Payment providers team up to slash transaction fees in South Africa

Eight of the largest non-bank players in South Africa’s payment space have banded together to form the Association for South African Payment Providers (Asapp) to accelerate adoption and reduce the cost of digital payments in the country.

Members include Lesaka Technologies, iKhokha, Yoco, Shop2Shop, Network International, Altron FinTech, Hello Group, and Peach Payment Services.

The association is headed by Lesaka Technologies CEO Lincoln Mali, who described South Africa’s payment landscape as being at a turning point, with the informal economy growing at over 20% annually.

However, Mali noted that the country’s reliance on cash is currently a significant hindrance to its economic growth.

A recent study found that 55% of South African earners use cash as a dominant payment method.

“While cash remains essential for many, it limits efficiency, inclusivity and transparency in the broader economy,” Mali said.

He pointed to the increasingly important role that non-banks play in changing the payment landscape in South Africa as digital payment facilitators.

This is what Asapp sets out to do by collaborating to tackle the common need of removing barriers and reducing the cost of digital payments in South Africa.

“Our mission is simple: advance digitisation and bridge the gap between the formal and informal economies,” Mali said

“We seek to create an inclusive, efficient, and customer-centric payment ecosystem by ensuring fair infrastructure access, reducing the cost of digital payments and promoting transparency and consumer empowerment.”

Lesaka Technologies chairperson Ali Mazanderani likened the impact of the cost of digital payments in South Africa to providing people with torches that do not contain batteries.

“We’ve managed to give everyone an account, but they can’t use that account at the point of sale,” he said, referring to the perception of fees associated with transactions.

“That has a huge cost. It has a security cost, a transactional cost, and a cost to the economy as a whole, and many of our merchants can’t engage with the South African economy as a result.”

Network International’s Africa group director, Mpho Sadiki, noted that South Africa has seen numerous developments in the fintech landscape over the past few years. However, many of these have been sidelined because of a lack of mainstream interoperability.

One example of a payment system that has overcome this challenge is PayShap. However, Altron managing director Johann Gellatly pointed to how banks have dictated these developments up until now.

“The payment ecosystem is a closed-loop system, and banks dictate the payment rails,” Gellatly said.

“In the last 30 years, we’ve only seen two transaction systems being introduced, and that is DebiCheck and now the initiative of PayShap.”

Therefore, he said one of Assap’s goals is to have equitable, fair access to the payment ecosystem and voting rights when engaging with the regulator.

A panel discussion between representatives of four of Asapp’s eight members. From left: Nozipho Thsabalala, Mpho Sadiki, Moosa Manjra, Rahul Jain, and Johan Gellatly

The South African Reserve Bank’s head of the national payment department, Tim Masela, mentioned how the country has been working on reforming the National Payment Systems Act to enable non-banks to access the payment ecosystem.

“We recognise the role of non-bank players as fundamental in the payment system and, therefore, believe that we should play our part and enable them to access the system.

“This is to ensure that they can continue the role played in facilitating access to digital payments.”

Masela said that Sarb’s goal is to have a system that regulates based on activity rather than on the institution.

He added that the ideal system is where institutions can enter the payment system based on whether they meet specific criteria.

“We also want to address the current challenge where certain parties believe they are subjected to onerous requirements to enter the system, whereas others enter for free,” Masela said.

“So we will be levelling the playing field.”

ORIGINAL ARTICLE | 'Payment providers team up to slash transaction fees in South Africa'