Mapping the Retail Payment Services Landscape in Zambia

A recent study Mapping the Retail Payment Services Landscape in Zambia managed by Cenfri commissioned by FinMark Trust and conducted by Bankable Frontiers Associates finds:

  • Despite a push by the government for financial inclusion few banks seem to be interested in the low-income market
  • There is still much room for profitability at the high end-segments of the market and only increased competitive pressure or a development or social mandate would drive substantial incursions by banks into middle-low and low-income levels.
  • Banks are reluctant to share their retail payment infrastructure and the Bank of Zambia is pushing for the creation of a local switch.
  • Nonbanks such as mobile money providers are reluctant to increase interoperability of their services
  • Banks tends to be overly conservative in their requirements for account opening, despite a relatively flexible anti-money laundering regulatory regime
  • Urban residents and individuals with regular consistent incomes have access to a greater array of payment options than rural Zambians and those working in informal employment.
  • There exists a demand for payment services that take less time to use and are more reliable than the options available today
  • Basic infrastructure in many parts of the country is an obstacle for the full development of electronic retail payments to support financial inclusion.

Please click here to download the full report (PDF, 2.59MB) 

The study analysed the country context, demand, supply and regulatory framework for payment services in order to conclude on the scope for retail payment services to play a transformative financial inclusion role and the market and regulatory challenges to be overcome for that potential to be realised.

 

The report is part of a series of studies that also covers Malawi, Mozambique and Zimbabwe. In addition to the individual country report, the findings feed into a regional synthesis report that identifies cross-cutting trends, provides a brief global comparison, and concludes on implications for regional financial integration.

 

Recommendations and conclusion

 

Zambia has made remarkable progress towards modernization of its national payment system but there is a long way to go until most of the population can benefit from convenient, accessible and affordable electronic payments. However, efforts to improve the policy framework for payment system development should be prioritized to (i) take advantage of existing market activity and (ii) provide essential regulatory clarity for future development of innovative market solutions by:

  • Issuing e-money regulations to set minimum standards for existing businesses and provide certainty for new entrants.
  • Creating enabling rules for banks to use agents for the delivery of their services in a cost-effective matter, to expand their footprint outside urban areas and to increase convenience in places where they currently have physical presence.
  • Creating effective risk-based supervision practices to support a dynamic and healthy market.
  • Improving penalization of fraud in electronic transactions for greater consumer confidence for long-term sustainability.
 

Mapping the Retail Payment Services Landscape in Zambia

A recent study Mapping the Retail Payment Services Landscape in Zambia managed by Cenfri commissioned by FinMark Trust and conducted by Bankable Frontiers Associates finds:

  • Despite a push by the government for financial inclusion few banks seem to be interested in the low-income market
  • There is still much room for profitability at the high end-segments of the market and only increased competitive pressure or a development or social mandate would drive substantial incursions by banks into middle-low and low-income levels.
  • Banks are reluctant to share their retail payment infrastructure and the Bank of Zambia is pushing for the creation of a local switch.
  • Nonbanks such as mobile money providers are reluctant to increase interoperability of their services
  • Banks tends to be overly conservative in their requirements for account opening, despite a relatively flexible anti-money laundering regulatory regime
  • Urban residents and individuals with regular consistent incomes have access to a greater array of payment options than rural Zambians and those working in informal employment.
  • There exists a demand for payment services that take less time to use and are more reliable than the options available today
  • Basic infrastructure in many parts of the country is an obstacle for the full development of electronic retail payments to support financial inclusion.

Please click here to download the full report (PDF, 2.59MB) 

The study analysed the country context, demand, supply and regulatory framework for payment services in order to conclude on the scope for retail payment services to play a transformative financial inclusion role and the market and regulatory challenges to be overcome for that potential to be realised.

 

The report is part of a series of studies that also covers Malawi, Mozambique and Zimbabwe. In addition to the individual country report, the findings feed into a regional synthesis report that identifies cross-cutting trends, provides a brief global comparison, and concludes on implications for regional financial integration.

 

Recommendations and conclusion

 

Zambia has made remarkable progress towards modernization of its national payment system but there is a long way to go until most of the population can benefit from convenient, accessible and affordable electronic payments. However, efforts to improve the policy framework for payment system development should be prioritized to (i) take advantage of existing market activity and (ii) provide essential regulatory clarity for future development of innovative market solutions by:

  • Issuing e-money regulations to set minimum standards for existing businesses and provide certainty for new entrants.
  • Creating enabling rules for banks to use agents for the delivery of their services in a cost-effective matter, to expand their footprint outside urban areas and to increase convenience in places where they currently have physical presence.
  • Creating effective risk-based supervision practices to support a dynamic and healthy market.
  • Improving penalization of fraud in electronic transactions for greater consumer confidence for long-term sustainability.