Source: Plastic money fuels market quandary | The Financial Gazette May 4, 2017
…Erratic POS connectivity disrupts daily transactions
…Majority of rural retailers still to get POS machines
By Tendai Makaripe
IT is around 1800 hours and dusk is falling rapidly. John Murefu (not his real name) is preparing for super at home in Ruwa, when he receives a call about an illness.
It’s on the other side of town, some 30 kilometres away, but he has to go.
He gets into his car and starts the engine. The fuel light flickers — the tank needs refilling if he is to get to his destination. There is no cash, but thankfully, a crusade by the central bank encouraging cashless payments has resulted in fuel stations getting point of sale (POS) machines for debit and credit card transactions.
Murefu drives his automobile to the fuel station nearby, and asks to pay with his card.
“I’m sorry our machine is down,” the fuel attendant retorts, stubbornly. “Is there any other way I can pay for the fuel? Do you have Ecocash,” Murefu asks, seriously concerned.
“I’m sorry we don’t have Ecocash,” the attendant responds, indifferently.
Ecocash is a mobile payment platform operated by the country’s largest mobile telecommunications network.
Another fuel station is 10 kilometres away in the Msasa industrial area.
Murefu drives his car, heading towards Msasa and fortunately manages to get there without running out.
“How much?” the attendant asks, holding the fuel dispenser.
“I have a card,” Murefu answers.
“I’m sorry our POS machine is not working. The network is down,” she says, curtly. “Try another place.”
There are five other fuel stations for him to try in the area.
Two of them have run out of fuel; one does not have a POS machine at all, and the other two indicate that theirs are down.
Feeling terribly let down, Murefu takes the gamble to drive into Harare’s central business district.
It’s now very dark, and he may not get there with the little fuel in the tank. But what else can he do?
Fortunately, he manages; the fuel station he gets to first accepts his card, but the transaction is declined.
“What’s the reason,” he asks, stretching his hand out of the car window to receive a printout. “Transaction failed. Please try again,” the printout says.
Dejected, he calls a cousin to come with cash to bail him out.
Murefu’s situation highlights the problems faced by millions of Zimbabweans grappling with a cash crisis in the country.
The worsening cash crisis has forced the Reserve Bank of Zimbabwe (RBZ) to compel Zimbabweans to resort to use of electronic means of payment, such as debit cards, to reduce demand for cash
But the card payment system has wreaked havoc on the transacting public, with system failures and other problems undermining confidence in its crusade.
The alternative electronic payment systems have several drawbacks inconveniencing customers.
In supermarkets and at fuel stations, customers are increasingly getting dejected by failed transactions and inoperative POS machines.
The fact that there is also inadequate supply of the POS machines in the market has compounded the problem, throwing the entire strategy into quandary.
Retailers who opened up to the Financial Gazette’s Companies & Markets blamed the telecommunications system which provides the backbone for the alternative payment facilities for the chaos.
The POS system works within the confines of local broadband services, which, when disrupted, inconveniences customers.
IT experts said POS connectivity is normally obstructed when banks congest the POS platform, which predominantly use Zimswitch, an electronic funds switch that processes automated transactions.
If Zimswitch is overloaded, the system collapses, they said.
“The broadband support system has often fallen short of expectations. Network drops at crucial moments and double debiting is also common,” said one retailer based in the central business district.
In rural areas, the situation is even worse considering that such network hiccups are being experienced in major cities and towns which have requisite infrastructure.
Rural areas have erratic network coverage which hampers the smooth flow of transactions using POS machines.
“Network problems are posing a significant challenge to the few retailers with POS machines in rural areas,” said Confederation of Zimbabwe Retailers president, Denford Mutashu.
“They do not have technical back up and requisite IT departments that are always on standby in case there is loss of connectivity as is the case with large scale retail outlets,” he said.
Regrettably, such areas are home to thousands of tobacco farmers whose payments for crop sales at the auction floors are being deposited into bank accounts as government tries to compel them to embrace plastic money.
The tobacco farmers, many of them smallholder farmers, are therefore failing to use money in their bank accounts in their localities because of such issues.
Banks, they say, are too far away from their homes. Besides the challenge of network connectivity and supporting infrastructure, rural areas also have a massive shortage of POS machines, further compounding their woes.
This is mainly due to the fact that most of the rural folks are unbanked.
Banks, apparently, cannot deploy critical equipment in these areas to cater for a few people with bank accounts, one banker suggested.
Observers feel that a call for farmers to use plastic money should be met by a corresponding upgrade in supporting infrastructure as well as an increase in the number of POS machines in rural areas.
But with thousands of retailers in urban centres still to get the gadgets, chances for rural retailers acquiring these are slim.
The market has an estimated 35 000 POS machines against a target of about 50 000 in December 2016.
However, the target still falls short of what a country with a population of about 14 million would require.
The central bank is on record saying POS machines should be made available within 72 hours of application but there are many retailers around the country who are yet to access them despite having applied for the gadgets last year.
At Nembudziya growth point in Gokwe, about 140km from Kadoma, there are only two businesses with POS machines out of a combined 40 businesses in the area.
One retailer at the growth point said he applied for the machine in October last year but has not received anything.
“After making a follow up with my bank in Kadoma, I was told that demand has overwhelmed supply so I have to await my turn,” he said.
Worsening the situation has been the struggling mobile money transfer facilities, which are also network-based and cannot function efficiently in rural areas affected by network problems.
While the RBZ said it would roll out affordable POS machines to support the informal sector, there are concerns over the feasibility of this project.
Statistics show that Zimbabwe has over 5,7 million registered small to medium entrepreneurs and satisfying this demand would be a daunting task.
To add to the chaos, some service providers in major cities and towns, especially at fuel stations, are taking advantage of glitches associated with POS machines to misrepresent to customers that they are not working and ask for cash payments.
They then help their friends, relatives and some customers to get the cash after using cards on the pretext of paying for goods.
Some fuel attendants are among a syndicate which is selling cash to desperate individuals who are accessing as little as US$30 a day from their banks.
After getting cash from customers, they use different bank cards to get cash.
They then sell the cash to people at a premium.
Consumer Council of Zimbabwe deputy executive director, Rose Mpofu, said they are worried about how market players were fleecing customers due to the cash shortages.
“We are working with different legal and regulatory authorities that can address these issues and our goal is to raise awareness of the situation in the digital world. We are also driving at ensuring that we have a consumer protection Act (in place) to enhance consumer protection in the country,” Mpofu said.