South Africa

PayShap must be free – Michael Jordaan

Former FNB CEO and venture capitalist Michael Jordaan said that prohibitively high transaction costs will stifle the adoption of PayShap.

PayShap is a new payment system launched by the South African Reserve Bank (SARB) and BankservAfrica, a company that processes electronic transactions.

PayShap is intended to displace cash from the economy by allowing for instant transfers, which the receiver can verify in real-time. 

The service allows users to make payments using phone numbers, known as ShapIDs, rather than relying on bank account numbers.

Fundi Tshazibana, a deputy governor of the South African Reserve Bank (SARB), said that PayShap is an opportunity to reduce transaction costs and build trust in digital payment methods.

Tshazibana said that small transactions have historically been cash-driven. In future, PayShap could be used instead of cash for small transactions such as taxi commutes.

The goal of PayShap is to make payments safer, faster, and more cost-effective than had previously been possible.

PayShap transactions are currently capped to a maximum of R3,000.

South African Reserve Bank deputy governor Fundi Tshazibana

The cost of transacting

Jordaan said facilitating rapid digital payment is “cool,” but he hoped the big banks would make transactions free to mimic cash and encourage the adoption of the service.

“Brazil’s Pix, which served as inspiration for PayShap, is free. India’s UPI is free. Singapore’s PayNow is free,” Jordaan highlighted.

However, in South Africa, using the service can carry significant costs which can hamper the uptake among cash-strapped communities.

“It seems the big banks have priced this from R1 to R45. Of course, R45 will never beat a free, cash payment, which is really sad for PayShap adoption,” Jordaan said.

Standard Bank, Absa, Nedbank, and FNB are the first cohort of banks to offer PayShap transactions, with more coming soon.

The PayShap system is a product of collaboration between the banks, but they are allowed to compete with one another on pricing. 

While banks fiercely compete with each other, “in payments we knew that we had to collaborate”,  said Rufaida Ranoobhai, head of the South African payment division at Standard Bank.

Ranoobhai said that PayShap allows for collaboration and agreement on procedures while creating spaces in the payments ecosystem where the banks can compete.

Nedbank is currently charging R0 for PayShap transactions until the end of April, meaning only FNB and Nedbank currently meet Jordaan’s standard of free transactions.

All the roleplayers at the PayShap launch event emphasised that adjustments would be made to the offering based on how users engage with the platform.

Dayalan Govender, managing executive of solution innovation at Nedbank, said that they do not want prohibitive pricing to stand in the way of the adoption of PayShap.

He said that the bank would gain valuable data about how individuals spend cash that could help deepen their relationship with clients.

MyBroadBand conducted an analysis of the prices the banks are charging for PayShap transactions.

Transaction valueAbsaFNBNedbank*Standard Bank
Under R100R2.50FreeR1R7.5
Source: MyBroadBand *This is applicable for PayShapID to PayShap ID transactions.