Johannesburg - South Africa’s national payments system will be overhauled in the next few years to not only accommodate the growing number of financial technology (fintech) innovations in the country, but also to help increase access to services for end users.
The South African Reserve Bank (SARB) unveiled its Vision 2025, a strategy for the national payments system, on Monday evening.
As the regulator of payments, the bank believes it is vital that the country's payment systems are capable of meeting people's evolving needs while helping to address challenges such as high unemployment, a low savings rate and income inequalities, as well as structural deficiencies faced by the country.
Financial inclusion is a prominent feature in the policy document, which will update the payment system to include fintech innovations such as mobile transactions.
The national payment system is one of the pillars of financial stability of the economic system. It presents the infrastructure which enables consumers and businesses to make financial transactions, including making payments by means of the accounts and payment instruments issued by banks and other financial institutions.
Faster development than ever before
Payment system developments in the past decade have been rapid, overshadowing those of previous decades, said Reserve Bank governor Lesetja Kganyago.
South African consumers over the last decade have witnessed innovations such as mobile device and internet payments, making electronic payments and remittances possible across jurisdictions.
“A well-functioning National Payment System also helps our country to achieve broader societal objectives, such as improving access to financial services for all citizens,” he said.
It also plays a big role in contributing to a stable financial system, thus containing or even preventing financial crises, Kganyago said.
“We must ensure that South Africa has an efficient, resilient, safe and cost-effective NPS given the important role that it plays as a conduit of funds within the economy and between the nation and the rest of the world,” he said.
Vision 2025 sets nine goals that will guide the development of payment systems in South Africa to create a safer and more efficient system.
First there has to be a clear and transparent regulatory and governance framework; secondly, transparency and public accountability are key.
The system also has to boost financial stability and security while promoting competition and innovation, and it has to be cost effective. It also has to possess interoperability and function, with flexibility and adaptability. Regional integration is a critical component, and lastly financial inclusion is non-negotiable.
SARB said in the vision document that the goals outlined in Vision 2025 should guide the development of the South African national payments system over the next decade. It should also support the aims of the national development pan 2030 to eliminate poverty and reduce inequality.
Bu it said Vision 2025 is only a first step. “It is up to the industry to take the lead in detailing project plans aligned to the strategies to meet these goals,” SARB stated.
It predicted that future payment systems would be marked by the inclusion of new players across the value chain, and the wider adoption of capabilities such as real-time payment processing. Regulatory frameworks must keep pace with this rapid evolution.
Hallmark of modern economy
SARB said financial innovation is the hallmark of a modern economy, and that it has to be supported.
Deputy governor Francois Groepe said according to Ernest & Young’s FinTech Adoption Index, South Africa boasts fintech adoption levels of 33% - in line with the global average.
The survey respondents expect this type of adoption to increase to an average of 52% globally, with South Africa counting among the countries with the highest intended use among consumers at 71%.