard service for those that need to make online payments. These supplementary services helped Ecocash congeal and seemingly dominate and they might form a foundation for some sort of reincarnation for the service. There is only one problem to this however and it is called the banking system.

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4 thoughts on “Why Ecocash will fail in the current Zimbabwean cash crisis

  1. Its an interesting article. However let me just mention that the crisis is as ‘ Hard cash crisis’ and not an absolute cash crisis. People have money in the bank, but can not access it physically. As you have highlighted, Ecocash have diverisfied their service, this will keep them in business for a while, as bills still need be to paid. Ecocash has banking services which links the bank account to your Ecocash.This means that the money that cannot be accessed in the bank can be transfered to your EcoCash. Now , why am I mentioning this , when in actual fact people can not physically access that cash via EcoCash Agents? Its because you can still make payments in shops via EcoCash transfer and mastercard. As long as EcoCash implements a nationwide strategy to educate people on using E-commerce means such the card and ecoCash transfer for payments, the system will survive. The real people to worry about is the banks, because for them, failure to provide money to their clients is a failure of service delivery. Eventually those clients will find it less cumbersome and much better to transfer the money from their bank accounts into their ecocash wallet and use it via the EcoCash MasterCard and make other payments via EcoCash, rather than having to wait for 4 days in a que at a bank , and getting 50 dollars or nothing at. If EcoCash manage to roll out their small point of sales systems which where accessible to every informal economy enterpreneur and business person such as the local banana man, the combis and the vendor etc, chances of failing will be minimal as payments can be done in the informal Economy too. My final thrust on this issue is, yes with the current unpredictable market and economic conditions EcoCash may fail, but they still have quite a number of Rabbits to pull from the hat.

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    1. There is no such thing as ‘Hard Cash Crisis’. Money in the bank is not cash. Economics 101 tells us that Cash refers to notes and coins.Ecocash is for sending money to those in remote rural areas. Once they cannot perform this service the game is up. All those supplementary services that ecocash offers will not sustain Ecocash because that is the expertise of the banks.If you want to see why Ecocash will fail just look at the failed introduction of M-pesa in South Africa. It failed because south african consumers have a multitude of options for financial transactions that their banks offer.This is because of the developed financial services market. Zimbabwe’s financial services will develop and Ecocash will be left in the cold. Ecocash will fail because ultimately Econet is a telecoms company.

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  2. Which is why I put it in quotes. But rather let me highlight that anything not hard cash is what we call plastic money. What you need to realize is the world is moving towards plastic money. Zimbabwe has a traditional banking system that is cemented largely by the use of physical money. Is money in your account but not accessed physically as notes and coins from the bank not money? yet you can access it via E-Commerce means? .Right now 70% of purchases happening in shops, are happening through the use of plastic money. This is your Cards and other payment services such as EcoCash and TeleCash. As long as Ecocash has attached a Zimswitch card or MasterCard and P.O.S to their system, they will always be better than our traditional banks. Why? because EcoCash has more reach and convenience than what the banks offer. Why would I go to the bank to Que, when i can just transfer the money from my bank account into my EcoCash in the comfort of my home, and then use my EcoCash card to buy groceries in the shop at the same time pay school fees for my son through my EcoCash without having to lift a foot to go to the bank . I can also send money to my Grandmother in the rurals , make sure she also has an EcoCash debit MasterCard with which she can use to buy groceries if she goes to the nearest growth point which has a shop with a P.O.S machine. One problem that EcoCash poses to our local banks , is, it in itself is morphing with the times. People want to pay bills in the most convenient way, and frankly this is more convenient than going to the bank. ‘Convenience has always been a determinant of competitive advantage and that’s what EcoCash has.’

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  3. Again you are missing the earlier point i made so i will state it again for posterity. Why is it then that similiar services like M-Pesa failed in South Africa. It is simply because the South African market had an advanced banking system with a multitude of financial options for customers to transact with. The banking system is becoming more advanced in Zimbabwe and more and more people are opening bank accounts because this is the only place where you can access cash. The flaw with ecocash is that you need to get money from the banking system into ecocash via cash-in. This is unnecessary burden which will lead to its decline. If this where not the case then ecocash agents would be experiencing brisk business in this. I understand your point that ecocash can be linked to a bank account but in the long run as the market develops you will notice the market starting to shun ecocash for prestige reasons. Ecocash is a product for the rural folk and it will be shunned by urban working class consumers who want their financial services to be premium ones (Think American express black card).Also as our banking market develops you will start to see the need for things like credit cards. Ecocash cannot possibly offer this service.

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