In developed and developing markets around the world people are tapping, swiping and dipping cards, phones, watches and even rings to make purchases. In Africa, however, 98% of all transactions are still made in cash.
“Africa as a continent has not lived up to its promise of full financial inclusion for both consumers and SMEs – there is still work to be done, says Andrew Torre, group country manager for Visa, sub-Saharan Africa. “The continent remains a high-potential, low-performance market when it comes to digitised commerce.”
National Treasury’s deputy director-general Ismail Momoniat would probably agree with the statement, as far as it pertains to South Africa. At the first day of public hearings in parliament, held to assess the progress of transformation in the financial services sector, he said the objectives and transformation goals stipulated in the charter were not ambitious enough. “The current BEE regulations do not sufficiently cover things like financial inclusion and access….”
Torre acknowldeges this could be true. “Part of the problem is that we have tried to apply traditional thinking, products, services and solutions to what is a highly complex, fragmented continent that lacks traditional infrastructure to support them.”
This thinking is changing as Visa and peers look to expand their global footprints, embrace digital technology and facilitate a greater shift away from cash-based commerce.
An estimated 77% of South Africans are banked, which means that 23% or some 12 million people remain outside the banking mainstream.
This is a problem that is being felt particularly acutely as government chases its own tail in an exhausting and pitiful circus whose end goal is apparently to ensure that come April 1, 17 million social grants will be paid.
If every South African had their own bank account, grant payments would be a simple process.
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South Africa’s social grants problem is exacerbated by the fact that Sassa system does not enable interoperability.
Interoperability, which enables the participation of multiple role players, is essential and possible, he says. Last April the Payments Association of South Africa announced that it had released a fully interoperable specification to facilitate biometric authentication on payment cards – apparently the first in the world. This was done in partnership with Mastercard and Visa, and the specification enables a range of biometric solutions, from fingerprint verification to palm, voice, iris, or facial biometrics. “Financial inclusion is too important to be limited by proprietary technology,” he says.
While options are floated, the unbanked population simply resorts to cash, which is inefficient and exposes users to risks such as theft and fire, as many of those in Hout Bay’s Imizamo Yethu would have discovered.
But this is changing. “Banks know they need to change the way they do business and we are seeing this happening with banks onboarding clients digitally – ultimately bringing more people into the financial sector,” says Geraldine Mitchley, Visa’s senior director for emerging payments and innovation.
The mobile phone is transforming the payments space, delivering financial services, at scale, to more people in Africa than ever before.
“What we saw was that although people had a bank account, they used it simply to hold and withdraw cash,” she says. “Mobile is enabling a world of e-commerce and new payment solutions.”
For instance merchants previously relied on plastic cards distributed to banked people to be used at places that accepted them – which virtually ties credit and debit card payments to medium-sized merchants in urban areas.
Visa has developed a way to give even the smallest of merchants in the most remote villages a way to be paid at a reasonable cost with 100% reliability, which is also simple for customers to use.
Called mVisa, an app is downloaded to a smart or feature phone, which then allows customers to make purchases in-store or online, pay bills or transfer cash from person to person.
Consumers can initiate a transfer of funds simply by scanning an ‘mVisa’ Quick Response (QR)’ code at the merchant outlet – no expensive payment terminals required. The QR code does not need power, paper or subscriptions. What this means is that merchants, particularly those out of the formal sector who live on day-to-day trade, can be paid in real time.
“Africa is poised to benefit from digitised commerce if the industry can harness the power of mobile devices,” says Torre. “Mobile can be the key in unlocking the products, services and solutions that can take the region to a digital future. The shift from high tech solutions for Africa to low tech (like the QR code) means barriers to entry are being broken down to allow more people to transact.”