Discovery Bank has joined the ranks of banks offering PayShap to their clients.
Launched just over four months ago, the real-time digital payment service allows South Africans who belong to participating banks to transfer money instantly between their cellphones. Until recently, the participating banks only included Absa, First National Bank (FNB), Nedbank, and Standard Bank. On 12 July, Discovery Bank introduced PayShap as an alternative payment option to their clients. In time to come, it is hoped that more banks, as well as non-banks, will provide this option.
Using PayShap, bank account holders can make payments and receive money instantly, between participating banks, without sharing their account details. The system also removes the need for remembering bank account numbers when transferring money. Consumers can send and receive money using their cellphone number as a stand-in, or proxy, for their bank account number. These payments are made using a unique identifier – the consumer’s cellphone number, or ShapID.
At present, a R3 000 limit applies to individual transactions, while the daily limit is R5 000.
Making the connection
PayShap is not a standalone app and is accessed through existing banking channels.
Last week, Discovery Bank announced it had integrated the payment rails of the digital payments service into its existing payment infrastructure. A payment rail is a virtual network that connects financial institutions, allowing money to be moved between payers and payees.
Akash Dowra, the head of client insights and chief growth officer at Discovery Bank, says they are the only bank that has integrated PayShap into their existing real-time payment journeys, “as opposed to building a separate journey (which was the approach of all the other banks)”.
Dowra says the Discovery banking system automatically routes payments through the most efficient payment rail, whether an existing real-time clearing network, Discovery’s own Contact Payments, or PayShap.
“Due to this sophisticated system architecture, we are able to route many more payments through PayShap than other banks from launch.”
So much so, Discovery Bank claims, that they processed about 52% of outgoing PayShap transactions across the industry within the first week of launching the payment service.
So far, so good
At the launch of the payment service on 13 March, the South African Reserve Bank (Sarb) said that PayShap – driven by BankservAfrica and the Payments Association of South Africa – was aimed at “deepening digital financial inclusion of both consumers and small businesses by making digital payments more convenient and reducing the reliance on cash in the economy”. The industry-led initiative stemmed from the Rapid Payments Programme in support of the Sarb’s efforts to “continually reform the country’s national payment system”.
Of course, a prerequisite for financial inclusion is widescale adoption of the service by the public.
According to another statistic provided by Discovery Bank, since PayShap’s launch in March, the platform accounts for 0.4% of all real-time clearing payments in South Africa.
According to Rufaida Hamilton, the head of payments at Standard Bank, the bank is ticking upward to 20% of the total market share of enlisted users and showing movement upwards of 25.3% of the transaction throughput originating from Standard Bank. Hamilton adds that Standard Bank will continue to embed more features to enhance the service and extend it beyond the person-to-person client segments in the upcoming months.
“We continue to believe that (as with other services we have launched) slow, steady growth and take-up, with sharp client feedback focus, will enable us to respond with agility if we are at all concerned that take-up is slow or low.”
Chipo Mushwana, executive: emerging innovation at Nedbank, says the growth and usage of PayShap have been increasing steadily since its launch. Mushwana says they believe PayShap will play a key role in driving South Africa towards the digital economy and will become the preferred payment method by all South Africans.
“As more consumers understand and trust this new payment method, we expect continued growth. Across the industry, there have been over 400 000 transactions processed, with Nedbank being one of the biggest contributors to this,” Mushwana says.
Absa says they experienced high growth and usage of PayShap among customers in the months following the PayShap launch, with an initial 40% of all PayShap registrations originating from Absa.
According to an Absa spokesperson, the entry of new PayShap participants and the subsequent impact is still being assessed. At present, the service is available 24/7 on the Absa Mobile Banking App.
“We will soon, also offer PayShap payments via our Connected Banking and USSD channels and be bringing even more features to our customers later this year.”
Price of transactions
As Discovery Bank pointed out in a press release last week, payments have come a long way in the past few decades. Electronic funds transfers have made it easier to pay others, but they are processed in “batches” and aren’t as immediate as cash. While real-time clearance of these payments is now more common, the fees have been prohibitive, particularly for lower-value payments.
Whether PayShap’s transaction fees will turn out to be less so will depend on with which institution you bank.
Although the PayShap system is “a product of collaboration between the participating banks”, they are allowed to compete with one another on pricing.
Discovery Bank’s pricing structure for PayShap is the same as it is for their other real-time payments. These charges start at R1 for transactions under R100, R5 for transactions between R100 to R1 500, and thereafter the bank charges 0.4% of the amount, capped at R30.
If you are a Nedbank client, PayShap payments are R1 per transaction. However, if you were to make a payment to an account number instead of the ShapID, the cost will be R7.50.
For those banking with Absa, PayShap payments are R2.50 for low-value transactions. Following a review and adjustment of Absa’s low-value payment options, effective 1 July, PayShap pricing for transactions of R1 000 and above was reduced by 83% to R7.50 (previously R45).
“We will continue to monitor operating and market conditions to ensure Absa’s PayShap offering remains competitive and relevant to our customers, particularly for low-value transactions,” says an Absa spokesperson.
PayShap payments for FNB clients are free for transactions below R100 and R6 for transactions above R100.
Standard Bank clients pay R7.50 to make a payment of up to R3 000 per PayShap transaction.
Hamilton says this is the fee with which Standard launched the service, and they continue to monitor feedback from their clients and assess the market.
“We believe that as the payment service matures, we will be guided by our clients on where they find value in the offering, and we will respond to these insights accordingly.”
Should PayShap be free?
When the platform was launched in March, former FNB chief executive and venture capitalist Michael Jordaan told Daily Investor that prohibitively high transaction costs would stifle the adoption of PayShap.
Jordaan said he hoped the big banks in South Africa would make transactions free – as is the case with Brazil’s Pix, India’s UPI, and Singapore’s PayNow – to mimic cash and encourage the adoption of the service.
Moonstone asked all the participating banks whether making PayShap transactions free was feasible in the South African context and whether they would consider this in the future.
At the time of publication, only Nedbank and Standard Bank had answered this question.
According to Mushwana, in countries where similar platforms were free, their governments and regulators drove adoption by subsidising the costs of these real-time payment schemes while also regulating the pricing.
Hamilton states as different client needs and uses of PayShap become entrenched, Standard Bank will continue to review access channels and all aspects related to the optimal adoption of the service.
