National payments system in mixed fortunes—RBM

National payments system in mixed fortunes—RBM

The Reserve Bank of Malawi (RBM) says the national payments system recorded mixed fortunes in second half of 2023 with the total volume of transactions slightly dropping while the value surged to K71.9 billion.

In its Financial Stability Report, the RBM says that there was a considerable increase in industry’s use of electronic funds transfers (EFTs), a development which analysts attribute to the recent introduction of real-time payments for interbank transfers.

Reads the report in part: “Total volumes of transactions processed in the Mitass [Malawi Inter-bank Transfers and Settlement System) slightly declined by 0.8 percent to 3.72 million during the period.

“Despite the drop in volume of transactions, the corresponding value of transactions surged by 10.8 percent to K71.9 trillion during the same period.”

The report added that while large value interbank transactions dominated in terms of value, accounting for 93.3 percent of the total value of transactions, the industry has seen the dominance of EFTs over cheques, suggesting a substitution effect as more people migrate to quicker and safer means of payments.

Commenting on the report, information and communications technology expert Bram Fudzulani said this entails that the majority of payment transactions are processed and settled in real-time, thereby mitigating the settlement risk associated with deferred settlement arrangements.

He said: “The increase on the EFT could be attributed to the recent introduction of real-time payments for interbank transfers.

“You will recall previously this was not the case and it discouraged a lot of businesses, but now with the introduction of real-time payments, consumers have gained trust on the electronic payment system which adds value to their day to day life and business activities.”

Fudzulani said this means the economy is slowly shifting away from a cash-based economy.

“Cash is essentially untraceable, it’s a useful tool for criminals and corruption while digital currency is less easy to exploit and can be easily traced back to its source,” he said.

ICT Association of Malawi secretary general Kondwani Kamwendo said the expansion of EFTs reflects progress towards a more modern, efficient and resilient financial infrastructure, which can ultimately benefit the economy.

He said: “As economies increasingly digitise, EFTs play a crucial role in facilitating transactions within the digital ecosystem.

“They enable online purchases, electronic bill payments and other digital financial activities, supporting the growth of the digital economy.”

Kamwendo said  EFTs generally incur lower transaction costs compared to traditional payment methods such as cheques.

Meanwhile, the RBM has highlighted risks that the payment sector is still exposed to, including operational threats caused by network unavailability and power outages, cyber security and fraud perils, especially to retail digital financial services as well as contagion risks due to existing interconnectedness.

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