How AWS and PayShap Increased Financial Inclusion in South Africa

Nilesh Dusane, global head of institutional payments at AWS, and Ben Janse van Rensburg, interim CIO at BankservAfrica, told PYMNTS that instant payments will do much to transform South Africa’s financial services landscape.

Janse van Rensburg noted that BankservAfrica, operating as an automated clearing house, has been around for more than 50 years, and processes all manner of the millions of transactions and payments between banks in South Africa — everything from card payment to batch payments to real-time payments. And in working with Payments Association of South Africa, the clearing house is seeing fertile ground in broadening financial inclusion through the PayShap service.

PayShap launched in March, and operates as a rapid payment platform for low-value, high-volume transactions that runs on AWS. The platform was created in partnership between BankservAfrica and the Payments Association of South Africa, as part the Vision 2025 framework from the central bank.

Additionally, PayShap is meant to be the first instant payments system that is low cost, added Janse van Rensburg. Besides the goal of boosting financial inclusion, he said, there remains the benefit of “modernizing our payment ecosystem in South Africa.” Among the use cases that are gaining traction in these first few months since launch, he said, are alias payments, or proxy payments, which he noted have been introduced through PayShap.

At a high level, these alias payments allow funds to flow between parties — within seconds — without having to input (or even know) account-level information. Instead, mobile numbers or email addresses can be used to identify senders and receivers.

Tackling the Steps

Dusane observed that instant payments are gaining traction around the globe — at least as measured in terms of availability. There are more than 60 countries offering, or in the process of enabling, instant payments. But shepherding those new offerings to market is a multi-step process. The first step, he said, is to build a service like PayShap. The next step is to connect the financial ecosystem to that service, including the banks. And the final, perhaps most ambitious step, is driving user/consumer adoption.

On that last point, Janse van Rensburg said, PayShap, as an industry-led initiative, exists as “one of the first systems that we’ve designed, as an industry, where user experience” has been top of mind from the very beginning. He offered up the example where, in early design sessions, developers were focused on the hypothetical use case of a customer purchasing fruit at a local vendor.

Eight banks are live on the platform at present, said Janse van Rensburg, which shows that financial institutions (FIs) are dedicated to bringing instant payments to the general population.

At present, he shared that the adoption of alias payments is slower than may have been anticipated — which means that consumer education is necessary. A recent milestone saw the month of October mark the first month where PayShap notched more than a million transactions.

“Adoption is growing steadily,” he said, “and the user experience at the banks’ front end is getting better.” User adoption is likely to grow, added Dusane, as consumers become more comfortable with instant payments as used in commerce rather than solely P2P transactions.

“Merchant acceptance will be key for this, and for any payment system, to be successful,” said Janse van Rensburg.

Addressing Fraud and Risk Concerns

As with any new payment system, fraud and risk must be adequately addressed, and a multi-faceted approach is warranted as payments skew ever faster. Janse van Rensburg said that there’s “no single solution or entity that will have a silver bullet when it comes to fraud.”

PayShap, he said, has confirmation of payee built-in to its protocols, and added that messaging standards such as ISO 20022 will help bolster defenses against bad actors. In the meantime, he said, the platform is leveraging software-as-a-service capabilities offered by AWS to more easily integrate that confirmation of payee.

Dusane said that, in working with banks and market infrastructures alike, and modernizing FIs’ payment stacks, “we ensure that data is in a single place so that [FIs] can run advanced analytics, using machine learning or AI to het actionable insights.”

Looking ahead, said Janes van Rensburg, as consumers become more comfortable with faster payments, and FIs have more data and analytics on hand, transaction limits will likely be increased as risk and fraud scoring improves.

Secure and trusted instant payments that serve communities of empowered and informed consumers are a primary imperative towards financial inclusion supported by financial literacy and awareness, concluded Janse van Rensburg.

“As an industry,” said Dusane, “we’re at a fascinating point, where there are innovative solutions like PayShap … and go down that path to improve financial inclusion and offer better payment services to consumers.”