The cash crunch, which became progressively worse in January, has resulted in unimaginable pain for the informal sector whose lifeblood is cash transactions. But for big retailers such as OK Zimbabwe, Spar, Choppies and TM/Pick n Pay Supermarket, they have the infrastructure and capacity to process plastic money transactions through Zimswitch, VISA and Mastercard enabled point of sale (POS) devices and therefore the convenient flight to plastic money has been very rewarding to them.

There is also an added carrot through the cash-back facility, where consumers are given an option to redeem a portion of the cash balances sitting in their debit cards, that is if they have bought some groceries.

Though the market has caught onto plastic money and bank transfers as alternatives to cash — with such transactions jumping from US$4, 8 billion to US$5, 5 billion between May and July 2016 — people still require money in their pockets for miscellaneous transactions. It has become an irresistible draw card, especially in an environment where withdrawing cash from the bank has become a punishing undertaking. Big retailers are now squeezing out the informal businesses, the majority of which are teetering on the brink.

The informal businesses traditionally leverage on heavily discounted prices, which is made possible by virtually non-existent costs for rentals, wages and statutory obligations, but the dynamics have since changed. With neither the wherewithal nor the capacity to have POS devices, informal businesses have another handicap.

They haven’t embraced mobile commerce (m-commerce) as yet since they also restock their goods using cash. As a result, big retailers are the ones capitalising on mobile payment platforms such as EcoCash, Telecash and OneWallet.

SOURCE: The Sunday Mail