RELATIONS between banks and bulk electronic payments service provider, Paynet Zimbabwe, may have irretrievably broken amid revelations that the banks are on the verge of testing an alternative system.
This comes as Paynet said it had lined up a US$100 million damages claim after banks refused to settle receipts amounting to US$470 000 for services rendered.
Banks also refused to pay for services in US dollars, going forward, since the Reserve Bank of Zimbabwe announced in February that all bank balances and liabilities had been converted to local currency at 1 to 1.
Paynet provides an outsourced bulk payments transfer platform linking 22 financial institutions and over 1 200 corporate institutions in all sectors of the Zimbabwean economy.
The payment system was also used by major banks including CBZ, CABS, Nedbank and Standard Chartered, among others, which have all been negatively affected.
While Zimbabwe used the multi-currency system since February 2009, it converted to local currency in February and immediately after floated the exchange rate on the interbank market starting at 2,5 RTGS dollars to the green-back.
Since then, banks have declined demands by Paynet Zimbabwe to pay for its services in US dollar currency prompting the company to disconnect banks from its platform, slowing down transactions and causing backlogs.
Paynet Zimbabwe parent firm, Cambria Africa said the contract between Paynet and banks was denominated in US dollar yet the banks were now refusing to pay in US dollar for service fees, following the currency changes.
Paynet said this was despite the fact that the banks were making huge profits from using its aggregated payment platform and also paying for similar technology based externally sourced services, including software, in forex.
As a result, Paynet claimed it had lost US$170 000 providing services to banks between February and April this year and could not afford to accumulate additional losses. No comment could be obtained from the Bankers Association of Zimbabwe (BAZ) by the time of going to print yesterday, but market intelligence confirmed that an alternative payment system had been secured.
Highly placed banking sector sources told Business Weekly this week that there was no going back on the now bitter sweet relations and an acrimonious end to the romance over the refusal to pay for services was inevitable.
Banks have thus reportedly already secured an alternative system known as the Bank File Interchange System (BFIS), which banks are could be testing by July 17 and thereafter have it certified by the Reserve Bank of Zimbabwe before finally adopting it.
Paynet recently warned that banks had exposed clients to security and privacy risks by allegedly managing payments using manual spreadsheets sent by email and flash drives with much of this information unencrypted or insufficiently encrypted.
Nonetheless, a highly placed banking sector source, speaking on condition of anonymity, said banks had refused to be bullied into sub-mission and had already secured an alternative platform, which they are set to adopt.
However, as the impasse has remained largely unbroken, the banking public has continued to face serious inconveniences of delayed payments with most bulk electronic payments taking too long to go through.
“The new (bulk payments) system is now at testing stage. There are still challenges because most bulk payments have been disaggregated as individual RTGS transfers; so you find there always are backlogs in terms of payments; that is where some of the inefficiencies are coming from.
“The new system has been written and is now going through tests and I am sure the delivery time or final roll out time should be July 19 if I am not mistaken,” the source said.
The new BFIS bulk payments system, if successfully implemented, would break the alleged monopoly of Paynet’s bulk payments platform, which the banks are reportedly determined to break and never repeat in future. But it looks like this will not happen without leaving scars on either party after Cambria indicated a week ago that it had instructed its legal advisors to prepare a lawsuit for US$100 million claims.
“Payserv Africa and Paynet Zimbabwe, have instructed their legal practitioners in Zimbabwe, Titan Law, to commence legal action against the Bankers Association of Zimbabwe (BAZ) and related parties for anti-competitive practices seeking damages of US $100 million,” Cambria said.
Payserv Africa and Paynet Zimbabwe are subsidiaries of London exchange Alternative Investment Market (AIM) listed Cambria Africa Plc.