New payments system set to shake up South Africa’s banking industry
A major change is coming to South Africa’s banking and payments sector. Known as the Rapid Payment Programme (RPP), 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 or email addresses. Led by BankServAfrica in collaboration with the Payments Association of South Africa (PASA), RPP is the first of its kind in the country – unifying the entire banking sector under the common goal of broadening and modernising the industry to include those who had historically relied on cash as their primary payment method. According to Thomas Pays, CEO and Co-Founder of Ozow - an Instant EFT payment solutions provider, the initiative is set to change the course of how people transact in the future. “Not only will this make it easier for people to be able to make payments, but it will also help solve one of the biggest challenges that our country faces - how to get the millions of underbanked South African's transacting in the digital economy.” Aligning with the South African Reserve Bank’s Vision 2025 and PASA’s Project Future aimed at modernising the payments industry, RPP has been endorsed by various government bodies, 11 major banks and the broader fintech industry. It is anticipated that the successful launch of the initiative will take place as early as 2022. “This is a massive step in the right direction and is something that we have actively been lobbying for over the last six years. Our mission is centred around an imperative to empower previously disadvantaged South Africans with the development of innovative payment solutions that meet their real-world needs,” explains Pays. What this will mean for consumers While 80% of South Africans own a bank account, more than 70% of all retail payment volumes are still cash-based . In the informal economy, it is estimated that as much as 89% of all transactions are done using cash . To reduce the reliance on cash, Pays says that the move to introduce this next-generation payment ecosystem will make it easier for consumers to be able to transact digitally. “What sets RPP apart from previous banking initiatives that have hoped to achieve the same goal is that consumers will be able to select phone numbers, email addresses, and domain-based aliases as a way to identify themselves for the purposes of receiving payments,” he explains. The system is also set up to enable consumers to be able to make or receive payments instantly without having to wait for the funds to clear, regardless of which bank they are with. In the long-term, RPP will contribute to building a safe, reliable, and efficient National Payment System that would ultimately benefit all levels of society in the country. International success of rapid payment systems South Africa’s RPP is based on several international initiatives that have helped to revolutionise the way people pay in countries like India, Brazil, US, UK, Thailand, China and Singapore. Launched in 2015, India’s Unified Payment Interface (UPI) redefined the way people made payments, resulting in more than a billion transactions being made through the system each month. Pays says that 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. In response to the Covid-19 pandemic, Brazil’s Central Bank saw the need to create and regulate a new instant payment system called PIX to improve access to online services. Since its launch in November 2020, PIX has had the fastest adoption of a new payment service in the world. In total, 83 million individual users and more than 5.5 million companies registered more than 242 million PIX keys. More than 45% of the country’s population now uses this as a payment method. Fintechs to play a vital role Within the world of banking, fintech companies are at the forefront of developing these simple and accessible payments solutions to enable consumers to bank or transact online. BankServAfrica has recognised that fintech companies and other third-party providers will play a crucial role in developing easy and simple user interfaces for consumers to be able to use. “We believe that the work that Ozow has done to enable bank-to-bank payments online and in-person through some of the most simplified payment solutions for enterprises, SMMEs and individuals is perfectly primed to deliver RPP to the market,” says Pays. Using India as a benchmark, there is also tremendous value for fintechs to be part of the solution in South Africa. In February 2021, fintech providers of India’s UPI recorded a total of 2.3 billion digital payment transactions worth over four trillion Indian rupees. This marked a year-on-year growth of over 70% in volume of transactions . As a result of UPI, India’s fintech sector grew by an estimated $31 billion in 2020. By 2023, this is expected to jump $140 billion and by 2025, the fintech industry valuation is estimated at $150-160 billion . “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,” he adds. “We look forward to collaborating with BankServAfrica, PASA, the banks and all other stakeholders within the industry to help create a truly democratised, equitable, and inclusive financial and banking sector that will meet the needs and better serve all South Africans,” says Pays.