Kathy Gibson is at the World Economic Forum on Africa in Cape Town – The financial services sector in South Africa is undergoing an unprecedented transformation. Rapid developments in digital technologies are both disrupting and enabling change in previously disconnected sectors, such as banking, telecommunications and retail.

These advancements make digital payments and services more readily accessible and affordable to consumers and small businesses, but the usage of such products will be subject to how well payments providers collaborate to meet their needs.

This is according to a new Mastercard and Deloitte Africa report “The future of payments in South Africa: Enabling financial inclusion and innovation in a converging world” released today on the side-lines of the World Economic Forum on Africa.

The report states that if we are to achieve meaningful financial inclusion in South Africa, private and public sectors must collaborate to reduce the reliance on cash and encourage the use of digital payment methods and financial services to achieve more inclusive and sustainable economic growth. It is not yet a reality, but several developments are providing encouraging indications of progress.

“Great progress has been made in increasing access to financial services in the country, with 80% of the adult population now banked – up from just 46% in 2004,” says Mark Elliott, division president of Mastercard, Southern Africa. “Despite this increase, the majority of all consumer payments are still made in cash, which indicates that people are not frequently using payment cards or digital solutions for every day payments. A key challenge is the lack of digital payment acceptance at small businesses and informal retailers, as well as deeply embedded behaviours and attitudes towards cash.”

This in spite of the fact that cash is costly and carries safety risks. A Mastercard study showed that the cost of cash for consumers is R23-billion per annum or 0,52% of South Africa’s gross domestic product (GDP), with the majority of this cost carried by lower income earners.

According to the report, new digital technologies have disrupted traditional business such as banking, enabling new entrants such as telecommunications and retailers to actively play and shape the payments space.

“The convergence of these industries, enabled by technology, is already giving consumers access to a wealth of financial services such as insurance and remittances in a seamless and more affordable way. While digital technologies and new distribution models hold tremendous power to speed up South Africa’s journey to a cashless society, a greater focus is needed to deliver payment experiences that add real value to both small businesses and consumers,” says Elliott.

The area where this convergence is most notable is in telecommunications and banking. The combined strengths of financial and cellular services offer the opportunity to provide payments solutions as well as increased customer utility among the large customer bases of mobile phone operators. This convergence trend is also extending into the retail sector, with retailers now moving to offer digitally-enabled financial services and social media-driven ecommerce.

Elliot believes the global mega-trends are all around the speed of transaction and the user experience.

“The consumer is more informed about what transactions can look and feel like. They are also informed in the way they make decisions. For instance, 70% of online decisions are informed by social media.”

He believes that the ecosystem is set to become more important, and the focus for a lot of companies. “It is no longer about the number of customers or accounts – but the number of eyeballs. It’s about creating a marketplace where customer would rather live in your ecosystem than someone else’s.”

Bob Contri, global financial services industry leader at Deloitte, believes that convergence is one of the key issues that most of us are facing today.

“I come from the financial services industry, and technology is merging with virtually every other industry – whether mobility, smart cities, food delivery. And financial services underlies all of that with questions on the payment services that will drive them.

“We talk about co-opetition: big financial services companies and big tech are working together. There is also concern about the platform competitors, to the extent they are garnering more of the attention of your clients.”

Another area of convergence is how big companies are partnering with fintechs to help them drive the innovation agenda, he adds.

A key area which is seeing substantial growth is in the use of data, where advanced analytics and artificial intelligence (AI) are being used to unlock actionable insights to deliver more personalised services to people and better serve them.

“This also has the potential to benefit small businesses and informal cash-based enterprises, as advanced AI and data insights can unlock credit given that these tools help financial services providers better evaluate risk,” says Elliott.

It is evident that industry convergence in the payments space is inevitable and will become further influenced by regulatory change, if European and United Kingdom examples of open banking are followed. But payments ecosystem players need to rethink how they both compete and collaborate.

According to Dr Martyn Davies, MD: emerging markets and Africa at Deloitte Africa, the convergence across industry sectors requires new partnerships between companies. This presents a whole new layer of complexity to manage but also unrealised opportunities for new models to emerge.

One example is Mastercard’s Masterpass, a digital payment service offered by all major banks that enables consumers to make payments with their mobiles by scanning a Quick Response (QR) code. Its ability to work across a range of different mobile QR payment providers including SnapScan and Zapper has been vital in enabling the adoption of QR code technology and creating more robust service offerings to consumers. It has also incrementally expanded the country’s digital payments infrastructure among small businesses, bringing more people into the formal economy.

“If the converging industry players can move towards greater interoperability and partnerships, the end result must be an increase in payments offerings and better financial services, which answer customer needs with greater effect. This in turn will have the benefit of improving the customer experience and increasing adoption and usage of digital payments and services, thereby reducing cash dependency. Ultimately this will lead to increased financial inclusion and inclusive growth,” says Davies.

Kuseni Dlamini, chairman of Massmart, says convergence is one of the most important dynamics his organisation has to cope with.

“As a retailer we have to respond proactively to change customer behaviour.

“While our mission as Massmart is to save money, we also have to help them save time. So we have to include convenience as part of our operating model. We have embraced online and omni-channel, trying proactively to be relevant to customers.”

The goal is to be more relevant to customers, while reframing and reinventing the relationship with suppliers, Dlamini says.

Policies are still not entirely friendly to digitalization and convergence, he adds. “But is seems to me the conversation has started, which is a great thing.

“Where we are falling short, is if we are creating the right ecosystem? There are innovators here, but we don’t have e right ecosystem.

“People re successful if they have an environment that allows them to be successful – and the ecosystem is lacking; the country and policy environment is not creating the right platforms for scalable innovations.

“We need to be thinking of innovations on a global scale, not just local scale.”

Sola David-Borha, chief executive: Africa regions at Standard Bank Group, points out that convergence is disrupting all sectors, across Africa.

“What is driving it is what the consumer wants and the consumer in Kenya, Ghana, Mozambique all want the same thing: better experience, zero costs, value and to solve their problem. Your relevance in their lives lies in  how well you meet these needs.

“Across the continent we are seeing the same trend. From a Standard Bank perspective we are partnering with our competitors. We have partnered with the big cloud companies, we are investing in fintechs to find solutions,” she says.

“Ultimately, it is about serving the client: what is their problem and what is the best way of solving it?”

Making the change is about business transformation, and organisations have to first transform themselves, David-Borha says.

“Standard Bank has been on a journey of trying to be future-ready.”

Part of this transformation is re-architecting the operations, partnering with new technology players, and helping staff to understand their role and how they can reskill themselves.