Paynet readmits 3 banks as alternative is tested

Bulk payments service provider, Paynet Zimbabwe, may have readmitted at least three banks (names withheld) to its platform, days after indicating it will initiate legal action to claim US$100 million damages from banks for contract breaches. But the new substitute for Paynet developed after the payment currency impasse  is expected to go live next week.

Paynet has been involved in a bruising battle with banks after they collectively refused to settle US$470 000 obligations and to pay for its bulk payments service in US dollars since the Reserve Bank introduced local currency in February this year.

London listed Cambria's parent firm said it had lost nearly US$200 000 between February and April this year providing service to banks, which would not pay in US dollars despite the contract signed being denominated in the foreign currency.

The company reacted by switching banks off its electronic bulk payments platform, throwing the sector into a bulk payments crisis that slowed bulk transactions including salaries and left the banks scrambling for insecure and inefficient alternatives.

Banks refused to pay for services in US dollars, starting February 2019, after the Reserve Bank of Zimbabwe announced in February that all electronic US dollar bank balances and liabilities should be converted to local currency at 1 to 1 between US dollar and RTGS dollar.

The directive came amid a US dollar crunch in the domestic economy, which made settling accounts in foreign currency impossible. The directive was later followed by full adoption of mono-currency and banning of transactions in foreign currency with effect from June 24, 2019.

Paynet provides an outsourced bulk payments transfer platform linking 22 financial institutions and over 1 200 corporate institutions in all sectors of the 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.

When banks started using alternative payment means, after being cut off Paynet's system — which slowed down bulk payments - Paynet said banks exposed clients to security and privacy risks by managing payments using manual spreadsheets sent by email and flash drives. It also said that by using the alternative electronic payment means much of the information being exchanged between institutions was unencrypted or insufficiently encrypted to protect the transacting public.

As the impasse persisted, banks started collectively working on an alternative bulk payments system, which is scheduled to go on line by the 21st of this month.

The new payments system adopted by banks is known as Bank File Interchange System (BFIS) and already at user acceptance test, which was done for the whole of last week with four banks participating in trial runs before others join in.

But while banks press on with plans to adopt an alternative bulk payments system, Paynet last week reportedly readmitted three banks back to its platform, but it was not clear whether the banks had agreed to pay outstanding debt. It also remains unclear whether three unnamed banks will not be part of the US$100 million damages claim Paynet holding company, Cambria Africa, said it had instructed its lawyers, Titan Law Chambers to make.

Banks, however, appear mystified as to what could be happening behind the scenes, although Paynet had indicated that it continued to engage banks individually, when Paynet said it had reopened the bulk payments gateway to three banks.

Sources said a correspondence by BAZ and generated by the sector's interbank operations committee said three banks had "received communication from Paynet indicating that the gateway, which had been closed was now open for bulk payments".

BAZ, the highly placed source said, questioned whether Paynet was playing games and the association wanted to know how the banks in question responded. Efforts to get official comment from BAZ were not successful yesterday as executive director Sij Biyam, was said to be engaged in meetings.

Paynet Zimbabwe parent firm, Cambria Africa, said the contract between Paynet and banks was denominated in US dollar, but the banks were backtracking in refusing to pay service fees in US dollars,  following the currency changes.

The company said this was despite the fact that the banks were making huge profits from using its aggregated bulk payments platform while 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 t not afford to accumulate additional losses.