South African banks are in the process of developing the Rapid Payments Programme, an inter-banking payment system poised to revolutionise digital transactions in SA.
The industry-wide collaboration is led by BankServAfrica, in partnership with the Payments Association of South Africa and the Banking Association of South Africa.
Hailed by industry players as a game-changer in SA’s digital payments ecosystem, the RPP aims to unify the entire banking sector under the common goal of modernising the industry to include citizens who have historically relied on cash as their primary payment method.
The programme, set to go live in 2022, will address key goals identified in the South African Reserve Bank’s Vision 2025 – increasing financial inclusion, reducing SA’s dependency on cash and creating an integrated platform for digital payments.
The programme was first announced in 2018 by BankservAfrica, with an aim to define a mobile-friendly instant payment platform for the industry.
Initially, it will be implemented across 11 of SA’s major banks to help banking consumers and businesses overcome several barriers often associated with the digital transfer of cash through three key functions:
- Enabling instant digital payments between banks via a real-time clearing system that processes transactions within 60 seconds;
- Enabling proxy payments – conducting transactions without the need for bank account details through public and private identifiers, such as mobile numbers and e-mail addresses; and
- Request to pay – enabling users to request payment from other users digitally.
Once the RPP is implemented across SA’s banking sector, the aim is that, in future, it will include the involvement of the entire banking sector in the country as well as fintech players, according to BankservAfrica.
Thomas Pays, co-founder and CEO of Ozow, a payments solutions company, believes the RPP is set to shake up SA’s banking industry.
“This is a massive step in the right direction and it is something that we have actively been lobbying for over the last six years. This evolutionary banking concept aims to create a simpler, safer instant payment ecosystem that would give people the ability to make real-time payments using simple identifiers, such as mobile numbers, e-mail addresses or domain-based aliases,” explains Pays.
“Across the value chain, from the banks to fintechs like Ozow, we are geared to drive consumer awareness and build trust that would ultimately encourage migration to these new forms of digital payments. Unlike before, the unified approach that underpins RPP will act as a massive catalyst to ensure that this happens.”
While 80% of South Africans own a bank account, more than 53% of all retail payment volumes are still cash-based, according to Cash Matters. In the informal economy, it is estimated that as many as 89% of all transactions are carried out using cash.
To reduce the reliance on cash, Pays says the move to introduce this next-generation payment ecosystem will make it easier for consumers to be able to transact using their phones.
With local consumers’ high reliance on cash, BankServAfrica believes the RPP is poised to provide a free or low-cost digital payment system desperately needed in SA. This would free users from high fees, losing out on interest, waiting for days to receive payments from other banks and spending time in queues.
“We believe that RPP is poised to transform the way South Africans view and use digital payments, ultimately contributing to financial inclusion across the country. Our payments revolution is not about cancelling cash, but reducing dependency on it by the underbanked and SMEs,” says an RPP spokesperson.
“We anticipate that by 2023, RPP will be the most preferred e-payment option in SA. It will deepen financial inclusion and contribute to building a safe, reliable and efficient national payments system.”
According to BankservAfrica, the payment system, which is being developed in partnership with Tata Consultancy Services, is built on modern architecture such as ISO20022 and it will use application programming interfaces that will facilitate access, speed and global standardisation between the banks.
Once complete, the system will be trialled across 11 banks, with plans to be rolled out by August 2022.
SA’s RPP is based on several international initiatives that have helped to revolutionise the way people transact in countries like India, Brazil, the US, the UK, Thailand, China and Singapore.
Launched in 2015, India’s Unified Payment Interface redefined the way people made payments, resulting in more than a billion transactions being made through the system each month.
The system has helped India rapidly expand its entire banking ecosystem to previously untapped markets, which equated to a 50% increase in overall transactions in the country that were previously non-existent on the system.
Helen Whelan, content creator at local payments services firm Electrum, points out that SA has many lessons to learn from India and Thailand’s payments advancements.
“In SA, real-time clearing transaction volumes amount to only 3% of all EFT transactions – indicating to us that a better, safer, more cost-effective system is desperately needed. This type of system is already working well in other parts of the world.
“India’s Unified Payments Interface, introduced in 2016, was fuelled by a demonetisation goal to curb corruption. By combining the accessible and widespread national identity base with their real-time payments service, UPI was released,” explains Whelan.
Thailand launched a similar system, PromptPay, in 2017, to enable users to make and receive payments into their bank accounts or into digital wallets linked to their national ID, mobile phone numbers or e-mail addresses, she adds.
“Adopted by all the major banks in Thailand, PromptPay has been transformational. Since its launch, it has attracted 43 million users and processed more than 765 million transactions. We believe that RPP is poised to transform the way South Africans view and use digital payments, ultimately contributing to financial inclusion across the country,” concludesWhelan.