Payments in South Africa are set to undergo remarkable changes

29 July 2019 4 min. read
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The payments landscape across South Africa is set to undergo a comprehensive transformation of sorts, through a combination of policy changes that align with government objectives and overall disruption from businesses. This is according to a new report from Deloitte in conjunction with iCombine.

The report is based on a survey with 34 payment experts who hailed from as many as 22 institutions in South Africa, ensuring that a broad spectrum of stakeholders were considered when evaluating payments in South Africa. The analysis comes as the National Payment System (NPS) in South Africa is coming under increased scrutiny.

The South African Reserve Bank (SARB) is looking to make certain changes to the NPS, which was first enacted in 1998, and has since lost a degree of its relevance in the contemporary market. The SARB is examining methods of making the NPS more inclusive and accessible to more economic segments in the country.

Good use cases for South Africa

The hard yet straightforward means to this end are to reduce the cost of using the NPS and making it more efficient to carry a greater load in quicker time. As an institution, the SARB has also had to shift its perspective when it comes to the payments landscape in South Africa.

Where the regulatory framework under the NPS has traditionally extended to banks – given that banks have been the fundamental actor – the SARB is looking to expand the scope of regulatory scrutiny to reach the individual level in light of the range of new and diverse actors that have now come within the scope of payments activity.

Fintechs are one set of these actors. South Africa is among the fastest growing fintech markets in the world, which has led to a scenario where major banking corporations are adapting their practices to include digital activity on the one hand, and smaller players are gaining an increasing market share on the other.

Timeline of payments in South Africa

Smaller innovative firms that have established a firm grip over fintech technology and its evolution are now in a position to occupy a greater share of the payments market, particularly day-to-day transactions. This spells opportunity for smaller innovators, but has threatened the revenues of larger banks. 

Other innovators have the capacity not to develop entirely new payment methods, but to devise tools that can make the digital payments process easier, including mobile wallets, distributed ledgers and biometric technology. As a result, the number of actors involved in payments has increased tenfold.

As a result, the SARB is faced with an increasingly complex landscape of actors – what Deloitte terms as ‘participants’ – to consider when devising a regulatory framework to inform the NPS. The report identifies that this is a challenge being faced by regulators across the globe.

Highest areas of payment improvement

To quote the Deloitte report, “Much like Deloitte has seen in other regions, there may be early challenges in establishing the criteria for participation, evaluation and ongoing review by the regulator. Also, similar difficulties may arise in the designation, licensing and monitoring requirements needed for new settlement participants and payment service providers, among others.”

Amongst participants, the broader outlook seems optimistic. The report reads, “Overall, interviewees, as participants of the NPS, seem enthused and expectant. South Africa is poised for a new era in the NPS evolution that has potential to increase the flow of funds, boost financial inclusion, modernise core systems and their accessibility, and impact payments for the long-term good of the country’s economy.”