The digital payments sector is undergoing rapid transformation, with 2022 looking to be a year of increased financial inclusion and confidence in online sales
South Africa is set to face a period of unprecedented change in the payments landscape, change that is sorely needed to support the national imperative of financial inclusion, one of the main priorities outlined in the South African Reserve Bank’s (SARB) Vision 2025, particularly in terms of digital inclusion. Although 80% of South Africans have a bank account, most consumer transactions are still cash-based, which is risky and costly for business owners and can prevent small businesses from entering the formal economy.
A huge driver for change in the payment ecosystem is the growth in online sales. With an increase in the number of people working from home and the ongoing pandemic discouraging people from visiting physical outlets, the need to shop from home is growing at an astonishing rate. This, along with pre-authorised debit order systems, a greater uptake in mobile and contactless payments, the use of social media as a carrier for mobile transactions and the need to remove cash from the economy, is kicking off a revolution in payment technology.
These innovative solutions are disrupting the financial services sector because they go to the heart of customers’ needs. Contactless payment does away with cash handling, allows for faster payments and reduces queues at checkout. It is also far more secure, with zero PIN exposure at checkout. A significant concern addressed recently is fraudulent debit orders, which a new debit pre-authorisation system, DebiCheck, prevents. The ability of messaging platforms, such as WhatsApp, to offer in app purchasing is making the buying process seamless, with customers no longer redirected to a new web page to complete the payment process.
Another innovation in the digital payments sector is the rapid payments programme (RPP), an inter-banking payment system set to go live in 2022 and poised to grow e-commerce even further. The programme enables instant digital payments between banks, thereby reducing dependency on cash and creating an integrated platform for digital payments, possibly replacing the point of sale (POS) and making peer to peer payments a reality for lower income earners.
To enable this rapid growth in the payments industry, regulators, including government and central banks, need to create an open and competitive market. The South African National Payment System Act 78 of 1998 is currently under review, and one recommendation would allow non-banks, such as telcos and retailers, to issue e-money and perform certain transactions without needing to partner with a bank. Interoperability is also imperative to growth, another SARB Vision 2025 goal, which states that improved communication between payment systems will lead to a more harmonised and competitive payments ecosystem. We do, however, need to provide education on the benefits of digital payments, and the flexible, inclusive, low cost and scalable infrastructure needed for it in order to improve digital adoption and ultimately financial inclusion.
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