The digital era is driving demand for more efficient, faster and better national payment systems, with many countries looking to transform and modernise their payment systems.
A large-scale payments transformation needs a strong national imperative driven by government and regulators in collaboration with banks, associations and fintechs. For the national payment system to meet the needs of the new generation and to keep up with the digital times, banks need to leverage new technological and innovative capabilities, and offer payment systems that are efficient, cost-effective and modern to meet customer expectations.
These are some of the key findings from a Payments Study Tour Report, 2019 issued by PwC’s Strategy& consulting division.
As part of South Africa’s payments modernisation journey, an industry study tour was conducted to countries that would be of interest and relevance to South Africa. Countries were selected that had similar payments modernisation goals and had achieved industry transformation. PwC hosted the tour delegation on behalf of BankServAfrica and the Payments Association of South Africa (PASA).
Observing and analysing national payments strategies implemented in India, Thailand, China and Singapore, the South African delegation was able to draw on the commonalities of these countries’ approaches to solving socio-economic challenges through a payments modernisation journey. Several key learnings that emerged from the study tour all point towards the possibility of stimulating inclusive economic growth by reducing the usage of cash in the economy and if payments infrastructure can become more efficient, more inclusive, easier to regulate and more flexible to meet consumer needs.
Chantal Maritz, Strategy& Digital Transformation Lead at PwC, says: “Person-to-person affordable realtime payments were the critical catalysts for change in each of the countries visited, which all sought a payment method more efficient, more convenient and superior to cash. It’s all about providing a solution that is relevant, convenient and cost effective to the citizens of a country, leveraging technologies and partnerships that not only create a larger financial ecosystem, but also enables digital financial inclusion. South Africa is faced with an opportunity to learn from similar emerging markets and not only leapfrog more developed nations in its payments system modernisation but also address socio-economic challenges in the process”
Jan Pilbauer, Chief Payments and Innovation Officer at BankservAfrica, adds: “Payments are critical levers for economic growth, as well as digital and financial inclusion. If these modernisation initiatives form part of a bigger national initiative and are championed at governmental and regulatory level, phenomenal results can be achieved.”
Modernisation of South Africa’s payments infrastructure by introducing similar instant payments solutions can provide multiple benefits for the man on the street, small and medium-size businesses and government not only by providing an efficient instant, affordable payment mechanism to consumers that is a better alternative to cash and thus reduces the risks, costs and fraud associated with cash handling.
Maurits Pretorius, Executive of Strategy at PASA, says: “On this tour we pursued learnings from a regulatory level down to transition pathways, infrastructural and technological options selected and understanding how the markets respond to and interact with these new capabilities and products. Countries were selected that had similar payments modernisation goals and had achieved industry transformation. Other criteria considered markets with similar demographics and the benefits required – financial inclusion, low-cost services, speed of execution of transformation, efficiencies gained, challenges overcome, benefits attained, lessons learnt and what the future can look like. In each country the national imperative was bigger than the interests of any individual stakeholder.”
South Africa has been on a journey to modernise its payments system since the initiation of the Modernisation of Payments project in 2014. What is now needed is the catalyst to enable the leapfrogging and boost the South African economy.
Pilbauer comments further: “If just 10% of the cash transactions in the market are captured, R450-billion would be brought into the formal banking sector and this value could drive further benefits to the end user and improve financial inclusion.”
“Low-value electronic payments system modernisation is less about technical enhancements to payments rails, and more about the implementation of modern payments ecosystems that contribute to innovation and growth within the financial services sector, support government socio-economic agendas, and at the same time add new levels of convenience and digital financial access to consumers,” says Maritz.