Payment revolution to boost economies and financial inclusion
The digital payment revolution is well underway, and is set to drive financial inclusion, grow businesses and create new financial ecosystems outside of traditional banking.
Covid-19 fast tracks change
Noting that the Covid-19 pandemic had accelerated trends that were already developing, Gabriel Swanepoel, Vice President of Business Integration at Mastercard, Southern Africa, said: “Covid-19 introduced significant and permanent shifts in the way commerce happens and how we solve for the needs of merchants – especially smaller merchants.”
He highlighted the Mastercard New Payments Index, which found that 95% of consumers in South Africa are considering emerging payments such as, biometrics, digital currencies, and QR code, in addition to contactless, with 86% of South African consumers saying they have access to more ways to pay compared to this time last year and 77% saying digital payment methods help them save money.
Pierre Aurel, head of Payments at Synthesis, said changes during the past two years had also paved the way for new contactless payment solutions such as the Halo Dot Tap on Phone software POS by Synthesis, which now allows secure PIN entry on any NFC-enabled Android phone. Halo Dot will enable informal traders, SMEs and micro enterprises to accept card payments anywhere, anytime and in any amount, boosting financial inclusion and creating a safer alternative to handling cash.
Nedbank, which rolled out the solution in its PocketPOS tap on phone app last year in partnership with Mastercard, went live with the PIN feature last week. Chipo Mushwana, executive for Emerging Innovation & Payments at Nedbank, said: “Tap on Phone was initially, driven by the need for affordable digital payment solutions in South Africa. During the pandemic, Tap on Phone has proven to be a critical enabler for aspiring entrepreneurs in a depressed economy. Not only does this game-changing functionally facilitate safe and hygienic trade, but it also opens the door further for anyone to set up a new business simply by using their smart phone as a payment device.”
On the question of consumer hesitance about using their PIN on a stranger’s phone, she said: “We did our first Tap on Phone transaction last week Friday, and we all watched with bated breath. But the customer entered their PIN on the merchant’s phone without thinking twice.”
Future of payments
Commenting on where payments were going, Mushwana said: “We are going to see real-time payments go global, a lot of activity around business-to-business payments, growth in mobile wallet adoption, ecommerce and contactless payments in general. More focus from a regulatory perspective on digital currencies, and increasingly open finance, open banking as ecosystems evolve.”
Swanepoel agreed, saying: “We will continue to see the convergence of technologies; with fintechs playing a bigger role in the way consumer pain points are being solved. It’s an exciting future, with continued convergence, more choice for consumers and merchants, more co-opetition between stakeholders, and a broader data-driven finance ecosystem.”
Aurel noted that as payments ecosystems changed, there had to be a focus on cyber security. “All this technology converging between traditional banks and providers is merging in this ‘fintech pot’, so it remains crucial to ensure that it is secured. The payments industry needs to invest more in its cyber defense capabilities,” he said.
Louis van Staden, head of Payments at Luno, said cryptocurrency would make its way into the payments space in the form of stablecoins, which bridge old and new financial systems and enable fast, low-cost remittances and low value payments for broad consumer bases.
“We notice that while customers are overwhelmingly bullish about crypto as an investment, they are not really spending their cryptocurrencies, and keep them as part of their investment portfolios. But in the future of payments across Africa, where over 1.5 billion people are unbanked but over one billion have access to a mobile phone, currencies like stablecoins are coming to the fore giving people access to a currency pegged to the US dollar. This can transform their lives and keep prosperity in the hands of the people, and not rely on the intermediary structures we’ve had for many years,” Van Staden said.
Payments of the future will be frictionless, fast and focused on both merchant and customer’ needs and through these companies, Africa is paving the way globally.