Upwardly Mobile: The Power of a United Approach to African Payment Innovation
Thursday, February 12, 2015
The growing use of banking services in South Africa is driven by a national rollout of social security debit cards and strong economic growth across finance, real estate and business services sectors. According to the Banking Association of South Africa, just under a quarter of the adult population (23.5%) remains unbanked.
The rapid adoption of feature phones, smartphones and online technology has positive implications for financial inclusion policies and growth of payment electronification. It is also providing new, highly-convenient ways for consumers to pay themselves (through deposits and transfers), other people, bills and retailers. What could a mobile banking revolution mean for South Africa in particular?
A tradition of banking innovation
Innovation is nothing new for South Africa’s banking industry, which – along with Morocco and Egypt – has set a high standard for African financial services. As a result of a highly responsible central bank, the South African Reserve Bank, the well-organised Payments Association of South Africa (PASA) and a host of long-established financial institutions, the country was among the first in the world to set up a Faster Payments system. It is also showing dramatically increased use of internet banking, with penetration up from 7% in 2012 to 11% in 2013, driven by men aged 30 to 44. According to research by PwC, some banks in the market have already achieved operational savings by encouraging customers to migrate certain banking activities from the branch to electronic banking channels.
What’s more, innovation hasn’t ended with customer channels. In PwC’s survey, all four of the country’s biggest banks give innovation five out of five in terms of importance. This is not just talk: leading organisations have not only developed new systems, products and services but have also made clever use of technology to enhance the entire banking process. BankservAfrica, which runs South Africa’s national payment system, has established an electronic bill presentment and payment (EBPP) platform to help residents pay bills electronically.
Although advanced, certain aspects of South Africa’s banking infrastructure remains sub-optimal. While individual banks have undoubtedly developed some great technology solutions, these can typically be used only by their own customers. In other words, there’s a marked lack of interoperability between banks. This in turn is preventing South Africa’s banking sector from reaching every corner of the country. We believe one area of focus should be the development of a low value real-time person-to-person (P2P) payment capability.
Mobile money opportunity
With real-time P2P payments, consumers can use their feature phones and smart phones to send money to, or receive it from, anyone they know or owe. Tapping into the increasingly connected lives of today’s consumers, this modern, convenient equivalent of exchanging cash or writing cheques is an effective way to introduce financial services to previously unbanked members of society.