Cashless payments are financial transactions that are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.
Cashless Payments in Eswatini are currently handled by means of bank transfers, cheques, credit and debit cards, with no bills or coins handed from person to person.
A Cheque is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued. The person writing the cheque, (the drawer), has a transaction banking account (often called a current or cheque account) where their money is held.
The drawer writes various details including the amount to be paid, date, the payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the quantity of money stated.
Cheques are a type of bill of exchange that were developed as a way to make payments without the need to carry large amounts of money. Paper money evolved from promissory notes –another form of negotiable instrument similar to cheques in that they were originally a written order to pay the given amount to whomever had it in their possession (the “bearer”).
Technically, a cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified transactional account held in the drawer’s name with that institution. Both the drawer and payee may be natural persons or legal entities.
Currently in Eswatini, cheque amounts are limited to a maximum value of E100 000.00 per transaction for physical exchange of instruments by commercial banks in the clearing house. The clearing house clears and settles cheque transactions on a daily basis (morning and afternoon).
Effective 22 July 2013, cross border cheques were phased out and any cross border payments within SADC were to be processed via SIRESS (SADC Integrated Regional Electronic Settlement System). Any business that did not comply had no way of doing business from 2013 to date. Any other payments are done via (Electronic Funds Transfer (EFT).
At present the Central Bank of Eswatini and commercial banks participate in the Swaziland Automated Electronic Clearing House (SAECH) with an average clearing cycle of three working days.
REAL-TIME GROSS SETTLEMENT SYSTEMS (RTGS)
Real-Time Gross Settlement Systems are specialist fund transfer systems where the transmission of money or securities takes place from one bank to another on a “real time” and on “gross” basis. Settlement in “real time” means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed.
“Gross settlement” means the transaction is settled on one to one basis without bundling or netting with any other transaction. Once processed, payments are final and irrevocable.
RTGS systems are typically used for high-value transactions and critical payments that require immediate clearing. In some countries the RTGS systems may be the only way to get same day cleared funds and so may be used when payments need to be settled urgently. However, most regular payments would not use a RTGS system, but instead would use a national payment system or network that allows participants to batch and net payments.
RTGS systems are usually operated by a country’s central bank as it is seen as a critical infrastructure for a country’s economy.
ELECTRONIC FUNDS TRANSFER (EFT)
Electronic funds transfer (EFT) is the automated transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, through computer-based systems and without the direct intervention of bank staff. The EFT system provides fast, convenient, reliable and secure domestic payment and collection of funds.
Credit Transfers are predominantly being used by government and corporate customers to transfer salary payments to the employees’/ beneficiary’s account.
Direct debits involve periodic financial instructions from a customer to his or her bank authorizing a utility provider or any organization to collect funds from their account to settle an obligation.
Commercial Banks are expected to credit a beneficiary’s account within 24 hours upon receipt of a credit transfer instruction and to debit the payer’s account within 48 hours on receipt of a direct debit instruction confirmed against a mandate.
All the four Eswatini commercial banks participate in processing of EFT transactions which may be initiated by their individual or corporate customers.
DEBIT AND CREDIT CARDS
The difference between credit cards and debit cards is that with a debit card you use your money to transact while with a credit card, you can go way above your balance up to a given limit as discussed with your banker.
A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them at a later stage. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date. Each month, the credit card user receives a statement indicating the amount owed and must pay the bill by a due date, or may choose to pay a higher amount up to the entire amount owed.
A debit card (also known as a bank card or check card) is a plastic payment card that provides the cardholder electronic access to their bank account(s) at a financial institution. Some cards may bear a stored value with which a payment is made, while most relay a message to the cardholder’s bank to withdraw funds from a payer’s designated bank account. The card, where accepted, can be used instead of cash when making purchases. In some cases, the primary account number is assigned exclusively for use on the Internet without the physical card.
In many countries, the use of debit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances, cash transactions. The development of debit cards, unlike credit cards and charge cards, has generally been country specific resulting in a number of different processing systems around the world, which were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in one country to be used in other countries and allowed their use for internet and phone purchases.
Unlike credit and charge cards, payments using a debit card are immediately transferred from the cardholder’s designated bank account, instead of them paying the money back at a later date.
Debit cards usually also allow for instant withdrawal of cash, acting as the Automatic Teller Machine for withdrawing cash. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase
Mobile payment, also referred to as mobile money or mobile money transfer or mobile wallet generally refers to a safe and easy electronic payment service that allows users to store, send and receive money using their mobile phones. Instead of paying with cash, cheque, or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods. The payment system can be used on both smart phones and basic feature phones. Although the concept of using non-coin-based currency systems has a long history, it is only recently that the technology to support such systems has become widely available.
Currently, both mobile networks in Eswatini (Swazi Mobile and MTN) have licenses for this payment system. The system stores funds in secure electronic accounts linked to mobile phone numbers and ensures that they are secure as is the case with banks. The Mobile money payment system is more convenient for places where people are less likely to have bank accounts.