Africa’s second largest copper producer Zambia has seen rapid financial transformation in its payment system with mobile money exceeding 1 billion in the year 2022. This is according to retail payment statistics released by the central bank. The report reveals that retail payments rose 49.4% to K591 billion in the year 2022 with 50% of the volumes supported by mobile money transactions accounting for K295.8 billion while Electronic Funds Transfer (ETF) ranked second at K115.2 billion (20%), Point of Sale (POS) in third place at K111.5 billion (19%), Automated Teller Machines (ATM) housed K59.4 billion (10%) while cheque payments were the least utilized at K8.5 billion (1.4%).
Of these payment themes POS was the fastest in growth velocity at 81.4% while MOMO rallied 74.7% and EFT rose 16.7%. Cheque appetite as a mode of payment continues to dwindle with FY22 revealing a 2.9% decline.
Overall transactions in the retail payments space soared 81.4% to 1.68 billion supported by 1.58 billion (90%) attributed to mobile money while point of sale generated 61,532 (34.9%) and automated teller machines 33,013 (-10.3%). Electronic funds transfers and cheque payments were the least transacted at 9.4 million (9.7%) and 1.25 million (2.7%) respectively.
HIGHER PAYMENT UPTAKE FOR E- COMMERCE
Total average transaction size ebbed 18% to K350 as a result of 7.9% decline on MOMO size to K187, 6.3% increase in ETF to K12,255, 34.5% growth in POS to K1,812, 16.3% rise in ATM to K1,800 and a 5.55% slide in cheque amount to K6,771. The trend shows a faster adoption of payment themes for electronic commerce purpose. Many Zambian retailers have adopted mobile money and electronic points of sale for payments to ease transactability which are overshadowing the traditional cheque. This assertion continues to support the explosion in MOMO transactions through various sub themes such as push and pulls, bank to wallet and vanilla MOMO.
THE DECADE OF FINANCIAL TRANSFORMATION
The year 2022 marks the first year that payments systems, as a whole, exceeded 1 billion transactions, showing signs of mass adoption into mainstream payment systems. This was driven by mobile money becoming the first ever Zambian payment system to surpass 1 billion transactions.
The year also saw MOMO become the first majority payment system holding over 50% of transaction value (50.1%) since cheques held that position last in 2011 with 53% but now less than 2%.
Zambia has moved from an 83.6% paper based transaction nation in 2010 to and 88.5% paper-less transaction nation in 2022. This is one of the most rapid changes that one can witness in Zambian society.
In addition, we also saw cardholders switch over the past three years from majority withdrawal value to now majority POS transaction value.
This signals that vendors and businesses that lack MOMO or POS Infrastructure will struggle to serve the customer who has gotten used to MOMO transactions and swiping.
UPTICK IN EFT SIGNALS ECONOMIC RECOVERY
The uptick in EFT is attributed to a market claw back in risk appetite as businesses sought to reclaim pandemic dented growth. This was supported by positive ‘sentiment-induced’ currency appreciation that allowed for imports and general transactability across the banking sector. Remittances from diasporians versus outflows were another key driver. Zambians in the diaspora tend to remit funds back home in periods of Kwacha depreciation while locals tend to import more in periods of Kwacha appreciation.
MOMO SUPPORTS BANK FEE EARNINGS FY22
Mobile money architecture continues to leverage off population growth and it is for this reason the lucrative partnership between mobile network operators and banks has thrived. This explosion does in part explain the 11.49% growth in banking fees and charges to K3.3 billion through integrations that generate fees through pushing and pulling in digital channels.
While the payment channels continue to take a positive cue from digital transformation and are accelerating financial inclusion, the cyber fraud risk landscape has continued to widen. The need to protect the payment system remains a requirement that can not be overemphasized.
The Kwacha Arbitrageur