Payment Providers Team Up to Slash Transaction Fees in South Africa

Slashing Transaction Fees: A New Push for Payment Innovation in ⁤South Africa

South Africa’s high digital transaction fees are a significant barrier to financial ​inclusion and economic growth. These fees, largely dictated‌ by the banking industry,⁤ have stifled⁤ competition and innovation within the ⁢payment system.Seeking to change the status quo, a coalition of non-bank financial companies, the Association for South African Payment Providers (Asapp), has⁢ emerged to drive down costs and‍ empower consumers.

Breaking the Grip of the Existing System

Asapp,comprised of prominent players like Yoco,iKhoka,and‍ Network International,aims to directly participate in South Africa’s national payment ⁤system. By gaining access to crucial payment rails – ‌the infrastructure that enables fund⁣ transfers – they hope to foster competition and promote ‍interoperability, ultimately leading to​ lower transaction fees.

“The payment⁢ ecosystem is a closed-loop system, and banks dictate the⁤ payment rails,” stated​ Johann Gellatly,⁢ managing director of Altron FinTech, during ⁤a panel⁢ discussion‍ at the Asapp launch. This centralized control significantly impacts innovation and creates an uneven⁣ playing field for ⁤option payment providers.

A Call for shift Towards ⁣Affordability and Inclusivity

Ali Mazanderani, chairperson of⁢ Lesaka Technologies and ⁤a vocal⁢ advocate ‌for​ financial inclusion,⁤ emphasizes the urgency⁣ of addressing South Africa’s⁤ reliance on cash. “The SARB’s report issued in⁢ 2023 showed⁣ that over 90% of consumers ‌and SMMEs still use cash,‍ and the cost to society is​ high, as cash comes wiht many hidden costs,” Mazanderani explained.

Despite a ⁢high level of bank account penetration in South⁤ Africa, with nearly 90% of the ⁣population holding accounts, a significant portion‍ withdraw their entire balance, highlighting ⁣a disconnect between ⁣access and actual usage of financial services. According to Mazanderani, the challenge lies in providing affordable alternatives that cater to the needs of unrepresented segments ​of the population.

Beyond PayShap: Addressing Adoption Barriers

While initiatives⁣ like PayShap have paved the way for innovation in South Africa’s payment landscape, their adoption has not ‍reached the desired levels. Rahul jain, CEO of Peach Payments, points to inherent conflicts of interest within the ⁤current model ‍as a key factor. ⁤”let’s face the brutal fact that PayShap ⁣has ​not been well adopted in the market.but this ‍is‌ because inherent conflicts of interest are built into ⁣the current models,” Jain stated.

Jain argues that⁣ banks, as⁤ gatekeepers of the ‍PayShap ecosystem, ​are incentivized to protect their revenue streams generated through traditional methods like swipe fees. This creates a⁣ disincentive for widespread⁣ adoption ​of newer,potentially cheaper ⁢alternatives.

jain cites a personal example ⁣of a⁤ R3,000 PayShap transaction incurring a R20 fee with a major bank, illustrating ⁣the challenges consumers face even with a seemingly innovative platform.

A Call for Market Reform and Open Competition

“If ther were a free market for payments,” Jain asserts, ⁢”transaction fees would decrease,⁢ and merchants would be more willing to adopt these technologies at their point of sale.” This open competition, ‌he believes, is crucial for unlocking​ the⁤ true potential of innovation and driving down costs for everyone.

Asapp’s commitment to‍ gaining direct access to payment rails​ is ⁤a significant step towards achieving this‍ vision. By challenging​ the existing​ power structures and ⁢promoting⁣ a more inclusive and competitive‌ market, ‌they aim to empower consumers, foster economic growth, and solidify South Africa’s⁤ position as a leader in financial innovation.

How does Asapp plan to introduce competition to⁣ the South African payment market, and what impact could this‌ have on consumer transaction fees?

Slashing⁤ Transaction Fees:‌ A New Push ‍for Payment Innovation‍ in South Africa

A Conversation with Rahul Jain, CEO, Peach Payments

South africa’s high digital transaction fees are a‍ significant barrier to ‍financial inclusion and economic growth. These ‍fees,largely ‍dictated ⁤by the⁣ banking ‌industry,have stifled competition and ​innovation ⁤within the‌ payment system. Seeking to change the status quo, a coalition⁤ of non-bank financial companies, the ​Association⁤ for South African ⁣Payment​ Providers (Asapp), has⁢ emerged to drive down ⁣costs and ​empower consumers.⁤

Recently, Archyde spoke ​with Rahul Jain, CEO of Peach‍ Payments, a prominent member ​of Asapp, about their mission to revolutionize South Africa’s payment landscape.

Archyde: Rahul, Asapp has gained significant attention for its ambitious goal of‍ directly participating ‍in South Africa’s⁣ national payment system.‍ Can you explain the rationale behind‍ this move?

Rahul Jain: ​ The current landscape‍ presents a significant challenge‍ for innovation and affordability in payments.‌ Essentially,banks control the payment rails,which are the very infrastructure that enables fund transfers. This creates a closed-loop system where they dictate terms‌ and, ‌in many cases, influence fees to ⁣protect their own revenue streams.

Archyde: This certainly raises concerns about competition and ⁤consumer choice. ⁣How exactly will Asapp change this dynamic?

Rahul​ Jain: ​ By directly⁣ accessing payment rails,‍ Asapp ​aims to ⁤introduce healthy‌ competition into the market. ‍ We believe that open access and fair playing field will incentivize financial institutions to offer more competitive​ and clear pricing structures for ⁣consumers and businesses alike.Ultimately,this will lead to lower transaction fees,promoting financial inclusion and fostering‌ economic growth for​ all.

Archyde: The initial rollout of initiatives like PayShap in South africa was ‌met with‌ optimism, but adoption has been slower than anticipated.why has this been the case, in‍ your view?

Rahul Jain: There ‍are several reasons for this,‍ but a key one is the inherent conflict of ‍interest within ⁤the existing‍ model. While PayShap​ aims to‌ provide a more affordable alternative,it’s still largely controlled ⁤by ⁢the⁤ same banks that are incentivized ‌to promote their traditional​ payment methods. This creates⁢ a disincentive for widespread adoption of newer, potentially cheaper technologies, and we see that played out in the high fees consumers still ⁣face.

Archyde: ‌You mentioned⁣ high ⁤fees. Can you give us ⁣a concrete example?

Rahul Jain: I recently⁢ encountered a scenario‍ where a ‍R3,000 PayShap transaction incurred a R20 fee with a major bank. It’s this sort of contradiction that highlights ​the challenge⁤ we face. ⁣We need to break free ‌from this cycle if we ‍want to truly empower⁤ consumers and unlock the potential of innovative payment solutions.

Archyde: What do ‌you ‍envision for South Africa’s payment‍ landscape ⁣in the next few years, and what role ⁣do you see Asapp playing?

Rahul Jain: I believe‍ we’re on the cusp of a significant conversion. As more players gain access to payment rails⁣ and competition intensifies, consumers will have more choices, and⁣ transactions will become more affordable. Asapp’s mission is to be at the forefront of this change, advocating⁢ for open markets, fair competition, and greater financial inclusion‍ for all South Africans.

archyde: What can ⁣consumers‌ do to support this movement ⁤and⁣ demand ‌change?

Rahul​ Jain: First and foremost, consumers need to be aware of the high transaction fees ⁤they are currently facing and ​how they​ are ⁣contributing to the⁣ issue of financial⁤ exclusion. They‍ should explore alternative payment solutions and compare fees transparently. ‌ Most importantly, they need to voice⁣ their demands for more⁤ affordable and ​inclusive financial services. Their voices are ‌powerful, ‌and ‌their support is essential⁤ to driving real change.