Banks, Paynet stalemate stalls transactions

BULK payments service provider, Paynet Zimbabwe, has accused banks of greed in refusing to pay fees in foreign currency for using its payments platform despite pocketing a cumulative US22 million last year.

Paynet Zimbabwe, a subsidiary of financial payments technology service provider Payserve Group, has since suspended banks from the platform, one of major facilities used by for bulk payments, but says domestic financial institutions will not find an alternative at a lower cost.

Paynet provides an outsourced payments transfer platform linking 22 financial institutions and over 1200 corporate institutions in all sectors of the Zimbabwean economy.

Paynet took the decision to suspend service after banks collectively refused to pay and opted for alternative means.

The system was also used by major banks including CBZ, CABS, Nedbank and Standard Chartered, among others, which have been negatively affected. The banks have since instructed their clients to use alternative means, although Paynet contends some may not be able to facilitate bulk payments.

Payserv Group parent company and London Alternative Investment Market (AIM) listed Cambria Plc said, after the introduction of a local currency change in March this year and the simultaneous scrapping of the US dollar and RTGS dollar parity exchange rate policy affected them.

In Zimbabwe, Cambria also operates Millchem, one of Zimbabwe’s leading distributors of industrial solvents and metal treatment products.

Cambria said the contract between Paynet and banks was denominated in US dollar, but banks were refusing to pay US dollar service fees, after the currency changes, despite making huge profits and also paying for similar technology based external services, including software, in forex.

It also said while some banks claimed the Reserve Bank did allow payments to Paynet in forex, a position the company said had since been waived, the local banking institutions would still not play ball.

While the Bankers Association of Zimbabwe (BAZ) said the suspension of the Paynet services will not affect transactions such as RTGS, ZIPIT, mobile payments, internet banking and swift transfers, the facility was one of the major bulk payment platforms and its absence could have serious negative implications.

“This action arose from a dispute whereby the vendor (Paynet) has requested for settlement of local services rendered in United States Dollars,” BAZ said.

Paynet said it had lost over US$170 000 providing services to banks in March and April 2019, adding banks as a result collectively owe US$470 000 for over four  million transactions concluded since May 1, 2019. The company said it cannot allow further accumulation of possible losses.

“The company estimates that in 2018 banks netted $5 in profit for each dollar invoiced to them. Collectively in 2018 banks netted over US$22 million in profits via charges to their account holders for services provided by Paynet.

“Despite this highly profitable relationship with Paynet, banks have stonewalled the company’s attempt to maintain the US dollar value of its services following the devaluation of the currency to 5.86:1 USD on the interbank market,” Cambria said.

Cambria Plc said that by refusing to engage the Interbank Operations Committee, through which banks communicated, felt disruption from disconnection would be tolerated by customers.

It also said that banks felt they could find payment alternatives or promote alternative services to Paynet, notwithstanding approval, testing, security, stability, or reconcilability of such alternatives.

Further, Cambria said banks thought Paynet would reverse its position and accept local currency for its May invoice, a US2,6 cents per transaction at interbank exchange rates instead of the contracted average of US 16 cents and that Payserv would not risk cutting off service to banks.

“The worst possible case for Paynet is for its service to be replaced by a robust and immediately available alternative. Such an alternative would in the company’s view neither be cheap nor immediately available and customizable,” Cambria said.

The AIM listed company said the 5 000 plus corporate users of Paynet would find it difficult to switch to a new system, however robust. It said a new system would require the kind of customisation Paynet had provided to each bank at a far lower cost than would be charged by their core system providers.