A major change is coming to SA’s banking and payments sector. Known as the Rapid Payment Programme (RPP), this evolutionary banking concept aims to create a simpler, safer instant payment ecosystem that would give people the ability to make real-time payments using simple identifiers such as mobile numbers or e-mail addresses.
Led by BankservAfrica in collaboration with the Payments Association of SA (Pasa), RPP is the first of its kind in the country — unifying the entire banking sector under the common goal of broadening and modernising the industry to include those who had historically relied on cash as their primary payment method.
The initiative is set to change the course of how people transact. Not only will this make it easier for people to make payments, it will help solve one of the biggest challenges the country faces — how to get the millions of underbanked South Africans transacting in the digital economy.
Aligning with the Reserve Bank’s Vision 2025 and Pasa’s Project Future, aimed at modernising the payments industry, RPP has been endorsed by various government bodies, 11 major banks and the broader fintech industry. It is anticipated that the launch of the initiative will take place as early as 2022.
This is a huge step in the right direction, and something we have been actively lobbying for over the last six years. Our mission is to empower previously disadvantaged South Africans with the development of innovative payment solutions that meet their real-world needs.
While 80% of South Africans own a bank account, more than 70% of all retail payment volumes are still cash-based. In the informal economy it is estimated that as much as 89% of all transactions are done using cash. To reduce the reliance on cash, the move to introduce this next-generation payment ecosystem will make it easier for consumers to transact digitally.
Instant payments
What sets RPP apart from previous banking initiatives that have hoped to achieve the same goal is that consumers will be able to select phone numbers, e-mail addresses and domain-based aliases as ways to identify themselves for the purposes of receiving payments.
The system is also set up to enable consumers to make or receive payments instantly, without having to wait for the funds to clear, regardless of which bank they are with. In the long-term, RPP will contribute to building a safe, reliable and efficient national payment system that will ultimately benefit all levels of society in the country.
SA’s RPP is based on several international initiatives that have helped revolutionise the way people pay in countries such as India, Brazil, the US, the UK, Thailand, China and Singapore. Launched in 2015, India’s Unified Payment Interface (UPI) redefined the way people made payments, resulting in more than 1-billion transactions being made through the system monthly. The system has helped India rapidly expand its banking ecosystem to previously untapped markets, which equated to a 50% increase in overall transactions in the country that were previously nonexistent on the system.
In response to the Covid-19 pandemic, Brazil’s central bank saw the need to create and regulate a new instant payment system called Pix to improve access to online services. Since its launch in November 2020, Pix has had the fastest adoption of any new payment service in the world. In total, 83-million individual users and more than 5.5-million companies registered more than 242-million Pix keys. More than 45% of the country’s population now uses this as a payment method.
Within the world of banking, fintech companies are at the forefront of developing these simple and accessible payment solutions to enable consumers to bank or transact online. BankservAfrica has recognised that fintech companies and other third-party providers will play a crucial role in developing easy and simple user interfaces.
Tremendous value
We believe the work we have done to enable bank-to-bank payments online and in person through simplified payment solutions for enterprises; small, medium and micro enterprises; and individuals is perfectly primed to deliver RPP to the market. Using India as a benchmark, there is also tremendous value for fintechs to be part of the solution in SA.
In February, fintech providers of India’s UPI recorded a total of 2.3-billion digital payment transactions worth more than 4-trillion Indian rupees. This marked year-on-year growth of more than 70% in the volume of transactions. Due to UPI, India’s fintech sector grew about $31bn in 2020. By 2023 this is expected to jump to $140bn, and by 2025 the fintech industry valuation is forecast to be $150bn-$160bn.
The entire value chain in SA, from the banks to fintechs, is gearing up to drive consumer awareness and build the trust that will ultimately encourage migration to these new forms of digital payments. Unlike before, the unified approach that underpins RPP is expected to act as a significant catalyst to ensure this happens.
We look forward to collaborating with BankservAfrica, Pasa, the banks and all other stakeholders within the industry to help create a truly democratised, equitable, and inclusive financial and banking sector that will better serve South Africans by meeting their needs.
• Pays is CEO and co-founder of instant EFT payment solutions provider Ozow.
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