Main­stream bank sys­tems need to wake up and draw on the power of tech

Sunday Times - - Business Tech - By MUDIWA GAVAZA

● “There is a gen­er­a­tion of peo­ple grow­ing up in Africa who have a cell­phone long be­fore they think of get­ting a bank ac­count,” says Bankserv Africa CEO Chris Hamil­ton.

That pro­vides an op­por­tu­nity for banks to build dig­i­tal sys­tems from the out­set, rather than hav­ing to mi­grate cus­tomers into new ways of do­ing things.

Bankserv Africa, the largest au­to­mated pay­ments clear­ing house in Africa, and So­ci­ety for World­wide In­terbank Fi­nan­cial Telecom­mu­ni­ca­tion (Swift), the world’s lead­ing provider of secure fi­nan­cial-mes­sag­ing ser­vices, are work­ing to solve a sys­temic is­sue that could help SA take ad­van­tage of the in­for­ma­tion age: a bet­ter pay­ments sys­tem.

The ex­ist­ing sys­tem is be­set with in­ef­fi­cien­cies due to old in­fra­struc­ture, with two fun­da­men­tal prob­lems: the slow speed of con­clud­ing pay­ments; and the ca­pac­ity to re­lay only ba­sic in­for­ma­tion be­tween banks.

At an event in Jo­han­nes­burg in Novem­ber, the two com­pa­nies urged the bank­ing in­dus­try to in­vest in mod­ern sys­tems that will al­low for ef­fec­tive real-time pay­ments be­tween banks lo­cally and in­ter­na­tion­ally.

“There is ev­i­dence to sug­gest a strong link be­tween the so­phis­ti­ca­tion and ef­fi­ciency of fi­nan­cial mar­ket in­fra­struc­tures (FMIs) and eco­nomic growth. For this rea­son, many gov­ern­ments, in­clud­ing SA, have made en­hance­ments to FMIs a ma­jor pri­or­ity,” said Alain Raes, CEO for Europe, the Mid­dle East, Africa and Asia Pa­cific at Swift.

With mo­bile pen­e­tra­tion at 100% in coun­tries like SA, Ghana, Mali and Gabon, ac­cord­ing to GSM In­tel­li­gence, there is an op­por­tu­nity to cre­ate dig­i­tal pay­ment so­lu­tions. But for that to hap­pen, the main­stream bank­ing sys­tems need to catch up with the times.

A per­son in SA can im­me­di­ately send or re­ceive money through an in­tra­bank trans­fer, for ex­am­ple from one Ned­bank ac­count to an­other. In­terbank trans­fers, on the other hand, such as Stan­dard Bank to FNB, typ­i­cally take two to three work­ing days. This is a prob­lem. The cur­rent so­lu­tion is a R40 fee for an in­stant pay­ment, but this has proved steep for many South Africans.

The bank­ing sec­tor and the Re­serve Bank have a plan, de­tailed in the Na­tional Pay­ment Sys­tem Frame­work and Strat­egy Vi­sion 2025, that in­cludes mod­ernising the NPS to al­low for deeper in­te­gra­tion of SA’s econ­omy with the rest of the world, al­low­ing com­pa­nies and in­di­vid­u­als to eas­ily trans­act with each other lo­cally and abroad.

Sas­fin CEO Michael Sas­soon said there’s op­por­tu­nity in the in­for­mal econ­omy, such as quan­ti­fy­ing the value of in­for­mal trading and help­ing busi­nesses to scale through fi­nan­cial ser­vices en­abled by tech­nol­ogy.

“SA still has a big in­for­mal econ­omy. Banks like Capitec have done much to en­gage the bot­tom of the pyra­mid.”

There are reper­cus­sions of not hav­ing ca­pa­ble sys­tems in place.

Apps like Ten­cent-owned WeChat in China, which al­lows you to text, or­der food and in­ter­act on so­cial me­dia, have given rise to new pay­ment plat­forms out­side the bank­ing sys­tem. The tra­di­tional pay­ments sys­tem had not been de­vel­oped for the dig­i­tal econ­omy and Ten­cent to cre­ate their own par­al­lel sys­tems to fa­cil­i­tate mo­bile pay­ments.

“For the banks, the bat­tle is lost in China. They will never get those peo­ple back,” said Mar­tin Grunewald, ex­ec­u­tive head of the pay­ments busi­ness at Bankserv Africa.

Chi­nese reg­u­la­tors are now strug­gling to cre­ate a bridge be­tween the tra­di­tional pay­ment sys­tem and new dig­i­tal ones.

To avoid this dilemma, South African reg­u­la­tors and the bank­ing in­dus­try are try­ing to mod­ernise their sys­tems so in­no­va­tions can sim­ply in­te­grate into the ex­ist­ing in­fra­struc­ture.

Grunewald said de­vel­oped coun­tries tended to suf­fer from the in­ef­fi­cien­cies of long-es­tab­lished legacy sys­tems, whereas de­vel­op­ing coun­tries find it eas­ier to build mod­ern sys­tems from the start.

SA op­er­ates a dual econ­omy with a so­phis­ti­cated bank­ing sys­tem, which, for ex­am­ple, was a global pi­o­neer in im­ple­ment­ing a real-time pay­ment clear­ing sys­tem in 2006. But there are also high lev­els of poverty and many with­out bank ac­counts.

Lo­cal banks will prob­a­bly have to retro­fit new sys­tems onto the old. This is not just one bank’s prob­lem. The in­dus­try has to in­vest as a col­lec­tive in up­grad­ing the sys­tem.

For SA, a good model to fol­low might be the one used in In­dia, where tech firms and so­cial me­dia have the abil­ity to in­te­grate pay­ments on the ex­ist­ing sys­tem.

Grunewald said: “How many peo­ple do you know who are not on Whats App?

Very few. But if you’re in In­dia, you can trans­act from your Whats App app.”

Lo­cally, Absa has used so­cial plat­forms Face­book Mes­sen­ger and Twit­ter through Chat Bank­ing since 2016 for sim­ple bank­ing trans­ac­tions. This year it launched Chat Bank­ing on Whats App.

For banks, the bat­tle is lost in China. They will never get those peo­ple back

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.