Instant payments, digital identification, opening up the National Payment System and mobile payments are four major trends identified in a survey conducted by Deloitte, in collaboration with iCombine.
In an effort to establish the current state of the South African National Payment System (NPS) the companies conducted the survey last year. They also aimed to find out what needs to change and how the industry should respond.
The “Regenesis of SA Payments: What needs to change?” survey report was launched today, with 34 payment experts from 22 different South African institutes interviewed. They ranged from the regulators, the payment system operator, through to the retail banks, neo-banks, payment service providers, financial technology providers, e-commerce payment service providers and large retailers.
Deloitte is a global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. iCombine specialises in providing payment consulting services, including the development of payment products and services.
Instant payments
According to the report, fast payments systems overlaid with mobile payment services are stimulating economies by replacing bank notes, reducing card usage, enabling businesses and providing a service to consumers “as quick as cash”.
South African Reserve Bank head of fintech Arif Ismail said the market has expressed growth and the need to extend the instant payment capability to broader use cases and transaction types.
“Instant payment is a top priority, as we enter the shared and digital economy. The sending and receipt of payments in real-time matters and should not be constrained and reserved for business-related transactions or high-value payments,” said Ismail.
Payments Association of South Africa CEO Walter Volker said the high fee charged for this service is one of the biggest frustrations in South African banking.
“Many factors have prevented real-time payments (RTC) from reaching its full potential. One of these is the high fees charged by many of the banks for the service, which definitely have a dampening effect,” said Volker.
The survey also revealed that some stakeholders believe that while the current RTC system provides a solid core, the system infrastructure, messaging standards and processing capacity have not been designed for instant person-to-person and person-to-business payments.
Digital identification
The survey stated that according to a survey conducted by the Fintech Working Group in April last year, participants highlighted that a South African digital ID may result in increased financial inclusion by making it easier for South Africans to access financial services.
“A national reference database is required. We need the ability to latch on to a centralised digital platform which is owned by government and secured by government to enable authorisation on demand,” said Ismail.
According to the report, a central digital ID could benefit the market, addressing know your customer (KYC) requirements that are placed on financial institutions.
First National Bank EFT Credit House CEO Ravi Shunmugam says the KYC requirements still act as a hindrance to account ownership among the financially underserviced. “One of the biggest challenges to solve for financial inclusion is the current KYC requirements.”
Opening up the NPS
The report states that opening up the NPS has provided space for fintech firms to enter the payments arena, thereby broadening the payments ecosystem.
Capitec head of interbank Dirk Ehlers said open bank is the future. “Banks are already building their own solutions and platforms. There is a need for industry-wide standards and regulations which allow an element of flexibility, and different layers which inform who can have access to what.”
Mobile payments
The report states that growth in mobile subscribers has accelerated, which resulted in unprecedented change which has shaped and continues to reshape the consumer’s lifestyle.
South African Reserve Bank national payment system department head Tim Masela said if social media and mobile payments were integrated, traction will be seen. “The industry could put a valid solution together and take-up would be natural, especially among the younger generation. We are living in a world that expects payments to be integrated into the service experience.”
The reports notes the global trends in payments show an evolution from traditional and digital payment solutions is being achieved and accelerated.
“We need to be open to change, collaborate on emerging complex issues and develop policy transparently and iteratively (with adequate feedback loops) to ensure robust and appropriate policy development,” noted Ismail.
Share