PayShap bolsters national payments sector

Ashlin Perumall Baker McKenzie

In March 2023, the SA Reserve Bank announced the launch of PayShap, a realtime rapid payment platform that is aimed at offering safer, faster and significantly more convenient payment options for South Africans PayShap is the outcome of an industry-spanning collaboration, driven by BankservAfrica, the Payments Association of SA and the South African banking community, with the aim of modernising the national payments industry It is rooted in the Bank s Rapid Payments Programme, as part of its Vision 2025 strategy to reform the South African national payment system framework

The Bank has noted that PayShap will ultimately offer a cost-effective, instant payment service across banks, a proxy service to embed user banking details, a request to pay service, as well as support for several known retail payment use cases The service also addresses gaps in the interoperability of banking payment systems by implementing a transactions cleared on an immediate basis payments platform

One of the more tangible benefits for day-to-day users will be the reduction in information that will be required for payments In its initial phase, PayShap users will be able to access its real-time payment feature to pay recipients instantly, using either their banking details or by proxy via a unique identifier called a ShapID

A person s ShapID could, for example, be a cellphone number or a bank-generated identification number, used as a proxy for their full banking details These IDs are far easier to share and use than, for example, the cumbersome details needed for electronic funds transfers, which still require manual inputs of information such as branch codes, and the payee ’ s name and account details

Given that PayShap is a sector-wide project, it is also far more accessible to a wider range of South African customers, where speed in electronic payments has typically only been available to credit card holders, users of payment solution providers or open banking providers, for example PayShap also aims to reduce the use of cash for small transactions, an important step in an economy such as SA s

Recent estimates in a 2020 Worldpay Global Payments Report indicate that more than half of global payments are still cash based, and in the informal economy this shoots up to almost 90% At launch, it has been stated that PayShap will process real-time clearance of lowvalue transactions to a maximum value of R3,000

The next phase of the service will see the launch of a request-to-pay function, which will allow users to initiate a request for payment and then securely receive funds almost instantly into their bank account PayShap uses a push payment system rather than a debitpull , meaning that the payment recipient in the system will maintain control of receiving the payment, making transactions safer and more secure

Payments will be processed by BankservAfrica, which is primarily an automated clearing house The service will be cheaper than the usual banking transactions

The implementation of PayShap will also improve adherence to global best practices for financial communication Last year, the Bank, participating banks and other financial markets infrastructures adopted the International Organisation for Standardisation financial messaging standard (ISO

20022) for high-value payments in the domestic market, and the PayShap platform is fully ISO 20022 compliant ISO 20022 financial messaging provides structured and data-rich communications that are more readily exchanged among corporates and banking systems

By 2025, most major reserve currencies will have moved to ISO 20022 as it becomes the de facto messaging standard for these types of transactions Being part of this global harmonisation will bolster SA s ability to participate in this wider ecosystem as it emerges

The introduction of the

PayShap platform comes at an exciting time in the South African payments industry, which has become one of the largest subsegments of the fintech industry on the African continent This development signals a progressive approach by local policymakers, together with the industry, and will hopefully lead to more dynamism in the sector and wider access to the country s fintech products and investment opportunities, while keeping in step with the growing demands of international standards

It is also, however, a potential disruptor in the fintech sector, where some successful fintech ventures have built their payment products in the gaps of the traditional banking digital payments infrastructure

It remains to be seen whether the introduction of PayShap will influence any consolidation of players in an already saturated payments industry