Last week, after a tour of EcoCash Business (well, EcoCash Commuter mostly), we got the opportunity to interview the Econet Services CEO, Darlington Mandivenga and Econet Wireless Mobile Money Executive, Francis Matseketsa. Econet Services, as we wrote last week, is now managing such strategic services as EcoCash for the entire Econet Wireless group.
In the interview, we talked about the uptake of EcoCash services by merchants, Bulk EcoCash transactions, bill payments, the mobile banking services part of the MMT services, the role of traditional banks, the regulation of mobile money services, and also touched on the relationship and role of TN Bank. We post below an edited transcription of the interview.
Techzim: So the merchant side of EcoCash. How are you rolling it out? We’ve just seen the transport sector, the EcoCash Commuter. When are the types of businesses going to come in?
DM: Merchants form a very important piece of the EcoCash ecosystem and there’s a lot of work that has gone into the acquiring and signing up of merchants. They are in difference categories; there are what we’re calling over the counter merchants, these are the small type of merchants like the General Dealers, Pharmacies, small retail outlets. We have signed up a lot of them and it’s an ongoing exercise. So all the ones we have signed up have got merchant numbers.
Phase 2 is now about going to the bigger merchants, the likes of OK Stores, The Pick n Pay’s the TM Supermarkets. We are in discussions with them right now. They are excited, they want to work with Econet. We are confident that by the time we get to the festive season all the big retail outlets will be part of the EcoCash merchant system.
Another example is the Dial a delivery service of the fast food outlets. They’ll be able to collect the payment before the delivery is even made.
There will be a flood of these merchants before the festive season, different types of businesses like hotels & restaurants, retail outlets, food outlets, fuel stations and others. Some fuel stations like Redan already accept EcoCash at some of their stations.
Some merchants are waiting for the mobile banking integration. Where if a merchants has, say $2,000 in their wallet and they want to bank it, they don’t have to physical go to the banking hall. They can easily transfer the money from the EcoCash wallet to their bank account, and when they need that money they can also withdraw the money to their EcoCash wallet. They can also do merchant to merchant transactions, they can pay their staff salaries. It’s all working together. The beauty about EcoCash is that it requires what we call a network effect. You have to have merchants, you have to have customers , the more use cases you have out there, the more customers are gonna take it.
The customer says, now that have it, what am I going to do with it? So if we can now start saying ‘you can pay for you kombi, you can receive your salary, you can buy Nando’s, You can pay Edgars (clothing retailer).
Techzim: So what about health institutions?
We’re working on those. We are also approaching them because we have seen a need there.
Techzim: What about the bulk EcoCash payments? Do the users already have the tools to use for paying salaries for example?
FM: The bulk payment functionality is fully operational. It’s live as we talk. We are in the process of ensuring that those institutions have connectivity and are able to push transactions in bulk from their offices. But what we have started internally is to make sure that we are in control in the first instance. So that are fully cognizant of the risks which are inherent. So in terms of active use, we’re still saying to users bring your file and we will push it through, but we’re working towards ensuring that they can push it from their end, after having made sure that the risk management procedure there is water tight.
DM: We are working also with NGOs for the distribution of aid. We are at very advanced stages; they want to start distributing aid through EcoCash.
Techzim: What about the bills? The utility companies and other like them?
FM: That is also in the pipeline. What we have done is that companies like Edgars, and some insurance companies like Champions Insurance, ZB Life are already live using the offline module. So we want to make sure we pursue both offline and online. Because they have their own systems and really it’s an issue. We are ready but we have to talk to them to sort out their systems as well so that their systems talk to each other.
DM: Everything has been discussed with the likes of ZESA (a state owned power company) It’s just the technical aspects that need to be finalised. They see the value, but their processes have to be ready.
FM: You don’t want a situation where a customer pays their bill but still get disconnected because a certain system has not been updated. It’s a very delicate setup.
Techzim: You talked about integration with the banks. Which banks are you integrated with right now in terms of enabling the mobile banking?
DM: Right now, none of the banks is completely integrated. The integration work is happening.
Techzim: Not even TN Bank?
DM: No. Not even TN. The integration is happening and we’re not giving preference to TN by the way. There’s an expectation that we’d give preference to TN.
We’re doing business here my brother. TN holds the EcoCash trust account as we speak but we have been encouraged by the Central Bank and we are happy to open this thing up to every banking player. We’re not about to use this to create an unfair advantage to TN Bank. It’s going to be open to every bank so the integration is happening. TN is also integrating as we speak. And we’re not slowing down any bank which can move faster than TN, so if any bank is ready before TN, we will launch with them.
Techzim: When do you think you will start rolling out the mobile banking component?
DM: By end of this month we should be able to have a couple of banks offering the service.
Techzim: How have the banks received this service?
They are excited. They are very very excited. And we’re actually humbled by the response that we have received from some of these banks. The big banks actually. Initially we thought that they were going to resist us, but we were amazed when we went to meet with them in term of the level of cooperation. It’s like they want it sooner than we do. We are very happy about it. So like I said, come end of October, you will see it.
Techzim: What about the Econet Shops themselves, are they accepting EcoCash?
FM: Definitely, that was the first step we did. Let me also add that most of the general dealers that were Agents or EcoCash, have come in great numbers to request to become merchants as well. So you’re looking at a bottle store, a general dealer in the rural areas, in the Growth Points, who says “I’m selling my sugar, cooking oil etc… come pay me with EcoCash.” These have added to the large number that have signed up as merchants. Most of those are really active. It’s easy to register them as merchants because they are Agents already.
DM: We are in the early stages but we want to make sure that we are in the remotest parts, but we also realise that in those remotest parts there will be challenges of liquidity. So again, by working , with all the banks, by the way, every single bank will be a Super Agent for EcoCash. Some of them have already signed up.
Techzim: What is the difference between an Agent and a Super Agent?
FM: A Super Agent, by name is superior to the normal Agent, in the sense that they can chip in. The reason we’re targeting banks to be Super Agents from a liquidity provision point of view, in terms of cash, and also in terms of the e-float. Banks are spread in major urban centers and they are identify the corporates who are playing the role of Agent who run short of cash, or e-float. So the Super Agent can create credit facilities for them and come up with what we call Commission Split. So we have a contract that governs sub-Agent and the Super Agent, which we then relate to this Commission Split. The Super Agent is also playing a kind of supervisory role.
An Agent is interfacing directly with the customer, to do cash-ins cash-outs, and any other EcoCash services like registrations, educating the customer and so forth. So the target is very deliberate to say, banks are superior, they are bigger. EcoCash is a banking product. In terms of risk management and regulatory issues and so forth.
DM: By signing up banks as Super Agents we have created a line of business for them. Most of these people that we’re calling Agents, their revenues are not significant, and most of them don’t even have bank accounts. But by now linking them up with a bank, there’s a banking relationship that is created. So they now have a bank account and with EcoCash when they have got enough money in their Wallet they can now transfer it into their bank account.
Techzim: To go back to EcoCash Commuter. In terms of the cost of transacting, for those trips longer than $1, since only those payments less than a dollar are free, will I pay more for the Harare – Bulawayo trip.
DM: It’s something that we’re looking into right now. So far, it’s only those transactions that are below $1 that are transaction free. Anything above that, we are running a business at the end of the day and we may have to introduce a fee. We have not yet decided on that because we’re in discussions with the long distance operators as we speak. If there’s going to be a charge it will be minimal and there will be a cap. Because we don’t want the customer to feel it. Although naturally, somebody who is supposed to pay $2 and you now say they pay $2.20, there will be some resistance initially, but when they then see the convenience, we are hoping that eventually they realise that it’s worth more than the 20 cents they are paying.
Techzim: What about the merchants, what qualifies a business to be a merchant?
We have made sure that we make a clear distinction between an Agent and a merchant, in terms of the criteria. A merchant is simple. An Agent requires us to make sure that we are in line with regulatory requirements from a Know Your Customer (KYC) point of view. All the criteria that is used by the banks is more along that adoption. It’s almost like we have created mini bank branches all over the country.
For a merchant there are requirements are less because they are simply receiving money. They are not dishing out money to customers, such that they may even trick the customers. So, it’s the customers that are paying for the goods and services. Yes, in as much as there may be reason for them to run away and not deliver the goods to the people, but the risk is much less. So it’s simply your trading license. You are operating a business so just show us that at least you are licensed so that we do not perpetrate for example, the financing of terrorism or money laundering. We also need to have the ID and photographs of the person running the business. It’s as simple as that. If you are a registered company, because you already have your papers, you just submit them to us.
Techzim: So in what situation are you now? Are you trying to have more or are you limiting the number of merchants you can have?
DM: We want to have more, but it’s regulated. In the case of those commuter minibuses, we had to ask for their operating licenses, before we could start working with them. We can’t just take anybody. That’s the regulation, but we would want to do more. If there could be deregulation, we would be happier, but we understand why regulation is there, and we want to be compliant.
Techzim: Talking about regulation, what role is the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) playing in all this? Or is POTRAZ regulating strictly the communications side of things?
DM: This is more a central bank issue.
FM: The USSD that we use to interacting with here on the EcoCash platform, it transmits the message. So POTRAZ would have the interest of having the platform send the messages, but they end there. It’s 95% financial regulation.
Techzim: Ok. POTRAZ already requires that licensed mobile operators remit 2% of their gross turnover annually [for the Universal Service Fund]. Does that apply to EcoCash revenues?
FM: As far as EcoCash is concerned, POTRAZ is looking at it from a communication point of view. But this one is a financial services product. It has got its own rules and regulations. Even the VAT issues and all that.
DM: When we report our revenues at Econet, it includes the EcoCash revenues, because the POTRAZ fees are a percentage of the total revenue.
Techzim: What about on the RBZ side, are you regulated like a bank?
FM: Let me clear the line on that regulation. I think it is important to know that the bank that we’re partnering with, TN Bank, plays a supervisory role on this product, in the sense that the Mobile Money Transfer (MMT) product, when it goes out there, it has to have a banking partnership. We are operating under the armpit of a banking license.
The whole idea is that we are not supposed to create money. To me that’s the number one regulatory aspect . We don’t create money because obviously it would distort the monetary values in the economy.
DM: I want to take this opportunity to talk about merchants. You were pushing us to talk about the advantages that TN might be having in this whole mix. I told you that we are going to launch wallet to bank and bank to wallet by the end of October. But because some of the merchants were coming to us and saying “Ok fine guys, I have accepted EcoCash and now I have $1,000 or $2,000 sitting in my wallet, I want to cash it out. Do I have to go to an Agent where I’m going to be charged commission and other things like that?”
So we’re encouraging them to go to any of the TN Bank branches and cash out up to $1,000 immediately. But for anything more than $1,000, we’re telling them that if they don’t have a TN Bank account, they’re not forced to open a TN Bank account but for the purposes of what we want to do because it’s sitting in EcoCash, we offer them a transit account. Because they say they already have a banking relationship with a certain bank, and we don’t force them to start banking with TN Bank. But they can transfer the money into a TN transit account and then TN pushes it to their bank account. And this is only during the period when we’re have not launched the banking service, because once it’s been launched, there’s no need to go through TN bank. Our strategy is not to push people to TN Bank.
Update: The reason internet payment services were not part of the interview is because they had told us earlier that online payments are in the pipeline but will not be coming any time soon. We interpreted that to mean not in the coming several weeks or, not this year.