The ‘Zero Cost Payments’ approach

Date: 19 Aug 2013 Comments: 0

Given the level of inventiveness and the number of new products coming on-stream in the area of new payment technology, particularly in payments involving mobile phones, it may be tempting to think that the move away from cash towards electronic payments is inevitable. But the developing world faces different challenges and has different opportunities provided by the smaller installed base of legacy technologies and rapidly expanding mobile phone usage.

Some merchants, especially small enterprises in remote locations who may operate in a mobile environment or in open-air markets etc., do not have reliable electricity supply and telephone landlines with which to operate traditional Point of Sale (POS) terminals – and are unwilling to pay substantial fees charged upfront and ongoing.

Those who receive funds often get paid in cash, or even when they do get paid electronically, immediately go to the ATM or the mobile phone agent to change the funds into cash.

The recent move by one African country to charge 10% tax on all transfers of funds made via mobile phone is surely in the wrong direction, encouraging people to revert to sending cash as a cheaper alternative. But perhaps this could be adjusted so that any transfers which stay electronic attract no fees, while any conversion to cash does have a government fee?

Banks, card associations, new technology providers and mobile phone operators all expect to make profits from the transactions. And given the relatively low spending habits of the average citizens who are receiving government benefits or receiving transfers from family members, there is little incentive for them to contribute marketing funds for any part of the process.

RTpay is a not-for-profit group with considerable experience in payment processing, including the development of central clearing, payroll and money transfer software which can be provided at no cost to governments. The aim is to develop a payments system that enables those citizens who do not have bank accounts and/or the availability of commercial debit cards to have access to a payment capability from a Government Central Accounts System (GCAS). This account can be managed via a stored value card or via a mobile phone payments application or both.

A critical benefit of this system would be that it would be operated at no cost to either side of a payment transaction; there would be no transaction fees or charges for merchants or individuals, effectively making every electronic transaction simpler and more attractive than cash payments. Furthermore, incentive schemes would be designed to sit alongside the electronic payments to provide even more reasons for consumers and businesses to move away from cash and onto the zero cost payments (ZCP) card.

For more information on Zero Cost Payments, see www.zerocostpayments.org

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