The Reserve Bank’s plan to overhaul South Africa’s payments ecosystem should expand participation in the financial services sector by fintechs and their customers.
That’s the view of payments gateway operator Peach Payments.
“Peach Payments strongly welcomes the initiative to overhaul the national payments infrastructure with the introduction of a national payments utility,” said company chief operating officer Sandeep Chagger.
“We believe it will democratise and unify payments infrastructure, make payments more affordable for individuals and businesses, and introduce additional interoperability to modernise digital transactions in the country.”
TechCentral last week reported that the Reserve Bank had released a position paper outlining how it intends carrying out its national payments ecosystem modernisation programme.
Reserve Bank governor Lesetja Kganyago said the programme’s objectives include developing and establishing a national payments utility, increasing competition and ensuring cash is no longer the only option available for transactions – which is still often the case.
Rationale
The rationale behind the creation of a national payments utility, in spite of robust private sector efforts to digitise payments, comes from the observation that the adoption of digital payment rails, including the rapid payments platform PayShap, lags other emerging market economies such as India and Brazil. The Reserve Bank identified cost barriers as the major inhibitor to adoption.
According to Peach Payments, open payments infrastructure – as opposed to siloed solutions pursued by individual service providers – is just what South Africa needs to stimulate higher adoption rates.
“UPI in India and PIX in Brazil have had a transformative impact on the countries’ payment ecosystems. In India, 85% of the country’s digital transactions are processed on UPI rails and over 76% of Brazil’s residents now use the PIX system,” said Chagger.
Read: Cash addiction is costing South Africa billions
“By following and taking inspiration from these successful systems with open infrastructure, real-time processing and low-cost models, South Africa … can position itself strongly for digital commerce growth and broad-based financial inclusion.”
Chagger said an another advantage of a unified and interoperable payments infrastructure is that it will help level the playing field for both banks and non-bank entities, fostering innovation and inclusive access, especially among lower-LSM communities.
The rise in the use of digital payment rails in India and Brazil coincided with a 10-14% drop in the use of cash in those economies. Chagger said this reduction in cash transactions not only lowers the cost of cash handling for businesses and governments but also increases transparency and security across the economy.
According to Tim Masela, outgoing head of the National Payments System at the Reserve Bank, cash costs the South African economy more than R30-billion/year, but the security aspect of digitised transactions is just as important to the economy.
Speaking at the launch of Visa’s first South African data centre on Wednesday, Masela said the integrity of the payments system is just as important to combating money laundering and terrorism financing activity as it is to driving consumer adoption of digital payment facilities.
“We believe that in a few months we will be removed from the FATF (Financial Action Task Force) grey list because we have executed on all the requirements that were expected of us. We should entrench integrity into the transactions in our system so that the consumers of those services can have trust in them – this will ensure they leverage the platforms that are in place,” said Masela.
Peach Payments said consumer education is going to be critical in driving adoption and building trust. However, any challenges faced as the country progresses towards a more digitised payments landscape are dwarfed by the opportunities it presents.
Chagger said a unified national payments utility has the potential to interoperate with similar utilities at a regional level to facilitate cross-border payments, something the Reserve Bank aims to do for the Southern African Development Community bloc.
International payments
According to Peach Payments, this concept can be stretched even further by connecting South Africa’s immediate payment rails with those of countries further afield such as India and Brazil, allowing for the facilitation of fast, secure and reliable instant international payments for remittances as well as trade. This is provided the solution is cost effective.
Read: EFTs may go in Reserve Bank payments overhaul
“The success of unified instant payment systems in other countries has been rooted in end-user savings, especially for low-income populations, township businesses and micro merchants. This continued affordability is critical to ensure success in South Africa as well,” said Chagger. – © 2025 NewsCentral Media
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