It is now becoming clearer that Ecocash, a mobile banking solution which holds about 97% of the country’s mobile banking market share and which is owned by the country’s dominant telecom company Econet Wireless Ltd might have been the target of the recent ban by the Zimbabwean government on mobile banking. Police in the Southern African nation have accused Econet Wireless Ltd., of money laundering, demanding a list of its subscribers and issuing a search warrant against it.

“In accordance with the provisions of the National Payment Systems Act [Chapter 24:23] and the Banking (Money Transmission, Mobile Banking and Mobile Money Interoperability) Regulations, Statutory Instrument 80 of 2020 (the Regulations), the Reserve Bank of Zimbabwe (the Bank) wishes to advise the public that it has designated Zimswitch as a national payment switch with immediate effect,” RBZ governor John Mangudya, had earlier announced in a statement in July. 

“All mobile money transmission providers and mobile banking providers are hereby directed to be connected to Zimswitch as provided for by section 4 of the Regulations.”

Here Is What You Need To Know

• This is the latest of the clash between the government and Econet whose money transfer service, Ecocash, facilitates more than 97% of transactions in the southern African country. Zimbabwe government says the activities of the mobile banking service are contributing to the rapid depreciation of the national currency.
• In an order against the company, the police accused the company of creating fictitious mobile money, converting it to cash and then buying foreign currency on the black market before sending it out the country.
• On June 26 the country banned most of those transactions and has now said it plans to force Econet’s Ecocash unit to use a government-run money-transfer platform. While Econet competes with state-owned companies, its market share dwarves theirs.

Switch To A “National Mobile Banking Grid” Or Cease To Exist

According to governor John Mangudya, “To ensure seamless integration, all money transmission providers and mobile money providers must complete the necessary installation or deployment or commissioning of infrastructure and connection protocols, credentials and documentation for connection to Zimswitch by no later than 15 August 2020.”

Zimbabweans have been using social media to question if Zimswitch is not another scam meant to benefit the elite.

Read also: Uganda’s Fintech Startup Raises Over $1 Million Via Crowdfunding

A quick check on the Zimswitch website gave the following results:

Zimswitch is the National Electronic Funds Switch for ATM’s and POS of Zimbabwe that serves not only the financial institutions who are its members and users but also provides an essential service to their customers; the Zimbabwean public. Zimswitch is also the oldest and most successful national switch in Africa outside of South Africa.

• Zimswitch was formed upon the signing of a partnership agreement of 8 local financial institutions dated 7 March 1994, to facilitate the shared use of automated teller machines (ATM’s) and point of sale (POS) facilities throughout Zimbabwe.
  • On the 31 March 2001 Zimswitch converted to a private company, incorporated in Zimbabwe. A newly formed company, Zveringa Systems (Private) Limited, was purchased for this purpose. This conversion to a company was undertaken both to enable faster decision making and to allow for the introduction of a business partner.
  • In February 2002, after an extensive evaluation, the partners awarded the business to Fintech — the technology arm of the Loita group at the time, represented in Zimbabwe by the Loita Company, EFTCorp. The In 2002 the replacement of the existing proprietary technology with the new version of an EFT solutions platform called Postilion was undertaken. This platform enables growth and development of the business as required to meet the new challenges. EFT Corp also provides the necessary consultancy, services and ongoing support to Zimswitch in respect of the EFT software. Zimswitch is 100% operated by LXS and majority owned.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.