Johannesburg, 19 Nov 2018
Giving SMEs and entrepreneurs greater access to non-cash forms of payment is essential in a country that's relying on small business to create employment opportunities. Mobile card payment solutions enable small businesses to expand their payment acceptance offerings and therefore can grow their businesses. This trend is gaining a foothold globally, as well as in Africa.
As consumers become increasingly comfortable using mobile technology, mobile payments for goods and services are becoming more convenient, secure and seamless for customers and businesses alike.
"However," says Johan Gellatly, Group Executive at Altron NuPay, "it's still a technology that people are unsure about; we need to create a level of trust around security as people aren't completely confident about it just yet. They need to know that mobile payments are safe and that their personal data, and money, are secure. The more people that use the technology, the more general acceptance will grow."
The same holds true for all new payment methods. If you consider that not so long ago, all transactions were carried out on paper and had a 30-day approval and settlement cycle. Today, almost every payment is online and instantaneous.
Advances in this sector are being driven primarily by a demand for fast, easy and convenient payments. This, combined with growing penetration of mobile phones and their associated technologies, has paved the way for mobile payment applications to become mainstream.
Gellatly says: "We're seeing a confluence of the unbanked becoming banked, combined with small businesses wanting to expand their payment options so that they can increase sales. As a result, a growing number of mobile payments solutions are entering the market, underlining the importance of this method of payment, particularly for small businesses and entrepreneurs."
The latest mobile payment technology entails the use of an app that allows the user to tap and pay using their mobile phone. "However, some South African users aren't quite ready for that level of sophistication in payment technology just yet; they still prefer to present their cards and use a pin because that feels like a more secure transaction," says Gellatly.
"The advantage of paying with tap and go using only your mobile phone is that while you may forget your wallet or bank card at home, you rarely forget your mobile phone," he says. "However, users need to become comfortable with the technology and trust that the payment transaction is secure, before this payment method will be widely accepted."
A mobile payment method that local users are comfortable with, and which is accessible for small businesses and entrepreneurs, is the use of a card acceptance device that uses Bluetooth to connect to a mobile phone, which connects into the South Africa banking card acceptance network for the online payment transaction. The users only tap or swipe their cards and enter their PIN, but they feel more secure because their bank card is present and used for the transaction to take place.
"The ultimate aim is to get these users to a stage where they'll download the payment application and eventually stop using their cards altogether," says Gellatly.
The implications of having access to a payment method that's powered by mobile technology are numerous. The informal sector, which is largely cash transaction-driven, can now accept card payments. People across Africa, but particularly in the SADC region, have more access to bank accounts than previously, but not necessarily to ATMs where they can draw cash. Local retailers don't always have card acceptance payment devices. These and other factors conspire to create a cash-driven economy, which restricts people to spending only the amount of cash that they have on hand, while also posing a safety risk for those merchants receiving cash payments.
Gellatly says: "It's very much a chicken and egg scenario. Retailers, especially in rural areas or smaller operations, can't always process card payments, but customers can't always draw cash. The market is more than ready for a card payment device that can accept customers' cards in a secure manner, that is PCI/DSS certified and compliant with the Payments Association of South Africa."
"In South Africa, we follow international standards for card payment acceptance, which has helped to change people's attitudes towards having bank accounts and making card payments. We're aligned with international trends in this regard. We must follow these international standards if we're serious about growing tourism in our territory as the majority of international travellers are accustomed to paying for goods and services with their cards. If we empower smaller merchants to have access to the technology to accept card payments, we can attempt to make a dent in reducing unemployment and grow the informal sector. The next step that we need to take is to shift people's payment behaviour towards using their mobile phones for payment transactions."
How mobile payments work:
1. The merchant downloads the app onto their mobile phone, connects via Bluetooth to a card acceptance device.
2. The users swipe/dip their card or tap to pay.
3. The payment transaction is deducted online directly off the customers' cards (debt or credit).
4. The card acceptance device transacts with the app via the merchant's phone.
5. The users authorise the payment by entering their PIN on the payment device.
6. The money is transferred into the retailer's account from customers'.
In South Africa, the applications for this type of payment technology are virtually limitless, ranging from the 'man-in-a-van' type of business, such as an electrician, plumber or even farrier, to roadside vendors, flea market operators and even taxi drivers. Anyone who has a smaller business and doesn't necessarily have the secure infrastructure to accept cash payments can use their mobile phone to ensure they're paid timeously for work done or items supplied.