Consumer payment choices, costs, and risks: Evidence from Zimbabwe

Very little is known about payment choices in the African context and in developing countries in general. Their unique infrastructures and economic nuances suggest that both the availability of instruments and supporting structures in the payment system are different from the general perception. This exploratory study investigates the payment choices in Zimbabwe, a country that claims the existence of a near cashless society. Through a descriptive and logit analysis based on survey data, we find that a strong preference for cash, coupled with cash shortages and inadequate infrastructure for electronic payments, has resulted in a multitiered pricing system, with significant premiums for digital payments. This perverse effect counters the heavily lauded benefits of mobile payments in developing countries. We argue that the demand-side bias in government policies will not effectively counter persistent currency failures and the resultant inflation, both of which have a strong influence on payment choices. We recommend that the government should consider polices that will reduce merchant adoption costs to encourage widespread use of digital payment instruments, such as debit cards.