This article was written by Anurag Dubey. The original article was published by Lipis Advisors. You can find the article here.
After more than a decade of working on South Africa’s payment system, we’re thrilled PayShap launched earlier this month. The new real-time Rapid Payments Program’s (RPP) name is a play on the South African slang term shap shap, meaning “all good”.
The new system fulfills part of the South African Reserve Bank’s Vision 2025 modernization framework, making low-value instant payments more affordable, efficient and simpler. The country hopes to provide a convenient and safer way to pay instantly, reduce the use of cash for small value transactions, and strengthen financial inclusion.
RPP is an industry-led initiative from the South African banks’ BankservAfrica (a payment infrastructure operator) and the Payments Association of South Africa (PASA). In addition to providing a cost-effective interoperable instant payment service, it includes a proxy service allowing payment to a mobile number without knowing the payee’s banking details, a request-to-pay service, and support for several peer-to-peer (P2P) and retail use cases. It also leverages the richness provided by using the ISO20022 data standard.
What exactly is being launched, when?
Consumers will be able to access PayShap through their banks’ channels such as internet banking, banking apps or USSD (SMS-based mobile banking). Non-bank participation in RPP is possible via any sponsor bank. PayShap will initially be offered by four banks – Absa, FNB, Nedbank and Standard Bank. More banks will offer the in the months to follow.
PayShap will be released to the market in two phases. First, the instant clearing feature will be launched which includes the ability to either pay by account (using account details) or proxy (using a unique identifier such as a cellphone number). Second, a request-to-pay function will be introduced that allows consumers to request a payment and receive money immediately and securely in their bank account.
Not RTP’s first rodeo in South Africa
RPP is not the first real-time payment system to be launched in South Africa. Real-time clearing (RTC), a low-value instant payment system was launched in 2006, has seen low adoption. This is due to lack of availability to users, fears about fraud, the high cost of the service, banks’ inconsistent marketing to users, and the unavailability of proxy payment services. Lessons learned have guided PayShap’s development, and we expect the service will see massive adoption.
PayShap is poised for extensive adoption
One of the key factors that will likely drive the adoption of RPP is the use of proxies for payments. The ability to pay by proxies is one of the key success factors for real-time payment systems such as UPI in India, PromptPay in Thailand, and PIX in Brazil. Ease of access to instant payments has also been linked to deeper financial inclusion and contributing to a safe, reliable, and efficient national payments system. With cloud services, open APIs, and an adaptable microservices architecture as cornerstones to further industry participation, PayShap will usher in a major modernization of South Africa’s payment system.
RPP’s launch is not an isolated act of modernization. Other initiatives include the South African Reserve Bank’s real-time gross settlement (RTGS) renewal program, and replacing PASA with the new, more inclusive Payments Industry Body (PIB).
Personally, I am excited to visit South Africa for the first time, where Leo Lipis and I will attend a celebration to mark PayShap’s launch. Follow us on LinkedIn to learn more about our visit.