Subscribe

Payment complexities mar PayShap rapid payments system

Sibahle Malinga
By Sibahle Malinga
Johannesburg, 20 Mar 2023

While South Africa’s new rapid payments programme, PayShap aims to increase financial inclusion, certain challenges such as pricing complexities may hinder wide-scale adoption of the service.

This is the sentiment shared by local fintech players who have raised several concerns regarding the operating model of the inter-banking payment programme launched last week by automated payments clearing organisation BankServAfrica, in partnership with the financial bodies Payments Association of South Africa and Banking Association of South Africa.

PayShap is currently available at SA’s big four banks − Absa, First National Bank, Nedbank and Standard Bank − with more banks expected to go live in the coming months.

Hailed by industry players as a game-changer in SA’s digital payments ecosystem, the programme was developed as part of South African Reserve Bank’s Vision 2025, which aims to modernise payment systems in the market, with a goal of reducing the number of unbanked South Africans.

It allows South African bank account holders to pay and receive money (up to R3 000 per transaction) instantly, between participating banks. It also seeks to make conducting transactions without the need for bank account details possible. This is done through public and private identifiers, such as a registered mobile number or an e-mail address.

Nicho Bouma, chief innovation officer at local payments service provider Pay@ is of the view that while PayShap is a significant development for the local financial market, however, several challenges still need to be addressed.

“This includes the sign-up processes, which is not intuitive and can lead to confusion and slow rates of adoption. This is a simple fix if banks can better communicate and educate users on the technology’s use cases.

“Secondly, it seems as though the banks have missed an opportunity to drive PayShap transaction growth. This is primarily because the system launched with prices that are more expensive than existing channels. For example, wallet-to-wallet transactions by telecommunications companies are free and instant. Currently, banking applications also default person-to-person payments to normal EFTs, rather than PayShap, which further limits adoption,” explains Bouma.

To sign up, bank customers need to register their ShapID via their banking app. The ShapID registered is a unique identifier such as a cellphone number or an email address.

Users can receive money directly into their bank account by giving someone their ShapID when requesting payment. Only the recipient needs to share a ShapID to perform a transaction.

Businesses sidelined

Brett White, VP of Product Payments at Clickatell.
Brett White, VP of Product Payments at Clickatell.

In terms of payment fees, the four participating banks have come out with fee structures that range from free for transactions under R100 and between R6 and R7.50 for transaction values between R200 and R1000, depending on the user’s bank.

This is significantly more than the average R10 charged by the big-four banks for EFT transactions of up to R1 000 and R49 for transactions over R1 000.

When compared to peer-to peer e-wallet payments local banks charge an average of R2.50 for every R100 sent.

Brett White, VP of product payments at payment chat commerce firm, Clickatell points out that the retail sector should see immediate gains by using the PayShap payment option and, under optimal conditions, it could make a big difference.

However, the complex pricing structure could hinder growth, he adds.

“The lack of consensus between what banks are charging will cause confusion amongst users. In many instances, the launch fees may be slightly cheaper than current immediate transfers, but are certainly more expensive than existing EFT charges, offering no real incentive to use the system.

“Making things overly complex will put users off and will impact the uptake of the service. If we want to see anything like the efficacy of what Brazil has achieved, we should be looking to make things as simple, transparent and cost effective as possible. Unfortunately, this first iteration of PayShap is not that. We hope that the market will correct and banks will support the benefit of a service which was created to help businesses and individuals quickly access funds needed to survive,” White explains.

Some local experts have touted PayShap to have the same potential as Pix payment, the instant payments platform developed by Brazil’s Central Bank in 2020.

The offering has reached several milestones in propelling e-commerce payments in the region and significantly improving financial inclusion, with more than half the Brazilian population, having already made a PIX transaction.

Clinton Leask, business development lead at Pay@, points out that another issue is that the PayShap system currently does not cater for person-to-business transactions.

“This would present a great opportunity to businesses looking to capitalise on the technology’s speed, security, and potential cost-effectiveness which will in-turn help to improve cash flow, reduce transaction costs, and expand customer bases.

“Doing so successfully will require good planning and preparation – specifically, businesses will need to build-out the infrastructure needed to aggregate and reconcile high volumes of micro-payments,” notes Leask.

For businesses looking to develop the back-end needed to facilitate PayShap, independently integrating with a wide range of potential payment frameworks and institutions will be no easy task, he adds.

Doing so will require significant investment in the form of both time and capital to account for, administer, and manage this process.

“It is likely then that we will see businesses look to payment aggregators to support their integration with PayShap. This is because payment aggregators enable cash-heavy businesses (like brick-and-mortar retailers) to digitise physical transactions,” he concludes.