Big change in payments in South Africa which can replace EFT and credit cards

Andy Higgins, managing director at Bob Group, expects PayShap to gain support in South Africa as a free, easy-to-use digital payment system.

Higgins is an e-commerce veteran who helped to launch Bidorbuy, Takealot, and Shopify in South Africa.

He was also a founding member and investor in PayFast, one of South Africa’s largest online payment processing platforms.

He is, therefore, well-positioned to comment on online payments and the trajectory which the industry is likely to follow.

Higgins said that PayShap, an instant payment service allowing customers to transact using their phone numbers, will gain widespread support in South Africa.

The South African Reserve Bank (SARB) launched PayShap in March 2023 to accelerate the country’s shift to a cashless society.

The rapid payment program (RPP) uses a ShapID, usually the person’s cellphone number, which is linked to their bank account.

When funds are transferred between ShapIDs, they clear within seconds. It is, therefore, suitable for a wide range of transactions, including e-commerce.

However, over the last three years, uptake has been slow. Higgins argues that this is because of pricing and poor implementation.

“Most South Africans still reach for a card or an EFT out of habit, and plenty of people have used PayShap once and never touched it again,” he said.

He explained that this is not a failure of the PayShap service. “It’s a failure of the rollout, and there’s a difference,” he said. Two things held it back.

• Cost: When a bank charges you R7 to R15 to send a PayShap payment, people are never going to use it to buy a R150 item online.

• Consistency: Every bank built its own version, in a different corner of a different app, with different limits and different quirks.

“When the experience is a lottery depending on who you bank with, people don’t build a habit,” Higgins said.

PayShap is set to improve

Higgins said these two issues are being actively addressed, which will change the trajectory of payments in South Africa.

BankservAfrica has been rebranded as PayInc, and the South African Reserve Bank wants PayShap to become a low-cost payment infrastructure for the country.

“Finance Minister Enoch Godongwana used this year’s budget to describe PayInc in those terms,” he said.

With further advances, including the Payments Ecosystem Modernisation programme and an interoperable QR standard in QR+, the future path is clear.

“We don’t have to guess how it ends, because two other countries have already run the experiment for us,” Higgins said.

Brazil launched Pix in 2020. In four years, it went from zero to more than 5 billion payments a month, used by over 8 in 10 adults.

In e-commerce, Pix overtook credit cards as the preferred payment method. By 2024, it was the most widely used online payment method in Brazil.

India’s UPI is even further down the road. It processes 12 billion payments a month, accounting for more than 80% of the country’s digital payments.

“India’s UPI is free to use. Credit cards in India have become a niche product for premium and international spend,” he said.

In Brazil and India, the cost of accepting a payment fell toward zero, and the money shifted to what happens around payments: credit, lending, and business services.

Higgins predicted that the SA Reserve Bank will force the issue to promote the use of PayShap as part of its move away from cash. This will happen in three ways.

• Parity across banks: Every bank has to offer the same PayShap. The same experience, same limits, and same pricing.

• Free for the payer, up to a limit: The payer will pay nothing up to a threshold. You don’t get mass adoption while charging people to spend their own money.

• Meaningful limits: The threshold has to be real. Not R200. Something like R25,000 and up. Enough to actually buy things online, pay a supplier, and settle an invoice.

Higgins said that these changes will change the economics of getting paid in South Africa, which includes e-commerce purchases.

A big change in online payments

Higgins said that the move towards PayShap, a free and fast online payment system, will change the current e-commerce landscape.

“When accepting a payment costs almost nothing, being the cheapest checkout stops being an advantage, because everyone will have it,” he said.

“What wins after that is the experience. This means a fast checkout that offers the payment method your customer prefers and doesn’t lose them at the last step.”

He said that the real prize is the customer relationship. This includes repeat orders, data, loyalty, and not just the single sale.

“My advice to merchants is simple. Switch PayShap and pay-by-bank on now, while adoption is still low and being early costs you nothing,” he said.

“Stop treating payments as a cost line to be squeezed and start treating them as the front door to a relationship. Build for where payments are going, not where they are.”

“The puck is moving. It has already happened in Brazil and India. Ours has just been a little slower off the mark, and it will not stay that way for too much longer.”