New payment architecture and infrastructure are being designed to provide the transactional capabilities necessary to allow for new and faster financial services, says South Africa-based automated payments clearing house BankservAfrica CEO Chris Hamilton.
BankservAfrica has renewed its infrastructure over the past few years, but the new architecture, which leverages direct input from Southern African financial organisations, is being designed to meet modern financial demands and give effect to the Vision 2025 policy document released by the South African Reserve Bank.
“Among the nine key objectives of the policy document, which has garnered broad support from the financial industry, is the need to improve inclusion in the formal economy, especially of the underbanked segments of the population,” he explains.
South Africa’s financial inclusion – broadly defined as access to basic financial services – stands at about 70%. However, if people who receive grant payments and use social-grant cards are removed, the banked segment drops to 59%.
While this highlights the importance of and the need for cheap and accessible financial services, enabled by low-cost interbank reconciliations and payments clearances, such as those provided by BankservAfrica, other Southern African countries have lower levels of financial inclusion and, hence, the initiative is relevant to all partner countries, says BankservAfrica acting chief payments officer Martin Grunewald.
“We are involved with most of the payment stakeholders in Africa, not just those in Southern Africa. For example, we are sharing lessons with the Democratic Republic of Congo’s (DRC’s) treasury and central bank, which aim to establish a payment clearing facility in the country. The DRC’s banked segment is about 9% of the population and many payments are cleared through a New York-based service.”
Meanwhile, digitalisation is facilitating new economic interactions and new financial services, as well as helping to bolster access to financial services, says Hamilton.
“The growth of smartphones presents an extraordinary opportunity to deliver services to the economy in different ways. But we must ensure that the payment system supports the increasingly diverse services offered on mobile phones and does not slow down the evolution of the financial sector.”
Further, there are many examples of payment systems from around that world that BankservAfrica and its partners can draw on. These provide a framework for how the payment system should start to change, he explains.
South Africa will, of necessity, have to develop additional local solutions and adaptations to ensure that it meets its own requirements and, to a lesser extent, regional financial services requirements, adds Hamilton.
BankservAfrica COO Emile Burger emphasises that part of the solution is to ensure low-cost transactions and support a growing variety of consumer choices. This is necessary to ensure that existing organisations and new entrants to the financial services market offer low-cost, high-volume and innovative financial services.
Additionally, improving financial access to include for the poorest and rural segments of the population might require the use of digital identity systems, such as that being developed by the Department of Home Affairs, to allow for quick, easy and cheap confirmation of personal details. However, digital security measures and active verification processes, such as biometrics-based security and identification layers, will be necessary to ensure that the ecosystem is secure to protect the identities of citizens.