Rwanda’s journey to cashless economy: Where are we three years to deadline?

Following Rwanda’s Vision 2020 and the Smart Rwanda Master Plan, Rwanda envisions becoming a cashless economy by 2020; with all government financial transactions done electronically and via mobile phones by 2018. Like any other economy that is well aware of the benefits that underlie a cashless economy, Government has for the past decade invested a lot to ensure that Rwanda’s vision of a cashless economy becomes a reality. Such investments include but not limited to infrastructure; such as the Rwanda Integrated Payments Processing System (RIPPS) that was put in place to reduce time lags in payments and mitigate systemic risk in the financial system. Today, a payment order that took three days to be paid is done in a day and for banks, it takes only two hours. Investment has also been done in fibre optic network, high speed broad band services (4G LTE) across the country, acceptance of electronic payments where government entities use electronic payment transactions like; declaration and payment of taxes and duties, electronic payment of water and electricity, payment of government services through Irembo as well as cost-effective and affordable infrastructure to broaden the payment network - enabling customers to pay from anywhere -to anyone, including incentive schemes to encourage payment service providers to deploy more digital payment solutions in the market. With regards to the regulatory framework, a conducive legal and regulatory framework has been put in place to guide the provision of electronic payment services. These and many others not mentioned here, have so far yielded impressive results as evidenced by the products and services currently offered in the market by financial service providers. As a result, progress has been recorded in different payment systems such as; ATMs have increased from 84 machines in 2010 to 4,004 machines as of December 2016. PoS’ increased from 99 terminals in 2010 to 1,885 terminals by December 2016; 1,448 and 59,952 bank and mobile money agents respectively were recorded by December 2016. Debit cards increased from 41,377 to 746,458 whereas credit cards increased from 172 to 3,668 as of December 2016. With the introduction of mobile financial services in 2009, several mobile banking products came into play, providing different services such as cash-in, cash-out from an account, cash-out at an ATM, person-to-person payment (P2P), business to person (B2P) payment, payment to merchant, bill payment, airtime top-up, taxes payment; cross border mobile transfers/ remittances and payment of water bills, fuel purchase at petrol stations, school fees and saving schemes. These led to an increase in the number of mobile money accounts from 639,673 in 2011 to 9,735,694 by December 2016 and the number of mobile banking subscribers increasing from 248,689 in June 2011 to 980,671 by December 2016. Currently, seven banks offer internet-based tax payment services and this has led to the number of subscribers increasing from 6,237 in June 2011 to 43,047 as of December 2016. Despite Government’s efforts to enable a cashless economy of which achievements have been highly noted, and with only three years left to 2020, Rwanda is still at the nascent stage with regards to cashless. Currently, retail electronic transactions account for less than 20% of GDP and according to the Finscope survey 2016, 89% adults prefer cash transactions due to its tangibility, acceptability, and perceived security while 74% would rather deal with people than machines even if machines are quicker. Yet, the payment system vision and strategic framework intends to guide the transformation of Rwanda into a cashless economy with e-payments accounting for 70 per cent of GDP. Non-cash payments’ share and total value of consumer, and population with a debit card of countries that are dubbed closest to cashless societies such as; Belgium account for 93% and 86%, France accounts for 92% and 69%, Canada accounts for 90% and 88%, United Kingdom accounts for 89% and 88%, Sweden for 89% and 96%, Australia for 86% and 79% while Netherlands accounts for 85% and 98% respectively. When you compare this with Rwanda’s case a lot has to be done to have a cashless Rwanda by 2020. Well, one would argue that we shouldn’t be comparing Rwanda with such developed countries but in my opinion if we want to get there, then we should think big- compare ourselves to such countries and in any case borrow a leaf from what they did to get there because such countries are testament to the fact that a true cashless economy is indeed possible. It is all about identifying the barriers and eliminating them and once this is done, any country can rapidly switch to cashless payment methods. When we look at our situation today, infrastructure is in place and we have a lot of innovative digital payment solutions in the market. But how many of us know they even exist? Just recently (after some education of course), I started using the pull –push, online and mobile payment services and realised how efficient and convenient these services were. Since then I have forgotten about lining up at banking halls just because of the convenience that underlies using these services. But as I use the service, I ask myself how many more people have been told about the convenience in this? In any case if we all knew about it, then no one would waste their time lining up at banking halls to withdraw cash then go to the next payment destination- total wastage of time! However this points to the biggest barrier which is lack of product knowledge as opposed to the new innovative digital financial services that are introduced in the market each and every other day. We still have very low levels of financial literacy and as the Rwanda Bankers Association Chairman Maurice Toroitich rightly puts it, until we break the knowledge and user trust barrier with the user (consumer and seller), the journey will remain tough. Better still, despite the good progress in terms of touch points, the number of POS is still low. One enters a supermarket or even a retail shop, or gas station and requests to pay using a card or through mobile only to be told we do not have those services or unless you add the withdraw charge (amafaranga y’okubikuza) you will have to pay by cash. This illustrates the magnitude of work that remains to achieve a cash-less economy by 2020, calling for much more efforts in reinforcing the enabling framework. For instance facilitating effective Interoperability of payment channels, which require having a common switch that connects all financial services providers’ i.e banks, telecos, MFIs, SACCOs, etc. This will for example enable me to easily send money from my MTN wallet to someone with an Airtel or Tigo wallet. It will also enable me to easily move money from my bank account to a SACCO account and vice-verse. There is also need to mandate that all People to Government (P2G) & Government to People (G2P) payments are done through a digital channel. Making a P2G payment digitally should not cost a customer more than making the payment via cash. Incentivise merchants at all levels to receive digital payments and support innovation in product development delivery of financial services and then undertaking initiatives which promote uptake and use of digital financial services such as financial literacy and financial education programmes which will provide an opportunity to enhance and cultivate the uptake of digital financial services. The so called closest to cashless economies like Belgium, Canada and the like have implemented things like giving high priority to making payment systems more efficient with modern infrastructure and latest technologies, imposed a limit on cash payments, revolutionary payment propositions such as availing mobile apps for IOS and Android users that allow users to set up digital payment wallets, contactless cards, like on toll roads and transport. France for example has actively focused on payments innovation, bringing to the market new solutions such as mobile payments, contactless cards, and m-POS to meet the diverse payment needs of consumers. Products like PayPass and emerging solutions for transit payments using smartphone applications were put in place. Swedish governments have strived to make electronic payments available, affordable and ubiquitous. These initiatives are not far from what our Government is currently doing. However the biggest barrier lies in educating the public on the benefits of going cashless as well as the benefits of using the products and services in the market. Government institutions, banks and some private companies are already in the right frame of mind to transform from a cash based system to a digital system but the uptake by consumers and providers of most of these commercial services is still low. Therefore, to have a sustainable cashless Rwanda, financial service providers and policy stakeholders must take more proactive actions to cause a behaviour change in the minds of consumers and especially the providers of commercial services to appreciate the longer term benefits of a digital rather than short term benefits of a cash-based economy. This, I believe, should be the next investment in this cashless journey. The author is Corporate Communications Expert National Bank of Rwanda

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Rwanda’s journey to cashless economy: Where are we three years to deadline?