Dynamic Research Journals (DRJ)

Journal of Economics and Finance (DRJ-JEF)

Volume 2 ~ Issue 4 (April, 2017) pp: 01-10
ISSN (Online); 2520-7490
www.dynamicresearchjournals.org

Cashless Transacting Economy: A Necessary Evil for

Development! A Zimbabwean Scenario!
1
Thabani Nyoni and 2Wellington G. Bonga
1
nyonithabani35@gmail.com, 2sirwellas@gmail.com

Abstract: The need to make and receive payments lies at the heart of every business. It could be a customer
purchasing goods or services or a company making payments to its suppliers or a bank account holder
transacting with his or her bank. The emergence of advanced information technologies has brought economic
agents closer; the world has just turned into a global business village. Apparently, Zimbabwes transition to a
cashless society is an opportunity rather than a challenge; though it has been brought up by the works of the
invisible hand to counter the cash crisis bedeviling the economy. This study mainly uncovers the implications of
a cashless economy to Zimbabwe. The study made some policy recommendations that are envisaged to improve
the operation of the cashless economy in Zimbabwe. Through financial literacv enhancement to sectors lagging
behind and the general populace, the economy can be financially advanced and business transactions
smoothened through increased usage of electronic payment systems. The study has also called for advanced
audit techniques to be applied in monitoring electronic transactions and avoid possible fraud. Promoting a
cashless economy and reaping full benefits, requires financial discipline from the Reserve Bank and other
financial institutions where money creation is linked to reserves and productivity levels.
Keywords Banks, Bank Charges, Cash Crisis, Cashless Economy, Cashless Society, Electronic Cash,
Financial innovation, Financial literacy, Plastic money, Zimbabwe
JEL Codes: E41, E42, E51, E52, E58, F36, F38, G01, G21, G33, 033, M15.

I. INTRODUCTION
Imagine a depositor, whom we can denote as Newyear. This depositor is an economic agent in
Zimbabwe. Newyear banks with a certain commercial bank in Zimbabwe, arbitrarily denoted Christmas Bank.
Newyear goes to the bank to make some withdrawals, only to find a lot of other depositors who want to make
withdrawals already in a very long queue. On this particular day Newyear fails to withdraw money because the
queue is so long that the bank is closed before withdrawing. The maximum withdrawal limit, at this bank, just
like in other banks, is $20 USD per day. Now, Newyear, works at a certain organisation in Zimbabwe,
December Pvt Ltd. Newyear is supposed to be at work the following day and yet has no money for transport.
Newyear is not even able to use a debit card to withdraw money via the ATM because all ATMs are either not
working or have no money at all. At the same time, Newyear cannot pay transport costs using debit card
precisely because transport operators do not accept the facility. Nonetheless, Newyear, goes back again at
Christmas Bank, this time around at 3:00 am! Newyear becomes the 699th depositor to arrive. This time around,
money is finished at Christmas Bank before Newyears turn comes to withdraw the $20. Now, Newyear is no
longer patient with this banks services. Newyear is confused and dissatisfied with the banks services.
However, the situation is almost the same with all banks, hence shifting will not bring in any benefit. The
employer, December Pvt Ltd, is complaining and mounting pressure about Newyears absenteeism at work. The
employer is actually threatening to terminate the employment contract!
The scenario described above closely resembles the current situation in Zimbabwe. Queues at banks
have become a common feature. Either there is a long queue or else there is no money in the bank. There is
missing money in the economy. Paper money demand is far greater than what banks have to supply. To control
and monitor paper money demand, withdrawal limits have been set. Maximum withdrawal limits for most banks
are as low as $20 per day. It is now a rare feature to find an ATM that has money, especially after hours, when
they were of greater help to meet unexpected demand. In most of the cases, its either the ATM is no longer
being used or there is no money at all. Most of the depositors, just like our good friend, Newyear, and other
economic agents continue to be frustrated by this cash crisis. There is need for responsible authorities to take
action before the situation deteriorates further.
While it is indisputable that Zimbabwe has been a cash-based economy for quite some time, it is
important to realize that with dynamic financial innovations, the economy of Zimbabwe, just like any other
economy elsewhere, cannot afford to turn a blind eye on the need to adopt and fully operationalize the cashless

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 Cashless Transacting Economy: A Necessary Evil for Development! A Zimbabwean Scenario!

economy. Today many people view the movement of Zimbabwe from a cash-based economy to a cashless
economy, as a challenge; a complicated one. Contrary to this myopic view, we strongly believe that the cashless
economy paradigm is actually an opportunity for us strengthen our financial sector which is, unfortunately, well
known for its fragility, ailments and poor performance.
Meanwhile, the emergence of advanced information technologies has facilitated cutting-edge
innovation in electronic payments where commodities are now traded without the use of physical cash.
Globally, there is a tremendous interest among economists and policy makers, to explore the possibilities of
moving towards a cashless economy. It is widely acknowledged that the movement from cash to cashless
economy cannot be ignored or looked down upon because it is now a reality. According to the World Payments
Report (2015), global non-cash transactions reached 358 million United States dollars in 2013, an increase of
7.6% over 2012.

II. CHARACTERISING THE CASHLESS ECONOMY

Woodford (2003) defines a cashless economy as one in which there are assumed to be no transactions
frictions that can be reduced through the use of money balances, and that accordingly provide a reason for
holding such balances even when they earn a rate of return. According to Ikeji (2011), a cashless economy is
operationally defined as a payment system where large chucks of financial transactions are carried out with little
or no cash; the parties involved prefer electronic payment systems such as bank cheques, wire transfers, direct
debits and credit cards, online transactions, mobile banking system etc.
Enabling cashless economy only requires financial literacy enhancement to the populace and business
especially SMEs and remote business. Financial literacy is generally low in many developing nations such as
Zimbabwe. Worth to note, is that on average financial literacy levels of men are far greater than that of women
(Bonga and Mlambo, 2016). Gender gap in financial literacy levels is found in both advanced economies and
emerging economies. However, there is greater possibility of lifting literacy levels to significant levels.
Financial sector develops when there are increased number of participants who are taking products and ensuring
more and better are developed (Bonga and Mlambo, 2016).
A cashless economy or an e-payment system, as defined by Salihu et al (2013), is a situation where
there is little or very low cash flow in a given society, thus every other purchases and transactions will be made
by electronic channels, examples of which are direct debit, electronic funds transfer, mobile payments,
multifunctional ATMs, internet banking and a significant increase in point of sale (POS) penetration and usage.
According to Adu (2016), a cashless economy is an environment in which money is spent without being
physically carried from one place to another. Patil & Mishra (2017) describe a cashless society as an economic
state where financial transactions are not conducted with money in the form of physical bank notes or coins, but
rather through the transfer of digital information (usually an electronic representation of money) between the
transacting parties.
In this study, however, a cash economy or society is defined as one where, most of the time, cash is
used to do purchases and transactions while a cashless economy or society is one where, most of the time,
purchases and transactions are done by either electronic transfers or the cheque system. The main feature of a
cashless society is the existence of a cashless system which is the ability to store money in an electronic purse
on a card and is fast becoming standard practice throughout the world, with developed countries on the
forefront. Developing countries such as Zimbabwe are beginning to adopt the cashless system, to make it the
main way of doing transactions. The development in Zimbabwe is driven by the cash crisis and not necessarily
pushed by politics. It is the work of the invisible hand and nobody can claim it. However, the rigid parts of the
economy have to be baptized to join other sectors on the electronic operations. In a cashless society, there are
very little cash-based transactions, most of the transactions are done electronically via plastic and or wired
money.

Financial Technology Advancement

Less Advanced Economies More Advanced Economies

Cash Economy Cashless Economy

Source: Authors Design

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 Cashless Transacting Economy: A Necessary Evil for Development! A Zimbabwean Scenario!

The above graph shows, the path from a cash economy to a cashless economy. Developed countries are
characterized by the use of plastic money in many of their business transanctions, while developing countries
use cash in most of their business transactions. Financial literacy advancement refers to the movement from cash
economy to cashless economy. Developing countries, like Zimbabwe are encouraged to advance themselves and
avoid excessive reliance on hard cash in business transactions. This can be attained through financial awareness
programs to business and the populace.
A cashless economy or society does not mean that there is no money in the economy. It does not refer
to the outright absence of hard cash. No. The term cashless society does not imply the complete non- existence
of cash transactions in the economic setting. What it means is that the amount of cash-based transactions is
significantly reduced to the bearable minimum.
In a cashless society there are many gadgets with applications that can facilitate financial transactions
without physically handling cash. In fact, in a typical cashless society, financial institutions such as banks,
handle lots of cash and therefore sensitize their clients or customers and ensure that most transactions are
handled through wire via use of computer technologies, the so-called electronic cash. The functioning of the
cashless economy is enhanced by e-finance, e-money, e-brokering, and e-exchanges.
In a cashless economy the central bank will stop printing and supplying notes and coins for the public
because there will be no need for loads of notes and coins in an economy where most transactions are done
electronically. It is important to note that the increased usage of cashless payment instruments strengthens
monetary policy effectiveness especially in terms of controlling the amount of money in circulation in the
economy, thus facilitating a smooth control over inflationary pressures. The current level of e-money usage in
Zimbabwe is not yet posing any threats to the financial stability of the Zimbabwean financial sector. It is rather
envisaged to stimulate economic growth by stabilizing the financial sector through facilitating a smooth flow of
business transactions.
However, the central bank may continue to operate like other banks, issuing its own deposits that could
be used as money in the same way as other bank deposits. In this case the central bank has no monopoly in the
issuance of money but it does not necessarily mean that the central bank effectively loses control over the
monetary policy. Nonetheless, it is important to note that this is one of the reasons why most governments in
developing countries are reluctant to fully embrace the cashless policy. They want to retain full monopoly over
the issuance of money, probably for political reasons.
In a typical cashless economy, all the money is either private money issued by banks in the form of
deposits or some electronic cash issued by financial institutions that may not necessarily be banks. When the
central bank stops printing money, it loses seigniorage revenue. In a truly cashless economy, the central bank
will have lost the largest part of its seigniorage revenue because it would have lost its highly celebrated
monopoly position in the creation of cash and settlement balances (those bank deposits held by the central bank,
to be used for the settlement of payments). Boeschoten & Hebbink (1996) already emphasized on the fact that
the effect of this loss on central bank balance sheets is likely to be large, depending upon the capacity of e-
money to substitute for traditional money. According to these authors, seigniorage revenues largely exceed
central bank operating expenses, being an important source of profit for central banks.
Money has basically four functions, that is: as a medium of exchange, as a store of value, as a standard
for deferred payments and as a unit of account. However, in a cashless economy, paper money or hard cash
automatically becomes functionally scarce because its functions would be reduced significantly, to just a mere
unit of account (for example, one Zimbabwe Dollar, one Zimbabwe Bond Note, one United States Dollar and so
on), but the existence of hard cash, in the actual sense, is not reduced to nothing. It is reduced only significantly.
In a cashless economy, the unit of account remains a national affair and is provided by the state. Therefore,
banks in the same country normally issue deposits, or other means of payments, in the same national unit of
account. In this regard, the state will normally exert some prudential supervision over the institutions that issue
money. This actually implies that the other three functions of money are characteristically compromised in a
cashless society.
Furthermore, the cashless society is characterised with more or advanced developments in the
telecommunication and information technology infrastructure, which paves way for various technologically
advanced financial innovations such as Automated Tell Machines (ATMs), Electronic Funds Transfers (EFTs),
credit and debit cards, mobile money, telebanking, home banking, online or internet banking and payment
systems, electronic cheques, E- cash and other digital banking and payment systems.

III. OVERVIEW OF THE CASHLESS ECONOMY IN ZIMBABWE

The Zimbabwean cashless system of payment is now showing some tangible signs of feasibility,
although it is still lagging behind the standard global payment evolution. The cashless system of payment is
another term used to describe a cashless economy or society, and is operationally defined in the Reversion
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Dictionary, as a society where transactions are functioning and operated or performed without using coins or
bank notes for money transactions but instead using credit cards or electronic transfer of funds. Zimbabwes
quest for moving from cash to cashless economy is actually a positive development, worth commenting.
Although we currently do not expect Zimbabwe to be one of the leading world economies in the
cashless revolution, efforts ought to be made to embrace the electronic payment system in its entirety. It is in
this consciousness that the Reserve Bank of Zimbabwe (RBZ), being the apex regulatory authority in the
financial sector of Zimbabwe, is expected to play a pivotal role in facilitating a smooth transition from a cash-
based economy to a cashless economy. The move to adopt a cashless economy in Zimbabwe is not only justified
but also necessitated by the need to address the current cash crisis, as well as other various constraints associated
with physical cash movement such as theft, ineffectiveness and inefficiency and other ancillary costs of
handling hard cash. The policy thrust of adopting and embracing the cashless revolution is to strengthen
Zimbabwes fragile financial system, control money laundering and other illicit financial activities, clean up
inflation (caused by too much money circulation in the economy), reduce corruption, and the urgent need to
adopt to best practices in terms of global standards of cash handling.
However, it is generally understood that Zimbabwes preparedness to adopt the cashless economy is
currently on a low profile. It is important to note that the movement to a cashless society in the Zimbabwean
scenario should be taken on a step-by-step fashion. It cannot be an overnight process, otherwise it may end up
achieving undesired results and ultimately stimulating havoc in the already distressed Zimbabwean economy.

IV. IMPLICATIONS OF A CASHLESS SOCIETY IN ZIMBABWE

There has been a revolution of electronic payment systems over the years, especially in developed
nations where it has already driven economies to a cashless society as it ostensibly removes the need for hard
cash as well as physical payment systems and replacing them with plastic money (cards) and digital money
(internet). In Zimbabwe, the pioneers of the cashless economy paradigm are known to be Standard Chartered
Bank and Central Africa Building Society (CABS), who, during 1990s; were the first to adopt electronic
innovation which saw the duo installing Automated Teller Machines (ATMs). Today there are various other
forms of electronic innovations that have managed to find their way into the Zimbabwean economy and these
include Electronic Funds Transfer Systems (EFTs), telephone banking, personal computer banking as well as
internet banking.
However, the movement from a cash society to a cashless society has various implications to
Zimbabwe. These are discussed below:

Faster transactions; The movement from a cash society to a cashless society has a positive implication to a
developing country like Zimbabwe in the sense that the cashless society releases banks from the constraints of
time and geographical location and allows banks to cut costs on transactions, improve their service delivery, and
respond better to the demands of the market. For banks in Zimbabwe, the implication is that the cashless society
will initiate efficiency through electronic payment processing, reduced cost of operations (cash handling) and
increased banking penetration.
On the same line of argument, another positive implication of the cashless society to Zimbabwe is that
it will help reduce the risk of carrying cash around. Cash is not only expensive but also risky to carry about. This
is mainly attributed to the obvious fact that you apparently become vulnerable to attacks and or robbery.
According to Ejiofor & Rasaki (2012), it has been proven time after time that queuing at point of sale
terminals and vending machines is greatly reduced; typically three times more people can be served using a
cashless system than could have been if they were paying cash. This leaves employees more time to enjoy their
break. Improving the speed of service may also offer the benefit of reducing staff levels at off peak times.

Reduced costs; To a developing economy like Zimbabwe, the movement from a cash society to a cashless
society implies reduced costs of banking services (including cost of credit and bank charges) and according to
Odior & Banuso (2014), the cashless society actually drives financial inclusion by providing more efficient
transaction options and greater reach. However, in the Zimbabwean scenario, things are paradoxical with
regards to transaction costs. The cashless economy is supposed to necessitate lower transaction costs and yet in
Zimbabwe transaction costs, especially on withdrawals and POSs is too high. Commission charged by banks on
ATM transactions is, so far, relatively too high; thereby discouraging customers from using the ATM service,
during those few days when it is functional. It is not yet clear as to why. However, it is important to note that
this discourages economic agents from embracing the cashless economy because, instead of benefitting from it,
they are now being financially strained.
Observation on how the cashless economy is operating in Zimbabwe shows that it is not yet efficient
especially with regards to cost effectiveness. Let us consider the circumstance of our good friend, Newyear. She
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ends up incurring the so-called shadow costs due to the queues at her bank, Christmas Bank. In reality, the
cashless economy is not expected to be characterised by bottlenecks at banks as is the current situation in
Zimbabwe. ATMs should be functional. Banks should be efficient in terms of service delivery. There should be
POS systems in most vending points or markets so that economic agents are able to transact using plastic
money. Newyear, in her situation, could not even go to work and yet she had her money in her electronic purse!

Improves hygiene on site: The handling of coins and notes provide an easy way for bacteria to spread
quickly from one individual to another. A recent study of coins and notes revealed the presence of bacteria on
87% of the notes (Ejiofor & Rasaki, 2012). In a cashless society, it actually implies that catering staffs in food
outlets no longer have to handle cash, at the same time as serving food.

Increased Sales; It has been demonstrated that with the introduction of a cashless system has increased sales
by as much as 20%. Vending and Catering purchases are often dictated by the amount of loose change we have
in our pockets. With the introduction of a cashless system this is never a problem; the value on the card is
available 24 hours a day, 7 days a week. 70% of vending machine vaults are coin related! Often vending
machines require the exact change to be inserted in order to make a purchase. This can be frustrating and many
times, people decide not to bother. Removing coins from your machines improves reliability, and overcomes the
exact change problem (Ejiofor & Rasaki, 2012). All this adds up to an overall implication of more sales and
happier customers in our Zimbabwean economy. The card system in Zimbabwe is sometimes reported not
working or on stand-by. This negatively affects the efficiency of the cashless economy and ostensibly defeats
the purpose of adopting plastic money.

Easy cash collection; Time spent collecting, counting and sorting cash costs money. Time is money, as we
all know. Therefore, the cashless society offers a choice of top-up options including Payroll deduction, Credit
and Debit card and Coin and Note. Removing all the cash from your site removes the security issues relating to
cash handling significantly and reduces the risk of vandalism and theft from your vending and catering points of
sale. The implication is that businesses and individuals can safely and easily collect their money in a cashless
society due reduced risk of robbery and vandalism. With an electronic purse, all you know is that your money is
safe.
All money is safely locked away in alarmed cashboxes that are fully auditable. Since the money
collected from coin and note loaders is high value denominations, less time is spent on counting and reconciling
the cash, apparently saving time and money to the business operator. For the government of Zimbabwe and the
economy at large, the cashless society implies that tax collections will be increased, hence; greater financial
inclusion and increased economic growth. A recent study by Odior & Banuso (2014), indicates that there is a
positive correlation between increased payment efficiency and economic growth.

Clearance of goods; The use of electronic payment systems in the Customs services apparently facilitates
easy clearance of goods by the importer. At the same time money that belongs to the government will not find
its way into someone's pocket since it would be paid electronically to the right account, thereby reducing the
incidence of both corruption and fraud (that malicious tendency of diverting government funds into personal use
without any authority, whatsoever).

Reduces cash in circulation; A cashless system prevents too much cash from circulating in the economy
thereby curbing armed robbery cases and cash related crimes. Hence the implication to Zimbabwe is that the
movement to a cashless society will go a long way in curbing the negative consequences associated with high
cash usage, which has resulted in a number of challenges across the financial sector, examples of which include:
corruption, robberies, money laundering, high cost of processing borne by every entity across the value chain,
revenue leakage arising from significant handling of cash, inefficient treasury management due to nature of cash
processing, limitations of monetary policy due to high volumes of cash outside the formal economy as well as
terrorist funding.

Job Creation; The licensing and establishment of payment agencies will create jobs and new business
opportunities. For example, in Zimbabwe a lot of people are now employed at various Ecocash, OneWallet,
Mycash and Telecash agencies around the country. However, the issue of job creation cannot be
overemphasized. On the other side of the same coin, as Zimbabwe draws closer to a fully functional cashless
economy, a number of workers will be layed off because most of jobs will have to be done by machines.

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Bank queues, absenteeism and productivity loss; Observation shows that most workers are spending a
considerable amount of time in bank queues waiting for their turn to withdraw their money. Now, as it is,
absenteeism has a well-known negative relationship with productivity. It is crystal clear that time spent on bank
queues is productive time which is being wasted. Let us take for example, our dear friend Newyear, she spent at
least 2 days for her to get only $20. Can you imagine 2 working days being wasted on a bank queue? To
Newyear, and probably Christmas Bank, this may be quite reasonable, however, on the other side of the same
coin; December Pvt Ltd has been robbed of its time, although unintentionally. And yet in business, time is
money. At the end of it all, the only option left for December Pvt Ltd, is to dismiss our good friend Newyear.
Really?

Availability of credit; One of the most important benefits of the cashless economy is its ability to ensure that
most of the cash available in the economy is in within the banks or financial institutions and not at home. This is
quite important because it ensures that banks have excess liquidity that can be used as credit to both the public
and private investment sectors in Zimbabwe. Additionally, electronic payment systems generally encourage a
savings culture. It is generally understood that most Zimbabweans are not savers; they are instant gratifiers
either by default or naturally. However, the cashless economy can go a long way in promoting sustainable
savings, which is actually a prerequisite for investment. In the same line of argument, electronic payment
systems have the ability to track individual spending, to facilitate the design of financial products by the banks
and other financial institutions. Such information is also useful to the government when making economic
decisions.
Furthermore, information obtained by tracking individual and or corporate spending and saving
patterns is also useful to financial institutions like banks especially when they want to evaluate their clients for
credit worthiness. One of the many reasons why the banking sector in Zimbabwe is not performing up to
standard is because of information asymmetry resulting in the so-called lemon problem, a situation where by
banks end up lending money to uncredit worthy clients precisely because they possess inadequate information
about the borrower. A number of banks actually closed down in the recent years in Zimbabwe and these include
Time bank, Genesis bank and many others. Therefore, emergence of the cashless economy is an opportunity to
improve the performance of the financial sector in Zimbabwe.

Managing inflation and driving economic growth; The movement to a cashless society may imply some
improvements in the effectiveness of the monetary policy of Zimbabwe in managing potential inflation and
driving economic growth. In fact, various studies highlight the multiplier effect of cashless payments on GDP
growth. Let us briefly look at these few examples: Moodys Analytics (2013), who studied the impact of card
usage on GDP of 51 countries, found that electronic card usage added USD 1.1 trillion in real dollars to private
consumption and GDP from 2003 to 2008. In another study, Zandi et al (2013), studied 56 counties over 2008-
2012, and found that USD 983 billion were added to their GDP per year; their estimates indicate that future 1%
increase in card usage across these counties would produce GDP increase of 0.032%. Odior & Banuso (2014),
have shown that 10% increase in the efficiency of the national payments system leads to 1% increase in the
GDP.
Therefore, it can be deduced that, a cashless society has great potential to grow the national economy
by increasing the velocity of money, which in turn promotes economic growth, reducing the volume of cash
kept outside the banking system (thereby managing inflation) and providing banks with more liquidity for
lending to the needy sectors of the economy, at attractive rates.

High Cost of Access; Before users can engage in electronic retail payments, they must invest in devices that
give access, and then purchase that access to the networks that constitute the internet. This obviously implies
extra costs to the individual user especially given that Zimbabwe is a developing economy where most people
are still living under abject poverty. Observations show that even in agricultural markets such as Mbare Musika
in Harare, just like elsewhere in the country, there are no POS as yet. This therefore calls for financial literacy
enhancement, since financial literacy is crucial to every person (Bonga and Mlambo, 2016). Financial literacy is
becoming almost as important as being able to read and write, Carter (2013).
Currently in Zimbabwe, one cannot buy anything from a street vendor using plastic money, implying
low levels of financial technology use. You cannot use your card to purchase goods at a Tuck-shop anywhere in
Zimbabwe. The main reason is that the businessmen themselves are not yet willing and able to purchase those
necessary devices, the POS machines. To them, especially the small to medium enterprises (SMEs), a POS
machine is virtually a useless investment. All they want is hard cash. Their main argument is that when they go
to buy their products, their suppliers want hard cash not e-cash and therefore, to them, a cashless economy is a
big blow to their businesses.
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The cashless economy in Zimbabwe will not function properly unless there are enough vending
machines and or other access facilities where buyers will be able to swipe and perform their transactions without
any hussles. For example, tobacco farmers who normally spend most of their time in the rural areas find it
difficult to access cash especially these days. After selling their tobacco at the auction floors, most farmers
continue to be disappointed after failing to get hard cash at their respective banks, which operate more like
Christmas Bank, where money is constantly reported to be finished for that particular day or days if not week.
This is now becoming a rampant problem because these farmers have no option but to do like our dear friend,
Newyear, until they get their money. This is a daunting task especially for someone who lives in rural areas
most of the time. In a typical cashless economy, economic agents are not expected to be in need of too much
physical cash. In this example, just like in any other cases you might think of; what makes farmers want,
specifically hard cash, is that they cannot use their cards at their rural homes. Retailers in rural areas in
Zimbabwe want cash transactions. Few of them are now forced, by the current cash crisis; to accept mobile
money, which is a characteristic of a cashless economy.
However, those retailers who accept mobile payments like Ecocash, Telecash etc.; frequently lament
over the difficulties they encounter in trying to cash-out their money because they will be told that there is no
money. The problem here is the absence of adequate facilities to ensure a smooth operation of the cashless
economy. It also important to note that the current cash crisis prevailing in Zimbabwe can be controlled easily
when the cashless payment paradigm is properly adopted, especially with regards to adequate facilities that
support e-cash. These facilities should be found in both rural and urban areas. That way, there will be no need
for loads of bank notes and or coins in the economy. Why would, for example; Newyear, want hard cash when
she could use e-money in place of it?

Confidence and Security; There is lack of adequate security with the use of certain electronic payment
devices like ATM card payments. According to Ejiofor & Rasaki (2012), internet fraud is on ascendancy,
especially in Nigeria. In Zimbabwe similar cases have been reported, although once in a blue moon, hence
enough security for the entire Zimbabwean economy is of paramount importance. This implies that as we move
to a cashless society more technologically advanced and reliable security systems are needed. Advanced audit
techniques are as well demanded to check on correct flow of transactions.

Infrastructure; Zimbabwe is a developing economy where there is still need for more infrastructure
development to accommodate all these innovations that come along with the cashless society. The Point of Sale
(POS) terminals, telecommunication networks and internet facilities are still inadequate. The implication is that
the government of Zimbabwe might incur extra costs to harness adequate infrastructure development to embrace
the cashless society.

Lack of Knowledge and Skill; Another negative implication of a movement to a cashless society is that
both consumers and business enterprises have limited knowledge of what services exist, how they operate and
what benefits are to be derived from the cashless economy. Although Zimbabwe boasts of a very high rate of
literacy, most people, especially those in rural areas still need to be familiarised with at least simple financial
literature in order for them to quickly appreciate the cashless paradigm which comes with financial innovation.
This is probably the logic behind the slow adoption and acceptance of a cashless society in Zimbabwe. It is the
duty of the banks and other financial institutions to spread the news to the populace. Banks are uniquely
positioned to offer financial education, as they can passage theoretical economic concepts, such as scarcity and
opportunity costs, with practical money-in-the-pocket services, and supplement them with the necessary
financial products, Askari (2009). For the economy to benefit from financial sector stability through increased
literacy there is also greater need for government involvement, through setting up of a national strategy on
financial literacy so as to reach financial stability in the economy (Bonga and Mlambo, 2016).

Operational Disruptions; For a developing country like Zimbabwe, the movement from a cash society to a
cashless society might imply some risks such as operational disruption that affect the stability of electronic
payment systems. Numerous examples exist, as put across by Ejiofor & Rasaki (2012); for instance, the
computer problem that caused the Bank of New York a whooping $22 billion overdraft in 1985; a roof collapse
after a heavy snow, resulting in a shutdown of an Electronic Data System facility for processing ATM
transactions, affecting more than 5000 ATMs in the US in 1993; the disruption of the operations of the Internet
as a result of the worm virus in 1987; and a host of other disruptions. Experience has shown that Zimbabwe
does not have the necessary state-of-the-art technological resources to maintain a stable and reliable electronic

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payment system; hence this implies that some operational disruptions will always catch up with such a
movement.

Lack of funds; It is capital intensive to establish a good cashless society. This actually implies that the
government of Zimbabwe should pump enough money for the success of the cashless society; which in any case
is not an easy task especially given that Zimbabwe is a developing economy with a host of financial problems
including the current cash crisis which has left most economic agents stranded and frustrated.

Power Supply; The movement from a cash society to a cashless society implies the need for a steady and
reliable source of power in terms of electricity. In Zimbabwe, it specifically implies that suppliers of power like
Zimbabwe Electricity Supply Authority (ZESA) should be rejuvenated to accommodate the cashless society that
is purely based on electronic payment systems; this is based on the argument that the current power supply in
Zimbabwe is very poor with major cities like Harare and Bulawayo still in short supply. For example, internet
payments and banking facilities, ATMs and ZimSwitch facilities; just to mention but a very few; do not operate
or function without power.

Urban/Rural Areas Coverage; The major problem is that the use of computer, access to internet and other
tools of Information Communication Technology (ICT) are limited greatly to the urban areas, and the challenges
faced by the ICT sector in the country include particularly the fact that the people in the rural areas are yet to
know how to use the computer or Information Technology (IT) facilities. This implies that there might be need
to educate some people especially those in rural areas on how to familiarise with ICT that comes together with
the cashless society.

V. ETHICAL, BEHAVIOURAL, LEGAL & SECURITY ISSUES

Paper money is wealth, just like gold, silver and other material things. Economic agents therefore have
the option to hold their wealth in a form that offers them greater utility. The determining factors needs to be
understood and observed accurately for possible policy move. In an independent country like Zimbabwe, people
are free to choose what they want to do as long as one is within the dictates of the Constitution of Zimbabwe.
Even if it comes to payments methods, economic agents will resort to those methods which they trust most.
While there are many factors that influence peoples choice of using or not a given payment method, it
is important to note that such factors are also hinged on various considerations related to legal and security risks
among other things. Bearing in mind that there are only two options on the table: cash-based and electronic
payment methods. Economic agents, based on their rationality, will put these two options on a scale to
evaluate the best option in an effort to maximize their utility. Most people will make their choices after
considering associated and potential risks for taking either option or even both. In this case, before the use of a
certain payment method, people would consider some factors such as trust, security and validity in order to
ensure that their money is really safe. Now, let us discuss the legal and security implications of the different
payment methods.
Paper currency is well known payment method, a traditional way of payment which provides the
opportunity for making transactions anonymously. That is why, according to Rogoff (2014), this method allows
agents to avoid laws, regulations and taxes. Sellers or buyers do not make inquiries about origin as an essential
property of money when it comes to ones knowledge of its history, which immediately makes his profile
anonymous (Kiyotaki & Wright, 1989). What the governments have to figure out is that the probability of
currency counterfeit needs to be correlated with the buyers identity. However, this might be also viewed in a
way that standard monetary theory requires the anonymity of transactions made by tax or law authorities. There
is a noteworthy amount of evidence that proves the large percentage of physical currency in exchange in most
countries (over 50%) is used to conceal transactions (Kiyotaki & Wright, 1989).
This is quite different when comparing with electronic payment systems that can be easily traced by
the government. Paper money or hard cash can be replaced with electronic money for reasons such as
prevention of both money laundering and anonymous transactions, reducing corruption especially in parastatals,
stabilizing the financial sector, or lowering the accumulation of revenues obtained from the black economy;
only to mention but a few. However, it cannot be guaranteed that the government can completely prevent
suspicious and or malicious activities when turning the economy into a cashless one, though if it could it
would be more reasonable for the countries, in the sense that the anonymity drawback of cash, which allows tax
evasion and supports illegal activities, in the long run has a negative impact on economic growth and
development and very harmful to the whole economy, while it could be avoided under such scenarios.

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From a consumer perspective, it may also be observed that the emergence of cashless payments might
affect the transactions costs. In Zimbabwe, transaction costs are escalating rather than reducing. Cashless
payments should reduce rather than fuel up transaction costs. However, studies in Nigeria, for example; Odior &
Banuso (2014) and Adu (2016) show that transaction costs have significantly reduced since the adoption of the
cashless society. In a cash economy, financial institutions such as banks and non-financial institutions such as
are obliged to pay pro-rated fees to companies such as MasterCard or VISA for the card services.
The probability of compromising social norms in money use in terms of extravagancy can also be
anticipated. However economic agents are expected to learn to use their money responsibly even if it is stored in
their various electronic wallets. Studies have shown that spending of economic agents escalate due to using
electronic payment systems. However other studies indicate that the cashless economy actually encourages a
saving culture. It should be highlighted also, that the cashless economy has been shown to be vulnerable to
cyber-attacks or system hacking and potential system crashes. For example, in Nigeria, system attacks have
been numerously recorded. In Zimbabwe, however, cyber-attack is not yet a serious problem but relevant
authorities need to be aware of these issues in order for them to stay alert and prepared. Nonetheless, Rogoff
(2014) noted that this argument does not seem to be significant enough because economies have already
encountered this kind of problem and they have taken remedial actions. Things are different with paper currency
in terms of potential fraud or theft; for if physical money were lost or stolen, it could be very hard to retrieve
that amount of money as rapidly as if problems with EMTS had occurred (Rogoff, 2014)
The underground economy, the so-called black economy sector, is well-known for its various
mechanisms used to avoid compliance with local legislation and/or tax evasion. The size of the black economy
sector cannot be predicted and there is a lack of any precision made, however, in Europe where the taxes and
regulations are higher when compared to the US, it is thought that the size of the black economy sector is
substantially larger (Schneider, Buehn, & Montenegro, 2010). In Zimbabwe, the adoption of a cashless economy
will enable the government to easily collect tax from the informal economy which is now growing faster than
the formal economy. According to Bancheva (2007), almost 6000 banks per year are subject of robbery in the
European Union. In Zimbabwe, bank robbery is not very serious as compared to other African countries such as
Nigeria, South Africa and Kenya.

VI. RECOMMENDATIONS
i. The responsible monetary authorities in Zimbabwe should at least encourage banks to further lower
their transaction charges for using cards and other electronic processing mechanisms. A move was
done towards end of last year (2016), after there was a public outcry. However, there is greater feeling
that the costs are too high if one has to transact many times a day, on basic needs like food, transport,
airtime and other spendings. Bonga (2016), indicated that depositors have of late, been forced to make
increased visits to the banks to withdraw their funds (multiple withdrawals per period), due to the cap
imposed on withdrawals. Lowering transaction charges will act as an incentive for clients and hence
most people will able to easily adopt the cashless economy initiative. In the same line of
recommendation, the monetary authorities can also hatch a new law that binds all banks not to exceed a
certain amount of charge per transaction, especially withdrawal charges, and that limit ought to be
relatively low.
ii. There is need to come up with Public Enlightenment Programmes (PEPs) about the cashless economy
(what really entails it) so that everyone will be well familiarised with it since it affects everyone. Such
PEPs are an opportunity to make people also understand the consequences of the cashless economy.
iii. Electronic payment systems are capital intensive, therefore banks and the government are encouraged
to collaborate to finance the required infrastructures such as power supply and state-of-the-art
communication networks for the smooth operation of the cashless system.

VII. CONCLUSION
The movement from a cash-based economy to a cashless economy cannot be overemphasized. There are
critical issues which need to be addressed before going any further. For example, the need to create an enabling
environment to support the smooth running of the e-commerce payment methods. The existence of a cashless
economy in Zimbabwe may end up achieving unintended results especially when responsible authorities do not
put enough infrastructure that support the cashless economy. Otherwise, the cashless economy itself is a positive
development for Zimbabwe. Another salient challenge militating against the operation of a cashless economy is
the fact that the economy of Zimbabwe is now becoming mostly informal. The informal sector is mostly
unbanked. Therefore, if enough facilities could be put, the unbanked informal sector could be easily harnessed
into the formal banking system. Hence the smooth flow of the cashless society.

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Strong currency monitoring should be in place. Government and institutional corruption should be
weakened and eliminated. Wealth and money creation should be linked to productivity. Banks should not offer
loans more than what they have received as deposits. International transactions should be smoothened through
proper remittance. This ensures exporters and importers to operate with efficiency.

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