Collaboration between financial service providers set to drive the success of rapid payments programme PayShap

About nine million underbanked consumers are expected to adopt the rapid payments programme recently launched as PayShap, with the expectation that around R3-trillion in expected flows will be serviced by rapid payments five years from now.

Speaking at an industry panel discussion hosted by instant EFT payment provider Ozow this week, Busi Radebe, the head of card and electronic payments at Capitec, said the adoption of a rapid payments process should be viewed by the financial services industry as a collaborative effort, rather than another issue to be relegated as a compliance matter.

“If companies see this as an opportunity for co-creation, there is opportunity to move forward. A key challenge is to drive adoption by keeping the product and language as simple as possible. The benchmark should be three clicks to make a payment,” he says.

According to the financial services firm McKinsey, South Africa is likely to be Africa’s biggest e-payments market in 2025, with $5-billion in annual revenues. PayShap’s three core services are instant payments, proxy payments and a request-to-pay service. 

Instant payments offer a centrally managed real-time clearing service, while proxy payments allow consumers to make payments to a ShapID using an identifier such as a cellphone number without the need for bank account details when making the payment. 

Later this year, PayShap will introduce a request-to-pay function which makes it possible to request payment and receive money securely and immediately in your bank account. Transactions are limited to a maximum of R3,000, and the daily payment limit is R5,000.

Ashlin Perumall, a partner at Baker McKenzie, points out that the implementation of PayShap will also improve adherence to global best practices for financial communication. 

Last year, the SA Reserve Bank, participating banks and other financial markets infrastructures adopted the International Organization for Standardization financial messaging standard (ISO 20022) for high-value payments in the domestic market, and the PayShap platform is fully ISO 20022 compliant. 

“ISO 20022 financial messaging provides structured and data-rich communications that are more readily exchanged among corporates and banking systems. By 2025, most major reserve currencies will have moved to ISO 20022 as it becomes the de facto messaging standard for these types of transactions,” Perumall says.

SA’s four big banks — Absa, First National Bank, Nedbank and Standard Bank — all currently offer PayShap and two more banks are expected to offer the service by the end of this year. 

Mpho Sadiki, the head of PayShap at BankservAfrica, says South Africa could realise savings of as much as R48-billion in five years on the back of cost-of-cash avoidance. 

“South Africa has about R23-billion worth of security and fraud issues each year, directly related to cash,” he says, adding that large retailers such as Shoprite had to contend with more than 400 armed robberies in 2018.

In the same year, the total payment volume in the formal and informal sectors was R63-billion. When developing the PayShap model, Sadiki says BankservAfrica looked at other countries which had successfully introduced rapid payment models, such as India, China, Singapore and Thailand.

Thailand, which introduced PromptPay in 2017, achieved critical mass within eight months and now processes an average of more than 1,000 low-value real-time payments per second. 

The International Monetary Fund reports that India’s digital payment volume has climbed at an average annual rate of 50% over the past five years. Transactions more than doubled, to 5.86 billion, in June 2022 from a year earlier as the number of participating banks jumped by 44% to 330. Values nearly doubled in the same period.

Sadiki says although the focus is currently on person-to-person payments, every South African, including small business owners, merchants and commercial businesses, stands to benefit from this service which becomes a viable alternative to cash — from reimbursing friends or family to paying for items on community marketplaces and for home maintenance services, car washes, restaurants, hair salons and transportation. 

When it comes to costs, the four participating banks have come out with fee structures that range from free for transactions under R100 to R45 for transactions over R1,000, while transactions from R200 to R1,000 attract fees between R6 and R7.50 from most banks. 

Gary Stone, the head of payments and regulatory at fintech payment aggregator Ozow, says there are currently around 20 million real-time clearing transactions a month, and about 130 million EFT (electronic funds transfer) transactions. 

Stone says 80% of the 150 million transactions are for amounts of R3,000 and below, illustrating the potential for PayShap use. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.