Zimbabwe suffers EcoCash Crash
This week we had a great show: Simon Taylor and Sarah Kocianski sit down with our guests Editor in Chief of Computer Weekly, Bryan Glick, Business Development at Bud, Nina Mohanty, and 11:FS Pulse Analyst, James Safford to discuss all things fintech.
For our deep dive this week, we’re taking a closer look at what happened in Zimbabwe after EcoCash suffered a two-day crash; effectively stopping all payments for the nation.
Mobile money marked a significant change for Zimbabwe. Hyperinflation created a country with damaged cash reserves and startlingly small amounts of cash. Zimbabwe uses USD and ZAR to replace their own unstable currency. Cash reserves have depleted so greatly that cash payments are essentially a non-entity. Banks have been forbidden from giving out USD to customers even if the cash is sent to specific individuals from outside the country.
There isn’t enough liquid currency in the country...the only thing they can do is transact electronically - Sarah KocianskiZimbabwe lacks any real non-digital means to transact. The only option available to the people of Zimbabwe is use EcoCash to make and receive payments electronically. Problems in the sub-Saharan African country should make developed nations, especially Sweden, take notice. For two days the people of Zimbabwe were unable to make payments. Even if there’s a heightened tolerance for failure of services from years of hyperinflation (there’s no evidence to suggest that there is) it doesn’t bode well for other nations looking to move to being cashless.
We shouldn’t understate the impact the EcoCash crash has had on Zimbabwe. Shoppers were stranded in supermarkets and other shops for over two days. There’s also a real risk of money being lost from payments being suspended for so long.
Mobile technology is critical to the lifeblood of the [Zimbabwean] economy - Simon TaylorA two-day crash on the majority of payments should be a major concern, especially considering the recent spate of payment rail failures with Visa and MasterCard. Other options have to be available for a nation’s economy to remain viable. For Zimbabwe it shows that an over reliance on one private company’s ability to provide a service can have severe consequences for an entire country. Especially when the ‘glitch’ is due to a scheduled system upgrade; similar upgrades haven’t gone well across the financial sector on multiple occasions in recent memory. Market dominance has been a growing concern in finance for a long time now, Zimbabwe’s woes suggest that perhaps regulators should create and develop stringent regulations to ensure competition in Africa. EcoCash crashed most recently, but a similar incident could easily occur with other payment facilities with a significant market share on the continent, such as M-Pesa. With so many question marks around what's going on with the Zimbabwean economy, and indeed many developing economies across the African continent, this is definitely a space we'll be keeping a close eye on for the future. Don’t forget to subscribe to the Fintech Insider podcast here and comment below with any insights you’ve got to share; join the Fintech Insider News community here.