An Assessment on the impact of plastic money on bank deposit mobilization 1

An Assessment on the impact of plastic money on bank deposit mobilization
1.1 Introduction
Plastic money refers to the use of credit cards, debit cards, smart cards, balance cards or store cards , Automated Teller Machine cards and charge cards for making payments for purchase of goods and services. Tucker (2008), this research therefore aims at studying the effects of plastic money use on bank deposit mobilization ,that is weather plastic money usage increases or decreases bank deposit mobilisation that is the ability of the bank to encourage people to deposit money through plastic money since there have been shortages of money (cash crisis).The outcome of the study is to enable the banking industry to establish the extend of achievements of the purpose for which plastic money was introduced, and offer information for further strategy formulation and enhancement to their competitive advantage.13 commercial banks were used for the research.
1.2 Background
For a long time now, backdating 2016, Zimbabwe has been hit by cash shortages in the banking sector, hence it has caused a decrease in the mobilization of deposits by banks leading to decreased net profit and overall bad financial performance by banks. In November 2016 we saw an introduction of bond notes by the Reserve Bank of Zimbabwe (RBZ) governor Mr Mangudya as a curb of cash crisis, however his solution was not welcome by the majority of the citizen of Zimbabwe.
This strategy came with a lot of problems within the banking sector as people from both the formal and the informal sector where now holding cash and re-selling at a higher rate it in the black market. Both the United states dollar,the South African rand and the Zimbabwean bond was no longer accessible as many people were holding cash for re sale ,this crisis saw many banks decreasing in their deposits therefore leading to losses as the main aim of the bank is to make profits through the mobilization of deposits
In return the bank promoted the the use of plastic money as a better remedy for the problems arising from cash shortage challenges as well as a way of mobilizing deposits for the banks

1.3 Problem Statement
Deposit mobilization is an integral part of banking activity, for a long time banks have been characterized by cash shortages and long ques in the banking sector. The most fundamental goal of banks is to increase profitability through bank deposit mobilisation and this has seen banks making losses in terms of deposit mobilisation, customers have been skeptic about banks, if customers get cash they would rather keep it than deposit it and at the same time customers have been in preference of other payment option as long it does not involve the bank. This has also led to the lose of customers.

1.4 Objectives
The primary objective of this study is to establish the effects of plastic money use on bank deposit mobilisation in banks. This primary objective will be met through secondary objectives as follows:
i. To study the role of plastic money in deposits mobilization in CBZ Bank
ii. To establish the level of uptake of plastic money products in CBZ Bank Limited by the transacting public in the various sectors of the economy particularly the retail and distribution sectors.

This chapter will begin by the review of the existing theory which are well vested on the ongoing research. These various research will give more knowledge on the subject matter of the study. Theoretical review will be followed by the empirical review, which is looking at what other scholars are saying about the subject matter.
Bank led theory
According to Lyman, Ivatury and Staschen, (2006) Bank led theory is a unique substitute of the actual banking in the sense that customers are able to do financial transaction at other retail agents instead at the bank branches. The bank is the initial service provider of financial service and customers will always maintain their accounts. Any retail that can do face to face with customers is able to perform the bank led theory, for example my cash, western union, ecocash ,mukuru dot com and others, these can be used by retail agents.
The retail agent will communicate electronically with the bank for which it is working with. This can be done using mobile phones and Point of sale machines (POS). An electronic record of the transaction is delivered from the agent to the bank and customers’ accounts will be settled in return.

Bank Focused Theory
Kapoor, (2010 ) states that a bank focused theory is derived through the use of traditional banking’s low cost delivery channels, so that it provides better services to its existing customers. These banks provide services that include the use of Automated Teller Machines (ATM) to internet banking or mobile banking to carter for certain banking services to customers. The model provides the bank with the latest way of convection branch banking therefore giving a greater value to customers.
The theory takes customers as their first concern as to do with the provision of quality goods and services ,security in identification and transaction, therefore banks will provide a branchless banking service that can run uninterrupted for a year for example the Commercial Bank of Zimbabwe (CBZ).
A number of studies has been conducted concerning plastic money usage and bank deposits mobilization. According to Bologna (2011) deposits are of greater importance in the bank’s funding as most of commercial banks’ assets are financed through deposits. In order to increase their deposits banks should adopt better marketing strategies for deposit mobilization, which aims on satisfying customers, offering better products and identifying their needs (Suresch, 2011).
Khalily, Meyer and Hushak (1987)cited that there are five main factors that determines the deposits which are income, interest rate, access to banking facilities, interest rates transactional cost and yield on investment. However Dazie, Winston and Afriyie (2003) cited in Haron and Azmi(2006) stated that empirically other factors that affects deposits are level of income, customer satisfaction, service quality and perceptions of the safety of depositors as affecting deposit mobilization by banks.
According to Douglas Wood (Manchester Business School 2003), he asserts that revenue for card users, he goes to say that card profitability consist of 7 potential sources of income which are annual fee placed on to card holder, withdrawal fee on cash, interest on income balance due, income proceeds from using card outside the country, commission received from banks, printing additional statements income. In return they will have a positive impact on deposit mobilization and profitability.


Model Specification
In the going study the researcher has adopted a multiple regression model. Which is
Yt = Bo+B1X 1+B2X2+……..BnXn+u
In this study the dependent variable is our total deposits and the explanatory variables are bank deposits rates, value of transaction of plastic cards and volume of transaction on plastic cards.
Estimating Techniques
The data collected from secondary data was organised and analysed by means of descriptive and explanatory methods and will be organised and analysed using EXCEL and EVIEWS 8.
Diagnostic Test
It occurs when there is violation of the second assumption which states that the covariance between the error terms is zero. Durbin Waston classical test is used to test if there is autocorrelation or not. Relatively large residuals will imply a negative negative autocorrelation and a positive autocorrelation will consist of relatively small residuals on squared difference between successful residuals. For there to be no autocorrelation, the difference will be random and it will fall between zero and four

The main aim of this test is to see if variables are normally distributed. This test uses Jarque-Bera and the corresponding probability, our probability value should be more than 5%, so as to prove that residuals are normally distributed and if it is less than 5% we reject it because it will not be normally distributed.

Test for Heteroscedasticity
To test if there is heteroscedasticity amongst a model, the variance amongst its residual is not constant and a model that shows constant variance amongst its residual will prove that it has homoscedasticity. Therefore to prove that our model is statically significant it should have a constant varience. Breusch Pagan Godfrey test was used in the following hypothesis. Residuals are said to be heteroscedastic if chi square less than 5% and if it is greater than 5% there is homoscedasticity.
Test for Serial Correlation
Data Types and Sources
This research has been done through collection of secondary data collected from RBZ website and financial statements of various banks from the period of 2015-2017
Manipulation of Data
Since we are going to adopt a multiple regression model which is
Yt = Bo+B1X 1+B2X2+……..+BnXn+u
Hence our actual model will be
Yt = Bo+B1X 1+B2X2+B3X3+u
Y = total deposits of banks in time given
Bo =the constant
X1 = interest rates on deposits
X2= value of transaction of plastic money
X3= volume of transaction on plastic money
U= error term
Justification of Variables
In our study, interest rates, value of transaction on plastic money and volume of transaction on plastic money are our independent variables that affect bank deposit mobilization and bank deposit mobilization is our dependent variable.
Interest rate was chosen because of the inverse relationship between it and bank deposit mobilization. If interest rates are high there will be an increase in deposits because people will tend to deposit where there are higher returns and the opposite is true.
Volumes of transaction on plastic money was chosen so as to find out how the frequency and severity of POS transaction will affect the bank deposit mobilization, that is if volumes of POS increase this will in turn increase the bank deposit and the opposite is also true.
Value of transaction on plastic money was chosen so that we find out how charges of using plastic cards can affect bank deposit mobilization and if the value of transaction increases this will also means that our deposits will increase and the latter is also true.

This chapter’s main objective is to present, analyse and interpret from the data collected from the time series of secondary data of variables from 2015-2017. The focus of this research is to provide answers from questions in chapter 1 and the following order is used for presentation model specific bias, serial correlation, heteroscedasticity and normality test.
Model specification Bias
When the P value is less than 5% (P;5) then that variable becomes significant and from our model,all our variables are significant because they are less than 5% which makes it a good model, this means that interest rates, value of transaction on plastic cards and volume of transaction on plastic cards are significant and they influence bank deposits positively.
Breusch pagan Godfrey test states that P value should be more than 5% and from our findings our P value is 0, 1452 which means that, there is no serial correlation.
Breusch Pegan Godfrey testv was used for heteroscedasticity test and it states that we use observed R squared and the corresponding P value and from our findings our P value is more than 5% and we cannot reject now hypothesis, and our residual is not heteroscedastic rather residual is homoscedastic.

Normality Test
This test uses Jarque-Bera and the corresponding probability, our probability value should be more than 5%, so from our observations we cannot reject our now hyphothesis and it means that residuals are normally distributed and from our test our P value is 0.94072 which is more than 5% and we accept now hypothesis.
Interpretation of results
The three variables which were interest rates on deposits, value of transaction on plastic cards and volume of transaction on plastic money were both significant in explaining plastic money’s effects on bank deposit mobilization.
Results from data analysed shows that interest rates on bank deposits have a strong and a good positive relationship with bank deposits of 0,7278, this will imply that an increase in the usage of plastic money will increase more deposits.

From the study, it can be noted that plastic money use has a big influence on the bank deposit mobilization of commercial banks. The significant test revealed that the influence of plastic money on banks was positive
In a nutshell it can be concluded that plastic as a form of money has significantly contributed to the deposit mobilization exercise within the commercial banks leading to deposit growth for the banks.
The findings reflect that indeed deposits growth was noted and witnessed as actuality driven by the improved use of plastic money by customers on various platforms. However future scholars have to go to find the denial on use of plastic money by some fragments of the society like the Indian and the Chinese business community who have a trivial share of the business and potential answers to that.

Dependent Variable: BANK_DEPOSITS
Method: Least Squares
Date: 04/05/18 Time: 11:29
Sample: 2015M01 2017M12
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

INTREST_RATES 3.49E-09 2.12E-09 1.650098 0.1087
VALUE_OF_TRANSC -1.89E-10 3.50E-11 -5.408681 0.0000
VOLUME_OF_TRANS 1.88E-12 3.95E-13 4.750976 0.0000
C 4004530. 1.22E-08 3.30E+14 0.0000

Mean dependent var 4004530. S.D. dependent var 0.000000
S.E. of regression 1.08E-08 Akaike info criterion -33.75171
Sum squared resid 3.71E-15 Schwarz criterion -33.57576
Log likelihood 611.5308 Hannan-Quinn criter. -33.69030
Durbin-Watson stat 0.975731

Heteroskedasticity Test: Breusch-Pagan-Godfrey

F-statistic 0.590788 Prob. F(3,32) 0.6255
Obs*R-squared 1.889269 Prob. Chi-Square(3) 0.5957
Scaled explained SS 1.631714 Prob. Chi-Square(3) 0.6522

Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 04/05/18 Time: 12:16
Sample: 2015M01 2017M12
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

C 2.96E-16 1.77E-16 1.667208 0.1052
INTREST_RATES -1.17E-17 3.09E-17 -0.377897 0.7080
VALUE_OF_TRANSC -3.95E-19 5.11E-19 -0.773733 0.4448
VOLUME_OF_TRANS 5.68E-21 5.77E-21 0.984655 0.3322

R-squared 0.052480 Mean dependent var 1.03E-16
Adjusted R-squared -0.036350 S.D. dependent var 1.54E-16
S.E. of regression 1.57E-16 Sum squared resid 7.91E-31
F-statistic 0.590788 Durbin-Watson stat 2.044192
Prob(F-statistic) 0.625544

Estimation Command:

Estimation Equation:

Substituted Coefficients:
BANK_DEPOSITS = 3.49029174414e-09*INTREST_RATES – 1.89041583447e-10*VALUE_OF_TRANSC + 1.87724077501e-12*VOLUME_OF_TRANS + 4004529.8

Date: 04/05/18 Time: 12:40
Sample: 2015M01 2017M12
Included observations: 36

Autocorrelation Partial Correlation AC PAC Q-Stat Prob

. |*** | . |*** | 1 0.471 0.471 8.6576 0.003
. |*** | . |** | 2 0.461 0.307 17.190 0.000
. |** | . | . | 3 0.333 0.054 21.788 0.000
. |** | . | . | 4 0.246 -0.023 24.375 0.000
. |** | . | . | 5 0.229 0.052 26.690 0.000
. | . | **| . | 6 -0.057 -0.318 26.839 0.000
. | . | . | . | 7 0.036 0.059 26.899 0.000
.*| . | .*| . | 8 -0.108 -0.075 27.465 0.001
**| . | **| . | 9 -0.230 -0.227 30.147 0.000
***| . | **| . | 10 -0.348 -0.236 36.505 0.000
***| . | .*| . | 11 -0.415 -0.101 45.944 0.000
**| . | . |*. | 12 -0.216 0.186 48.604 0.000
***| . | **| . | 13 -0.441 -0.237 60.186 0.000
**| . | . | . | 14 -0.313 0.009 66.271 0.000
**| . | . | . | 15 -0.303 0.013 72.243 0.000
.*| . | . | . | 16 -0.184 0.063 74.558 0.000