Launched in March 2023, PayShap is South Africa’s real-time interbank payment system designed to modernize the country’s cash-dominated economy. Developed by BankservAfrica, the South African Reserve Bank, and major commercial banks, PayShap aims to drive financial inclusion and digitize payments. With features like pay-by-proxy using mobile numbers, it is poised to transform how South Africans send and receive money. But five months in, challenges remain.
What is PayShap’s Role in South Africa’s Payment System?
PayShap was created as part of the South African Reserve Bank’s Vision 2025 strategy to modernize the national payment system. It addresses the country’s heavy reliance on cash, where 90% of transactions are still cash-based, despite 80% of adults having bank accounts. PayShap enables instant electronic funds transfers (EFTs) through three key features:
- Pay by Account: Direct transfers between bank accounts.
- Request to Pay: A digital invoicing feature to be launched in 2024.
- Pay by Proxy: Use of mobile numbers (ShapID) or business names (ShapName) for payments.
This system is a significant step toward reducing cash dependency and encouraging digital payments, especially among lower-income earners and small businesses.
PayShap’s Adoption Since Launch: Progress and Challenges
Since its launch, PayShap has processed over 400,000 transactions, accounting for 0.4% of all real-time clearing (RTC) payments in South Africa. Early adoption saw 5,000 default proxies registered daily, but this slowed to 1,500 daily registrations by August 2023.
One major hurdle is the transaction limits. Users can send up to ZAR 3,000 per transaction or ZAR 5,000 daily, far lower than the ZAR 5 million limit of existing RTC systems. These limits are in place to manage fraud risks, as PayShap transactions are irreversible. However, they may deter users who need higher-value transfers.
PayShap’s Implementation and Costs: A Double-Edged Sword
PayShap is not a standalone app but is integrated into the banking channels of participating banks, including Absa, FNB, Nedbank, Standard Bank, and Discovery Bank. While it’s designed to be cost-effective for banks, the current fees for users range from ZAR 10 to ZAR 49 per transaction, compared to ZAR 1 to ZAR 2.20 for traditional EFTs.
This pricing model reflects the costs of implementing PayShap, including new cloud-based infrastructure and ISO messaging standards. However, for users, the higher fees may limit adoption unless instant transfers are urgently needed.
PayShap Could Advance Payments in South Africa
PayShap has the potential to significantly impact South Africa’s payment ecosystem. Below are some of its key benefits:
| Benefits | Details |
|---|---|
| Building a digital ecosystem | Instant interbank payments service designed to meet the country’s need for digital payment agility. |
| Reducing dependency on cash | The system’s speed could encourage digital replacement of a cash economy. |
| Stimulating economic growth | New business development and growth opportunities are made possible through the digitisation of cash, due to the creation of a track record and credit profile. |
| Reducing information required for payments | PayShap allows for easy transactions from one account to another at different banks, using proxies like mobile phone numbers for payments. |
| Financial inclusion | It is hoped that the speed and safety of PayShap transfers will encourage currently unbanked citizens to open bank accounts and move away from cash. |
| Global international standards | The PayShap platform is fully ISO 20022 compliant, enabling it to better participate in a global financial ecosystem. |
PayShap Transfer Fees: A Comparison
While PayShap offers instant transfers, its fees are higher than traditional EFTs. Here’s a breakdown of the costs:
| Participating Banks | PayShap Fee | Electronic Fund Transfer Fee |
|---|---|---|
| Absa | R10 for payments up to R1,000 R49 for payments over R1,000 | R1 |
| FNB | R45 | Free |
| Nedbank | R10 for payments up to R3,000 R49 for payments over R3,000 | R2.20 |
| Standard Bank | R10 for payments up to R2,000 R50 for payments over R2,000 | R1.20 |
| Discovery | R1 for payments of R100 or less R5 for payments up to R1,500 0.4% of the transaction amount for payments totalling R1,500–R3,000 | R1 for payments of R100 or less R5 for payments up to R1,500 0.4% of the transaction amount for payments totalling R1,500–R3,000 |
Limitations of PayShap: Barriers to Wider Adoption
Despite its potential, PayShap faces several challenges:
| Limitations | Details |
|---|---|
| Limited participating banks | There are currently only five banks offering PayShap transfers, though more are set to participate by the end of the year. |
| Limited fintech involvement | Fintechs could help increase adoption but can currently only be a part of PayShap by routing their transactions via the participating incumbent banks, which may raise transfer fees further. |
| Payment frictions | Having to register the payment proxies for digital natives is easier. However, it is not so smooth for those who do not use online banking or have limited access to the internet. |
| Not serving the financially excluded | Use is limited to a currently small number of participating banks, and inclusion efforts rely on persuading unbanked citizens to transition from cash. |
| High transfer fee | The current cost of transferring money using PayShap is more expensive than previous forms of bank money transfer. This makes it less attractive to some users, who would rather sacrifice speed for cost. |
How PayShap Could Shape South Africa’s Payment Future
PayShap has the potential to revolutionize South Africa’s payment ecosystem by:
- Driving Financial Inclusion: Encouraging unbanked individuals to open accounts and use digital payments.
- Supporting SMEs: Helping micro-merchants and small businesses transition from cash to digital payments.
- Enabling Cross-Border Payments: Future plans include integrating PayShap with the Southern African Development Community’s (SADC) cross-border payment systems.
Additionally, partnerships with telcos and fintechs could expand PayShap’s reach, making it more accessible and affordable.
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PayShap Five Months On: A Work in Progress
What is PayShap’s future? Five months after its launch, PayShap is still in its infancy but holds immense promise. To achieve widespread adoption, it must address its limitations, including high fees, limited bank participation, and the exclusion of fintechs.
Expanding PayShap to include mobile money-like systems and lowering transaction costs could significantly boost its appeal. As South Africa moves toward a cashless economy, PayShap could play a pivotal role in shaping the future of digital payments.
What is PayShap? It’s more than a payment system—it’s a catalyst for financial transformation in South Africa.
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