South Africa's finance industry is on the right track to enable real-time payments, with initiatives such as low-cost money transfer scheme PayShap moving the country towards the unified, real-time payments ecosystem it needs for a secure digital economy, financial services firm Capitec Business Payments executive head Chris Zietsman has said.

During a November 20 discussion, he highlighted that India's real-time payment system Unified Payments Interface (UPI) had become the de facto way of making payments between people's bank accounts in that country using a smart mobile device. Services range from peer-to-peer payments to traditional payments to merchants for goods and services.

He said this is what PayShap could lead to in South Africa and that the industry was making progress towards this goal.

However, there was still lots of work to be done to make cross-border payments and remittances more affordable, said Capitec CEO Graham Lee.

International transactions still have several pain points, including that they tend to be slow and have opaque fee structures. Similarly, international remittances are costly in markets that can afford it least. A person cashing out a remittance payment in Zimbabwe, for example, could pay up to 7% to 9% of the amount sent in fees.

“This needs to change and needs to be disrupted. There need to be transparent fee structures and the costs for these transactions need to be lower. We are looking at other technology options to provide this service more effectively and cost effectively,” he said.

The bank provides cross-border payments for eight African countries in partnership with international money transfer service Mama Money. Capitec has also expanded this service to Bangladesh and Pakistan.

Many people send significant amounts of money to South Africa's neighbouring countries and often use methods that are not always safe nor transparent. This is why Capitec introduced money transfer on its app, said Capitec marketing and communications group executive Francois Viviers.

“We started with the eight countries along the main corridors of trade where the main demand is, and people receive the transfers into digital wallets or as cash.

“We added Bangladesh and Pakistan, owing to demand for transfers to these countries. We will expand the service where our clients need and where we have an opportunity to support them,” he said.

Further, the bank has also eliminated international transaction fees on card payments since October 1 this year, and has simplified international transfers to a flat R175 fee for transfers to 50 countries.

Capitec's focus on affordability stems from the fact that affordability impacts on accessibility, said Lee.

“We will soon launch our entrepreneur account, which small businesses, sole proprietors and traders can use to open an account quickly and inexpensively. The aim is to bring these small businesses into the banking space by enabling them to set up a business account in minutes.”

The same digital onboarding process used for its personal banking clients can now be used by banking clients to open a new business account in less than 30 minutes. It is an assisted process, with many fields prepopulated with information Capitec has, said Viviers.

The business can set the limits on their accounts and set delegations of authority for appropriate personnel and start transacting immediately, he added.

Additionally, Capitec can identify 1.4-million people who are running a business using their Capitec accounts.

“They want their businesses to be recognised and have dedicated accounts for their operations. Owing to the data we collect, we can provide credit based on the inflows into their accounts and they can repay as they earn revenue. This is what we aim to achieve when we introduce the entrepreneur account,” he said.

Conventional credit models look at salaries and the bank had to find a better way of determining credit worthiness to enable responsible lending to individuals and small and medium-sized enterprises and enable them to repay as they earn money.

Many of Capitec's clients have multiple income streams or are working as sole proprietors and entrepreneurs.

“We can give them credit based on the data we have of their income, and can structure the loans so that they pay back as they earn without a fixed monthly repayment,” said Viviers.

Meanwhile, most transactions with offshore service providers and retailers can only be done using credit card payments and there has been consistent demand for payment methods that do not rely on card-payment rails, said Zietsman.

The bank launched international e-commerce payments on its app on October 25 this year. Capitec's Pay solution can enable variable recurring international payments without relying on card payments, he said.

International service providers and retailers use large, international payment processes to process payments across multiple countries, but they do not have sufficient data and visibility on why a transaction failed, and their international clients do not feel in control of the process.

The variability in the recurring payments are typically owing to foreign exchange fluctuations.

However, Brazil's Pix national instant payment platform can allow account-to-account payments, and has proven to be successful, especially for commercial and merchant payments, including international merchant payments, he noted.

Capitec has extended its international variable, recurring payment service to Chinese online cross-border retailer Shein. Capitec clients can select to use their bank account to pay Shein and will receive a push-notification on their Capitec app to authorise the transaction.

“We are also building a recurring, variable billing solution for [online streaming service company] Netflix,” he added.

These capabilities of real-time digital payments and simple, cost-effective international payments are what PayShap could provide.

“We are excited about the standards being developed for the digital transaction capabilities we are building and we publish the standards openly to support other banks and the broader economy to fully transform [into a digital economy],” Zietsman said.

Capitec was supportive of the evolution of the payments ecosystem, but South Africa must consider what this should be, said Lee.

“Payments infrastructure is a public good. While it has been well managed over the years with lots of innovation, now is the time for an evolution to ensure that this public good is more evenly and fairly available, as well as secure and affordable.”

South Africa's reconciliation and payments infrastructure company PayInc, which handles reconciliations and payments between financial institutions, was transformed into a national payments utility after the South African Reserve Bank took ownership of 50% of the company, with South Africa's banks taking up direct shareholdings in the new utility.

“With the right national mindset, we can enable secure, simple and fast digital transacting, and our seat at the table [of the new national payments utility] is symbolic of our support for the evolution of the payments system,” said Lee.