Payment Banks & Mobile/Digital

Wallets in South Africa

Submitted by-Group 4
 • A mobile wallet is a virtual wallet that stores
payment card information on a mobile device.
A mobile wallet stores credit card, debit card,
coupons, or reward cards information.
• Mobile wallets are the fastest growing on the
continent and have the potential to serve over
500 million consumers by 2020.
Introductio • Excluding South Africa, Sub-Saharan Africa
n currently has less done 30 million bank cards
in circulation, yet there are over 150 million
mobile wallets out there with an estimated
$90 billion in transaction value.
• Near-field communication (NFC) in Africa
would facilitate the move to Retail payments
using mobile wallets and phones at point of
sale.
 Major Mobile wallet players in South
Africa are :

• M-Pesa
Mobile • SnapScan

Wallets in • FlickPay
• MasterPass
South Africa • Zapper
• MTN Mobile Money
• Paypal
M-Pesa •M-Pesa is a mobile phone-based money transfer, financing
and microfinancing service, launched in 2007 by Vodafone for Safaricom
and Vodacom, the largest mobile network operators in Kenya and
Tanzania .
•The service allows users to deposit money into an account stored on their
cell phones, to send balances using PIN-secured Text messages to other
users, including sellers of goods and services, and to redeem deposits for
regular money. Users are charged a small fee for sending and withdrawing
money using the service.
•In September 2010 Vodacom and Nedbank announced the launch of the
service in South Africa, where there were estimated to be more than 13
million "economically active" people without a bank account.
 Poor Quality of
Existing
Alternatives

why M-pesa
Strong Latent
A Reasonable
Demand for
Base of Banking
Domestic
was successful
Infrastructure
Remittances

in Kenya?
A Dominant
Mobile Operator A Supportive
and Low Airtime Banking Regulator
Commissions
 • High level of financial inclusion.
• The banking system in SA already has so
much on offer that there is an insufficiently
large gap to exploit.
why M-pesa • When M-Pesa was launched in SA in 2010,
Vodacom hoped to have 10 million
was subscribers within five years, but by the
end of March 2015, it only had around one
unsuccessful in million customers signed up in SA, with
South Africa? about 76 000 actively using the service.
• The vast majority have a balance of less
than R200, thus commercially unviable to
operate.
SnapScan

•SnapScan app lets you pay for stuff by simply opening

the app, and scanning a QR code and entering a PIN.

•Upon registration, you are required to scan or

manually enter either a debit or credit card details to
your profile. The information is saved on your phone
only, and not an external server . You need to set a PIN
to proceed.

•The app lets you store more than one card to your
profile. SnapScan lets you search for merchants nearby
or in South Africa.
FlickPay

• FlickPay has been primarily rolled out at

Vida e Caffé store
• Signing up is really simple, they all work
the same way. Download the free app,
register and add your card details, set a
PIN and you’re ready.
• When you need to pay, just open the
app, enter your PIN, hold your phone to
the camera at the bill for scanning and
confirm amount.
 MasterPay

• The MasterPass is the first

digital wallet in South Africa
from MasterCard and
Standard Bank.
• It works with most debit and
credit cards, including Visa,
for both in-store and online
purchases. The process is
seamless, quick and secure.
• Card details are only stored
on the app, like a regular
wallet.
• It has over 40 000 merchants
globally.
 Zapper

Zapper is mainly for making payments

at restaurants.
The QR code appears on your bill where
you scan to make payment.
It supports splitting the bill.
The interface isn’t as good as SnapScan.
We can find merchants near us by
location and other view history and you
have an inbox.
 Cash and Non
Cash
Transactions
in South Africa
Though cash maintains dominance (As of 2015,
cash usage in South Africa as a percent of its gross
domestic product (GDP) stood at 58.2 percent)
nearly $9.8 billion is now transacted through
digital payments, and the volume is forecasted to
grow by 16.2 percent between 2017 and 2021
 • The South African Reserve Bank requires a banking license
in order to issue e-money.

•The South African Reserve Bank (SARB) also has the regulatory
Regulations and supervisory power under the National Payment System Act,
1998 (NPS Act) to manage and control payment system risk.
applicable to
payment
•A mobile money account may constitute e-money. The position
paper specifically provides that only registered South African
banks can issue e-money. Accordingly, an entity providing the
banks/mobile mobile money.

wallets •South African banking legislation prohibits on a non-banking

entity from accepting deposits or issuing e-money in the mobile
money market unless a specific joint venture with a bank is
approved.
*the approach was adopted by both MTN and Vodacom for mobile
money.
Steps to
regulate
Payment
options.
The SARB Act mandates the SARB to oversee the regulation of the NPS
and to ensure its safety, soundness and efficiency.

In turn the NPS Act -1998, mandates the SARB to recognise a Payment
System Management Body (PSMB), to organise, manage and regulate its
members participating in the NPS.

In turn, PASA's Constitution governs its functions, structures and

activities, with further rules affecting its members in the form of PASA
Policies and Position Papers.
In the PASA environment the legal foundation governing participation is contained in a Payment Clearing House
(PCH) agreement. The specific transaction types and applicable Clearing Rules relevant to each PCH are agreed
amongst members forming part of a Participant Group (PG).

The PCH Participant Group (PCH PG) would also be responsible for the appointment of one or more PCH Systems
Operator (PSO) to facilitate clearing of payment instructions between the banks.

The participation of members and the PSO is further managed through adherence to Service Level Agreements
(SLAs).

Transactions cleared through the PSO are eventually settled at the SARB through the Real Time Gross Settlement
(RTGS) system called SAMOS (South African Multiple Options Settlement).
 Factors affecting Mobile money in
South Africa

Institutional Market
End User
environment environment

Institutional Environment-
• Partner with banks to offer mobile money services. This was seen by industry representatives as constraining
innovation.
• Limiting the ability of the providers to launch an offering that could provide a viable alternative to banking.
• Cost and time consuming which is a hinderance for the mobile wallet companies.
Market Environment-
• It has high financial inclusion, an established and effective financial sector and
competition for money transfer and payment services
• Trust in the retailers and banks is higher than the trust in the mobile network
providers and their agents.
• Without being able to offer a transacting advantage over the retailer offerings,
the value proposition was insufficient to cause a behavioural shift.

End User
• Mobile and internet penetration in the target market is high as is access to
traditional banking services.
• It is more convenient for users to leverage the competitive services.

The constraining regulatory environment resulted in a restricted product offering

that was not able to successfully compete with the retailers and banks in the local
remittance or transaction markets.
INNOVATIONS/DISRUPTIO
NS IN PAYMENTS
BANKS/MOBILE WALLETS
• Aiming to tap into the market of 11 million unbanked and
underbanked consumers in South Africa, First National
Bank (FNB) has launched a mobile bank account that
requires only their names and national identity number to
use. Called eWallet eXtra, this new service can be opened
with a feature phone or a smartphone and will have no
monthly fees.
• eWallet eXtra will enable users to send or receive deposits
from individuals and other banks, store funds for an
unlimited period, pay accounts and also buy prepaid
products like airtime, data and electricity.”
• South Africa's newest bank – which is entirely app-driven
on smartphones – has begun testing its new services with
staff ahead of its expected public launch next year called
Bank Zero. As its name suggests Bank Zero Mutual
Bank won't charge fees and will focus on savings. Although
it won't offer credit, Mastercard will supply a credit card if
users ask for one.
• The other major announcement, which is launching in the first
quarter of next year, is Discovery Bank, the new banking
division of South Africa's largest health insurer. Discovery
pioneered a medical aid system that promotes its members to
be more healthy by offering them incentives and discounts
through this scheme.
• Another new banking entrant is TymeBank, which was evolved
from being the provider of the backend of MTN Money, the
mobile payment service offered by Africa's largest cellular
network. Some 40% of Africans prefer to use digital channels
for transactions, it found.
• Meanwhile, mobile money continues to boom in Africa. The
original such service – Kenya's M-Pesa – announced it would
allow its users to make and receive payments through with
PayPal and Western Union.
• Meanwhile, calling it the first such mobile payment, the
world's largest smartphone maker also launched Samsung
Pay in South Africa.
 FUTURE
• AHEAD…
According to the GSM Association, over 57 percent of the
world’s mobile money accounts are located in sub-Saharan
Africa, and the continent’s FinTech market has been forecast to
grow from around $200m in value in 2018 to close to $3 billion
by 2020.

• Peer-2-peer borrowing, group-savings, micro-loans, micro-

insurance and more will come into the financial services mix.
South Africa alone can expect to see growth of around $4
billion in banking revenues across the next five years.

• Africa’s mobile financial services future will be all about a new

generation of banking services, new business models and a
new revenue mix by new types of provider. Incumbent banks
and new disruptive entrants can harness new revenue streams
by leveraging agile FinTech solutions and thinking progressively
–with the customer experience more than ever being “king”.