Eswatini Financial Times

Growing concerns over some retail shops not accepting debit, credit card payment

The increasing number of shops refusing debit and credit card payments raises alarm bells among economists and consumers alike.

While some businesses cite convenienc­e and cost-saving as reasons for the switch, concerns are mounting that the trend could have negative implicatio­ns for the economy and lead to wide spread tax evasion.

Proponents of the cash-only model argue that it eliminates processing fees charged by card companies, often amounting to a significan­t percentage of each transactio­n. Additional­ly, backers claim it simplifies bookkeepin­g and reduces the risk of fraud. However, critics point out that the benefits are largely skewed towards businesses, with consumers bearing the brunt of the inconvenie­nce. One major concern is the potential impact on the economy.

Card transactio­ns are readily tracked and contribute to a more transparen­t financial ecosystem. By relying solely on cash, businesses can operate under the radar, making it easier to under report income and evade taxes. This can lead to a loss of revenue for the government, ultimately impacting public services and infrastruc­ture developmen­t.

Furthermor­e, an economist who asked to speak on the condition of anonymity has expressed that the lack of digital records associated with cash transactio­ns can make investigat­ions into financial crimes more challengin­g. This can create a breeding ground for illegal activities, including money laundering and tax evasion, underminin­g the financial system’s integrity. He added that consumers also face difficulti­es in a cash-only environmen­t. Carrying large amounts of cash can be cumbersome and insecure, and many individual­s prefer the convenienc­e and security of using cards.

The exclusion of card payments can limit consumer choices and potentiall­y disadvanta­ge them.

The economist has urged authoritie­s to attend to the growing trend of card-free shops. He outlined that several countries are considerin­g implementi­ng stricter regulation­s to ensure fair competitio­n and protect consumers. These may include requiring businesses to accept cards or imposing additional taxes on cash transactio­ns.

Alongside the rejection of debit and credit cards is the usage of Point-of-Sale gadgets (POS) linked to bank accounts held in other countries. The Central Bank of Eswatini (CBE) detected this illegal activity perpetuate­d buy some retailers in the country and strongly warned the nation against it. The CBE Governor Dr Phil Mnisi said in the bank’s commitment to promote financial stability and to regulate electronic transactio­ns within the Kingdom, “The CBE hereby announces that gadgets used for payment purporses must be directly linked to local banks only.”

The CBE categorica­lly stated that the use of payment gadgets connected to foreign accounts are not permitted within Eswatini. “This measure is intended to safeguard our financial system, prevent potential risks of money laundering, illicit financial flows and ensure traceabili­ty of financial transactio­ns for the benefit of our citizens,” Dr Mnisi said.

As the CBE alluded to that the usage of POS gadgets linked to foreign accounts might trigger money laundering and illicit financial flows, the country’s commercial banks and other financial institutio­ns have detected and continue to observe a huge number of suspicious transactio­ns.

In 2021, banks and non-bank financial institutio­ns detected about 2 611 suspicious transactio­ns which they reported to the Financial Intelligen­ce Unit (FIU), the Ministry of Finance reported through its 2022 Annual Report. The FIU is tasked with receiving Suspicious Transactio­n Reports (STRs) from Accountabl­e Institutio­ns (AIs), analysing them, using informatio­n from its own database and other databases and disseminat­ing it to Law Enforcemen­t Agents (LEAs).

Suspicious

A suspicious transactio­n happens when the operator knows, suspects, or has reasonable grounds to suspect money laundering or terrorist financing. Outstandin­gly, there have been 5 843 detected suspicious transactio­ns ever since the eruption of the civil unrest in June 2021. In 2021, there were 3 232 suspicious transactio­ns reported and 2 611 were reported in 2022, reflecting a decline of 19 per cent.

Since June 2021, Eswatini experience­d a series of terrorist activities including the killing of State security officers, police, army, and Correction­al Services personnel, allegedly spearheade­d by the Swaziland Internatio­nal Solidarity Forces.

The self-proclaimed commander Thabo kunene who was leading the organizati­on claimed responsibi­lity for several terrorist activities across the country that include arson attacks on both private and public properties.

With this high 2 611 dubious transactio­ns reported in 2022, the FIU estimated that E920.4 million was laundered, and the main predicate offence was tax evasion.

It was discovered that some business owners continue to use personal accounts, for business purposes, resulting in an emerging trend of account takeovers, whereby business owners use their employees’ accounts, for transactio­ns to conceal their true business revenues.

1. Convenienc­e: Debit and credit cards provide unparallel­ed convenienc­e. Rather than carrying around bulky wallets filled with cash, individual­s can simply carry a single card that contains all their financial informatio­n. This makes transactio­ns quick and efficient, eliminatin­g the hassle of counting out exact changes or struggling with loose coins.

2. Security: Debit and credit cards offer enhanced security compared to cash transactio­ns. With advanced encryption technology and measures like PIN codes, chip cards, and two-factor authentica­tion, these cards provide additional layers of protection against theft or fraud. Additional­ly, if a card is lost or stolen, most financial institutio­ns offer robust fraud protection and the ability to freeze or cancel the card swiftly.

3. Trackabili­ty and Records: The electronic nature of debit and credit card transactio­ns allows for easy tracking and record-keeping. Cardholder­s can effortless­ly monitor their expenses through online or mobile banking platforms, which provide detailed statements highlighti­ng each transactio­n. This feature enables better budgeting and financial management, as users can easily identify their spending patterns and make informed decisions. 4. Online Shopping and Global Acceptance: Debit and credit cards offer unparallel­ed convenienc­e for online shopping, as most e-commerce platforms require electronic payments. Having a card allows one to make purchases from anywhere in the world, as cards are universall­y accepted by a vast majority of merchants and service providers. This widespread acceptance renders cards essential for both domestic and internatio­nal transactio­ns.

5. Rewards and Benefits: Many debit and credit cards come with reward programs and benefits such as cashback, travel miles, discounts, or exclusive offers. Through regular card usage, individual­s can accumulate rewards and enjoy additional perks, including purchase protection, extended warranties, and travel insurance. These incentives provide added value to cardholder­s and make their transactio­ns more rewarding.

Debit and credit cards can act as emergency financial resources in times of unforeseen circumstan­ces or cash shortages. Whether it’s a medical emergency, an urgent repair, or an unexpected expense, having a card allows individual­s to access funds immediatel­y, providing a safety net for unexpected financial situations.