Building a more inclusive SA society through digital payments innovation

iStock-1389102730_copy.jpgBetween rising interest rates and petrol prices, stellar cost-of-living increases, and a dire lack of electricity, South Africans may feel like they legitimately have a lot to complain about right now. But the one thing that we certainly can’t criticise is the quality of our banking and financial services. In fact, when it comes to digital banking advances, like convenient, secure and contactless payments, South Africa is nothing less than a world leader.

It’s a valuable position to be in. After all, the payments ecosystem has a vital role to play in unlocking the full economic potential of the country and its businesses and people. Of course, in the South African context, payments still reflect the lingering economic inequalities in our society. On the one hand, we have a highly sophisticated business and consumer environment where digital advances are quickly embraced. On the other hand, South Africa still has a vast informal economy, where cash remains king, and the full power of digital is yet to be harnessed.

One of the most pressing challenges facing South Africa in terms of its economic development is finding a way to integrate these two realities. The obvious reason why this needs to be achieved as a national priority is that the country needs to achieve genuine financial inclusion for individuals and businesses.

The problem, of course, is that cash is still perceived by many South Africans as a convenient, secure, cheap and tangible source of value. Unfortunately, nothing could be further from the truth because cash actually has many disadvantages. These range from the risk of theft without recourse to health dangers due to the transmission of germs. What’s more, cash is expensive. Especially when accessing it involves travelling long distances, on expensive public transport, to a bank and then spending valuable time waiting in queues.

The good news is that South Africa’s digital leadership in many aspects of financial and banking services means that digital payment solutions are rapidly emerging at the much-needed scale required to transform the country’s payments ecosystem. 

It's a mobile world

One of the most significant trends that are enabling the transition from cash to digital payments is the stellar adoption of mobile technology. And with this spread of hand-held digital devices comes the ability to deliver payment solutions that mimic the accessibility and immediacy of cash, with added security to boot.

Nedbank’s innovative Tap on Phone functionality is already leveraging this mobile device ‘revolution’, avoiding the need for a physical point of sale device and allowing merchants to use their smartphones to accept contactless payments from customers simply by tapping cards, watches or phones.

Another very exciting digital payments solution comes in the form of WhatsApp. The Nedbank Money Message utilises the WhatsApp platform to enable businesses to receive payments via the app, without the need for anyone to exchange account information.

And QR codes are also set to play a vital role in driving greater use of digital payments. Led by PASA, the payment industry is moving towards a single standard for QR codes which, in turn, will support interoperability. QR codes offer a way to effect payments via a smartphone very easily without having to exchange sensitive personal or financial information.

Unleashing entrepreneurial potential

It’s widely accepted that SMMEs are the growth engines of the African economy, and SMME development features prominently in the National Development Plan. However, the Global Entrepreneurship Monitor (GEM) shows that South Africa has one of the highest business start-up failures in the world. One of the primary reasons cited for this high failure rate of SMME growth is a lack of access to finance.[1]

Given that banks have long recognised the value, and importance, of providing finance in support of SMME growth, it’s an untenable situation – and it’s largely driven by an inability of these predominantly cash-based businesses to provide a verifiable history of operations that demonstrates their sustainability, growth potential and creditworthiness.

Accepting and making digital payments is a quick and affordable way of rectifying this situation, as it provides an instant view of the business’s cash flow and transactional history, which is invaluable in any application for funding.

Still work to be done

While South Africa’s focus on addressing the challenges of financial exclusion have resulted in the country becoming a global leader and pioneer in innovative digital payments, there is still much work to be done. And that work needs to begin with a collaborative rethink about customer ownership and digital market share. The imperative for economic inclusion is far bigger than any one bank. The financial services industry needs to come together and make sure that innovative digital technologies are made available to all South Africans, regardless of where they bank.

By Chipo Mushwana, Divisional Executive for Emerging Innovation, Nedbank

[1] Global Entrepreneurship Monitor, South Africa Report 2016/2017. Can small business survive in South Africa

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