When one strolls down the streets of our cities and towns, one would see people queuing at our banks to withdraw cash for them to be able to buy groceries and pay for utilities. In supermarkets, a few people are seen holding on to cash to purchase goods and a few are seen requesting cash back after a purchase. There seems to be a change as far as holding on to cash is concerned. Certain sections of the populace will tell you that they last visited a bank to withdraw or deposit cash some months ago. But at the same time, there is also a certain proportion of the populace who still want to hold on to cash and who constantly visit the bank.
This article seeks to answer the question, whether it is still that important to hold on to cash.
In developed countries, the demand to hold cash is very low, but in Zimbabwe, the appetite for cash is high which can be attributed to several factors. The world is changing so fast in terms of financial innovation and technological advancement and adjusting to these changes and embracing the use of plastic money will certainly result in ease of transacting and bring convenience to the public.
Of concern now is the fact that there are sections of the populace who still prefer to physically carry cash to conduct their day-to-day transactions such as buying groceries, pay rentals, deposit, and withdraw cash, and as such one would see queues at some of our banks. Long back during the barter trade era, one would travel long distances to go and exchange his/her goat for a bag of maize. Then, it could be accepted because there was no other alternative rather than to be physically there to conduct the transaction.
However, in modern times, things are changing so fast, and being able to move in line with the changing global trends will go a long way in improving the quality of lives of ordinary citizens, and the recent global COVID-19 pandemic has taught us that we need to change the way things are done and embrace the digital way of doing things. This then drives me to the topic of this article, which seeks to unbundle the benefits of using plastic money.
Plastic money is a generic term used for all types of bank cards or any form of electronic payment which includes debit cards, credit cards, in-store cards, mobile and internet banking.
Plastic money can be used in the following forms:
1. Debit cards- these can be used for online electronic payments of purchases by the cardholder. The source of funds will be from either a savings or current account and the card can also be used at POS terminals.
2. Credit cards- This is a plastic card given to a cardholder, with a credit limit that can be used to buy goods and services on credit or using cash advances. The difference between a debit and credit card is that credit cards also provide an overdraft facility and customers can purchase over and above the amount available in the account.
3. Mobile Banking- this is a service provided by a bank and allows a customer to transact remotely using a mobile device or tablet usually on a 24/7 basis.
4. Internet Banking- Also known as online banking is an electronic payment system that allows bank customers to conduct a range of financial transactions through the website of the bank.
The use of plastic money brings with it several benefits to the transacting public namely but not limited to:
1. Eliminates the need for carrying huge sums of money which poses a high risk of theft.
2. The transacting public is saved from the inconvenience of starting to go to the bank to queue for cash and then proceed to queue again to buy groceries or pay bills.
3. Anytime and anywhere access gives the customer the advantage of using it anywhere in the country.
4. In this era of the COVID-19 pandemic, it reduces the chances of contracting the deadly virus which is easily transmitted through gatherings and crowding.
The drive for the usage of plastic money driven by the opening of new bank accounts, the population of infrastructure such as Point of sale machines (POS), enhances financial inclusion and results in improved welfare and ease of transacting for the general populace. The RBZ (2013) stipulated that financial Institutions should promote the use of plastic money through the introduction of more point-of-sale devices, sharing of service delivery infrastructure as well as increasing the interoperability of systems for ease of transacting by the public, which banks have effectively done.
On the other hand, there are concerns from the public when it comes to the cost and hurdles associated with bank accounts. It is worth noting to point the fact that the banking sector has in the past tried to loosen this burden, though not comprising the Know-Your-Customer (KYC) requirements, by offering basic or "no-frills" bank accounts aimed at incorporating low-income customers and enhancing financial inclusion which will result in the use of plastic money.
The use of plastic money is the right step towards enhancing financial inclusion as well as the inconveniences of not being able to transact electronically. Several benefits accrue to the transacting public by using plastic money which are but not limited to risk reduction, safety, and convenience as well as anytime anywhere access.
Author: Tillas Gopoza is an Economist. He writes in his capacity as the Chief Economist for the Bankers Association of Zimbabwe. He can be contacted at tillas@baz.org.zw