E-payment instruments and welfare: The case of Zimbabwe
Abstract
The literature shows that electronic payments are key to improving financial inclusion and
achieving global development goals such as the United Nation’s (UNs) Sustainable
Development Goals. The benefits are premised on the welfare-enhancing effects of digital
payments, which reduce costs, the probability of loss and risk for low-income consumers,
as well as improve access to formal financial services. This study thus investigates the
conditions under which these welfare-enhancing gains can be obtained. It considers the
conditions under which e-payments can be welfare enhancing by using qualitative data
from Zimbabwe. The severe liquidity constraints in Zimbabwe provide a good case for
evaluating how well e-payments work, as the relative absence of cash has made the use
of mobile money inevitable. Focus group data are analysed to understand participants’
everyday experiences with the e-payment system in Zimbabwe. The results indicate that
the key challenges with payment systems faced by households include high costs,
malfunctions of the system at the point of sale, lengthy refund processes and limited
acceptance. Participants indicate a strong preference for foreign exchange cash as a mode
of payment. High levels of concentration in the mobile money market, lack of transparency
by financial service providers and a strong preference for cash by retailers are the main
drivers of system failure. Therefore, this study identifies the need for the government to
address the lack of competition in the market, as well as address macroeconomic liquidity
constraints.
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- TD: 2021 Volume 17 [42]