CBE invests E90m to cutdown banking costs
As part of its Strategy reset, the Central Bank of Eswatini (CBE) is working on launching a over E90 million National Domestic Switch – a national payment system (NPS) that will compel South African-owned banks to switch payments locally which will result in the reduction of banking costs for emaSwati.
The system will also enable funds to be transferred from one financial institution to another instantly, within a click.
This was disclosed by the CBE governor Dr Phil Mnisi on Wednesday during his breakfast meeting with the media.
The governor said that for this project, the CBE has invested over E90 million to enable transacting parties to conduct transactions efficiently. Currently, individuals and businesses alike are not able to transact instantly because the country does not have its domestic switch, therefore settlement of transactions are done in the Republic of South Africa.
For instance, payments made through Lightspeed Point of Sale (PoS) are cleared in South Africa. Simply put, when one swipes at a speed point, the intended payee doesn’t receive the money instantly because the transaction has to be cleared in South Africa and it comes with additional costs to the person initiating the transaction. However, with the imminent launch of the Domestic National Switch, all transactions will be done immediately.
Mnisi described the cards’ National Domestic Switch as a strategic intervention that will bring massive benefits to the Kingdom of Eswatini.
“Right now, banks are switching, settling payments outside the country, so the SA-owned banks, in particular, will now be compelled to switch payments locally,” he said.
He stated that this switch had massive benefits for Eswatini because it would level the play field and had the benefit of reducing the cost of banking to the emaSwati population.
Response
He explained that this was done as a response to the nation’s cries on the costs of banking services.
He added that the National Domestic Switch would also provide open banking, which allows financial service providers to connect directly to the domestic Switch instead of going via a licensed bank.
He stated that it further opens opportunities for issuing and acquiring cards which were currently not available in the country, but available outside the country.
“What we call a bin number is outside the
country, so this switch is an initiative that is of national importance,” he said.
He said they believed that more people would now find the CBE more open to more banking service providers in the economy.
The governor also explained that this strategy update was done in a bid to intentionally get ahead of the curve in its regulatory mandate.
Dr Mnisi said the strategy update process was implemented alongside all their key stakeholders and over the next five years, the Bank would implement several high-impact initiatives that seek to contribute to the country’s socioeconomic development and ensure long-term financial sustainability.
Agile
He stated that the Bank was also firm in its resolve to become agile, customer-centric, and execute its mandate quickly.
The governor mentioned that the strategy was a direction of the CBE, and they were currently involved with four key strategic focus areas, following strategy research after he joined the CBE in July 2022.
Mnisi stated that the rest was made to involve all stakeholders so that everyone buys into what they were doing.
He said they were moving with speed and agility, and they were also cognisant that the CBE was a regulatory body that manages risks and ensures that controls were in place, not compromising risk management controls and compliance with speed and agility.
“We believe that the CBE of today cannot be the CBE of yesterday, we need to engage with our stakeholders, we want them to feel us, and engage with us so that we can be in a continuous improvement as an institution,” he said. He stated that in the next five years, they would be implementing several high initiatives that seek to contribute to the country’s socio-economic development and ensure long-term financial sustainability.
He said the bank was also firm in their resort to be agile, and customer-centric and execute their mandate as provided accordingly. “These prioritized initiatives will start this year and we will be reviewing them in line with our strategy that we have planned for the next three to five years,” he said. The initiatives are the Central Bank Digital Currencies (CBDC) research and development, National Payment Switch, Financial Inclusion, and ESG. Furthermore, the governor stated that the second initiative would be driving financial Inclusion with intentionality. He shared that currently, the statistics were saying that in Eswatini there was about 85 per cent of the population financially included. “People are accessing banking services, though many service providers are accessing banking services. So, we want to deepen financial inclusion so that more people are using these banking services and products. The domestic will also accelerate financial inclusion,” he said.
What benefits does a payment switch infrastructure bring?
The national payment infrastructure provides several benefits to the whole payment industry, namely, customers, merchants, service providers, and the government through:
▶ Lower transaction costs: As a direct intermediary between payment operators, the interoperable national payment switch infrastructure will bring the muchneeded efficiency in dealing with domestic payments, which up to now requires a non-domestic intermediary. The National Domestic Switch will charge much lower routing fees to operators who will pass on the benefits to their customers.
▶Lower operation costs: The National Domestic Switch will be a central payment infrastructure allowing payment service providers to connect to the system through low-cost direct interfaces thus benefiting from economies of scale to reduce operation costs.
▶ More payment service providers:
The National Domestic will provide a level playing field for bank and non-bank operators to compete and provide new types of services which will ultimately provide more options to the customers.
More electronic payment options: Currently, retail payment options are principally limited to cards and the National Domestic Switch infrastructure will promote the emergence of a new breed of payment service providers who will bring more customer-centric services and embed innovative payment options in services such as insurance, booking, etc.